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UNITED STATES
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) June 18, 1997
First Midwest Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-10967 36-3161078
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
300 Park Boulevard, Suite 405, Itasca, Illinois 60143
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(Address of principal executive offices) (Zip Code)
(630) 875-7450
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Registrant's telephone number, including area code
N.A.
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(Former name and address, if changed since last report)
Exhibit Index is on Page 5
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FIRST MIDWEST BANCORP, INC.
FORM 8-K
JUNE 30, 1997
Item 5. Other Events
- --------------------
On June 18, 1997, First Midwest Bancorp, Inc. ("First Midwest") and SparBank,
Incorporated ("SparBank") entered into an Agreement and Plan of Merger (the
"Agreement") whereby SparBank will be merged with and into First Midwest.
SparBank is the holding company of McHenry State Bank ("MSB"), a 4-branch bank
with $445 million in total assets headquartered in McHenry, Illinois.
Pursuant to the Agreement, the transaction will be structured as a tax-free
exchange and accounted for as a pooling-of-interests. Each outstanding share of
SparBank's common stock, no par value, will be converted to 21.72 shares of
First Midwest common stock, $.01 par value, resulting in the issuance of
3,230,769 shares of First Midwest common stock. Based on First Midwest's June
19 closing price of $32.75 per share, the transaction is valued at approximately
$105 million.
The Agreement, which has been approved by the Board of Directors of both
companies and the shareholders of SparBank, is subject to customary regulatory
approvals. First Midwest shareholder approval is not necessary. It is
anticipated the acquisition will be consummated by September 30, 1997. First
Midwest anticipates merging MSB into its principal banking subsidiary, First
Midwest Bank, N.A., in the first quarter of 1998.
The transaction is anticipated to be neutral to First Midwest's 1997 earnings
and accretive to its 1998 earnings by approximately 2-3%. The 1998 accretion
results primarily from annualized net costs savings of approximately $1.8
million, representing approximately 18% of McHenry's current expense base, which
will be realized when MSB is merged into First Midwest Bank, N.A. in the first
quarter of 1998, in addition to modest first year revenue enhancements. A pre-
tax merger related charge of approximately $6.5 million will be recognized in
the quarter the transaction is consummated. Such charge includes costs related
to systems conversions, elimination of excess operating capacity, professional
fees, and a one time provision to bring MSB's loan loss reserves to First
Midwest's required levels. With the acquisition, First Midwest's total assets
will increase to approximately $3.5 billion.
Coincident to the signing of the Agreement, the Board of Directors of First
Midwest rescinded the balance of 900,000 shares stock repurchase program
authorized in November 1996.
The Agreement is attached hereto as Exhibit 2 and is incorporated by reference
herein. First Midwest issued a press release on June 20, 1997, which includes
selected proforma financial information as of March 31, 1997, which is filed as
Exhibit 99 hereto.
Item 7. Financial Statements and Exhibits
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(a) and (b) Not Applicable
(c) Exhibit Index is located on Page 5 of this Report on Form 8-K.
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FIRST MIDWEST BANCORP, INC.
FORM 8-K
JUNE 30, 1997
The following Items are not applicable for this Form 8-K:
Item 1. Changes in Control of Registrant
Item 2. Acquisition or Disposition of Assets
Item 3. Bankruptcy or Receivership
Item 4. Changes in Registrant's Certifying Accountant
Item 6. Resignations of Registrant's Directors
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FIRST MIDWEST BANCORP, INC.
FORM 8-K
JUNE 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Midwest Bancorp, Inc.
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(Registrant)
Date: June 30, 1997 DONALD J. SWISTOWICZ
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Donald J. Swistowicz
Executive Vice President
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FIRST MIDWEST BANCORP, INC.
FORM 8-K
JUNE 30, 1997
EXHIBIT INDEX
Page
Exhibit Number
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Exhibit 2 Agreement and Plan of Merger, dated June 18, 1997, 6
by and between SparBank, Inc., First Midwest Bancorp,
Inc., and FMB Acquisition Corporation.
Exhibit 99 Press release issued by First Midwest Bancorp, Inc. 81
dated June 20, 1997.
5
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AGREEMENT AND PLAN OF MERGER
AMONG
SPARBANK, INCORPORATED,
FIRST MIDWEST BANCORP, INC.,
AND
FMB ACQUISITION CORPORATION
DATED AS OF JUNE 18, 1997
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TABLE OF CONTENTS
I. THE MERGER ......................................................... 1
1.01 Effects of the Merger ...................................... 1
1.02 Conversion of Stock ........................................ 2
1.03 Time and Place of Closing .................................. 3
1.04 Exchange of SparBank Common Stock .......................... 4
1.05 Dissenting Shares .......................................... 5
1.06 Merger of the Bank ......................................... 5
II. REPRESENTATIONS AND WARRANTIES OF FIRST MIDWEST .................... 5
2.01 Organization ............................................... 5
2.02 Authorization .............................................. 6
2.03 Conflicts .................................................. 6
2.04 Antitakeover Provisions Inapplicable ....................... 7
2.05 Capitalization ............................................. 8
2.06 First Midwest Financial Statements; Material Changes ....... 8
2.07 First Midwest Subsidiaries ................................. 9
2.08 First Midwest Filings ...................................... 10
2.09 First Midwest Reports ...................................... 10
2.10 Compliance With Laws ...................................... 11
2.11 Disclosure ................................................. 11
2.12 Litigation ................................................. 11
2.13 Licenses ................................................... 12
2.14 Taxes ...................................................... 12
2.15 Insurance .................................................. 13
2.16 Loans; Investments ......................................... 13
2.17 Allowance for Possible Loan Losses ......................... 15
2.18 First Midwest Benefit Plans ................................ 15
2.19 Compliance With Environmental Laws ......................... 17
2.20 Disclosure Schedule of First Midwest ....................... 18
2.21 Defaults ................................................... 19
2.22 Materiality ................................................ 19
2.23 Operations Since December 31, 1996 ......................... 19
2.24 Undisclosed Liabilities .................................... 20
2.25 Assets ..................................................... 20
2.26 Insider Interests .......................................... 21
2.27 Pooling and Tax ............................................ 21
III. REPRESENTATIONS AND WARRANTIES OF SPARBANK ......................... 21
3.01 Organization ............................................... 21
3.02 Authorization .............................................. 22
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3.03 Conflicts .................................................. 22
3.04 Antitakeover Provisions Inapplicable ....................... 23
3.05 Capitalization and Stockholders ............................ 23
3.06 SparBank Financial Statements; Material Changes ............ 23
3.07 SparBank Subsidiaries ...................................... 24
3.08 SparBank Reports ........................................... 25
3.09 Compliance With Laws ....................................... 25
3.10 Litigation ................................................. 26
3.11 Licenses ................................................... 26
3.12 Taxes ...................................................... 27
3.13 Insurance .................................................. 27
3.14 Loans; Investments ......................................... 28
3.15 Allowance for Possible Loan Losses ......................... 30
3.16 SparBank Benefit Plans ..................................... 30
3.17 Compliance with Environmental Laws ......................... 33
3.18 Disclosure Schedule of SparBank ............................ 34
3.19 Defaults ................................................... 37
3.20 Materiality ................................................ 37
3.21 Operations Since December 31, 1996 ......................... 38
3.22 Corporate Records .......................................... 39
3.23 Undisclosed Liabilities .................................... 40
3.24 Assets ..................................................... 40
3.25 Indemnification ............................................ 40
3.26 Insider Interests .......................................... 41
3.27 Pooling and Tax ............................................ 41
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDERS ...... 41
4.01 Binding Effect ............................................. 41
4.02 Ownership of SparBank Common Stock ......................... 41
4.03 Approval of the Merger; Tender of Shares ................... 41
4.04 Execution of Investment Agreement and Registration Rights
Agreement ................................................ 42
4.05 Cooperation ................................................ 42
4.06 Actions Prior to Effective Time ............................ 42
4.07 Providing of Information; Regulatory Applications .......... 42
4.08 Other Negotiations ......................................... 42
4.09 Disposition of a Stockholder's Shares ...................... 42
V. COVENANTS .......................................................... 43
5.01 Conduct of Business by SparBank Until the Effective Time ... 43
5.02 Environmental Investigation ................................ 46
5.03 Indemnification ............................................ 47
5.04 Capital Stock .............................................. 48
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5.05 Certain Actions ............................................ 48
5.06 Title to Real Estate ....................................... 49
5.07 Conduct of Business by First Midwest Until the Effective
Time ..................................................... 49
5.08 Maintenance of the Allowance for Possible Loan Losses ...... 50
VI. ADDITIONAL AGREEMENTS .............................................. 50
6.01 Inspection of Records; Confidentiality ..................... 50
6.02 Registration Statement ..................................... 51
6.03 Affiliate Letters .......................................... 52
6.04 Brokers .................................................... 52
6.05 Cooperation ................................................ 52
6.06 Regulatory Applications .................................... 52
6.07 Financial Statements and Reports ........................... 53
6.08 Notice ..................................................... 53
6.09 Press Releases ............................................. 54
6.10 Delivery of Supplements to Disclosure Schedules ............ 54
6.11 Litigation Matters ......................................... 54
6.12 Tax Opinions ............................................... 54
6.13 Resolution of SparBank Benefit Plans ....................... 55
6.14 Extent of Knowledge ........................................ 56
6.15 Pooling of Interests; Tax Treatment ........................ 56
6.16 Stock Exchange Listing ..................................... 56
6.17 Publication of Combined Financial Results .................. 56
6.18 Election of Director ....................................... 57
6.19 Investment Agreement and Registration Rights Agreement ..... 57
6.20 Amendment of Rights Plan ................................... 57
VII. CONDITIONS ......................................................... 57
7.01 Conditions to the Obligations of First Midwest ............. 57
7.02 Conditions to the Obligations of SparBank and the
Stockholders ............................................. 59
7.03 Conditions to the Obligations of the Parties ............... 61
VIII. TERMINATION; AMENDMENT; WAIVER ..................................... 61
8.01 Termination ................................................ 61
8.02 Expenses ................................................... 62
8.03 Survival of Agreements ..................................... 63
8.04 Amendment .................................................. 64
8.05 Waiver ..................................................... 64
IX. OPINIONS OF COUNSEL ................................................ 64
9.01 Opinion of SparBank's Counsel .............................. 64
9.02 Opinion of First Midwest's Counsel ......................... 67
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X. GENERAL PROVISIONS ................................................. 69
10.01 Survival ................................................... 69
10.02 Notices .................................................... 69
10.03 Specific Enforceability .................................... 70
10.04 Applicable Law ............................................. 71
10.05 Headings, Etc. ............................................. 71
10.06 Severability ............................................... 71
10.07 Entire Agreement; Binding Effect; Non-Assignment;
Counterparts ............................................. 71
LIST OF EXHIBITS
6.03 Form of Affiliate Letters
6.14 SparBank Officer List
6.19(a) Investment Agreement
6.19(b) Registration Rights Agreement
6.20 Amendment to First Midwest Rights Plan
iv
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Exhibit 2
AGREEMENT AND PLAN OF MERGER
----------------------
This AGREEMENT AND PLAN OF MERGER (the "Agreement") being made and entered
into as of the 18th day of June, 1997, by and among First Midwest Bancorp, Inc.,
a Delaware corporation ("First Midwest"), FMB Acquisition Corporation, a
Delaware corporation and wholly owned subsidiary of First Midwest ("FMB
Subsidiary"), and SparBank, Incorporated, a Delaware corporation ("SparBank"),
and joined in solely for purposes of Article IV hereof by Geraldine C. Cowlin
and William J. Cowlin, stockholders of SparBank.
W I T N E S S E T H T H A T:
WHEREAS, each of First Midwest and SparBank is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended ("BHC"); and
WHEREAS, SparBank owns approximately 99.8% of the issued and outstanding
common stock of McHenry State Bank, an Illinois banking corporation (the
"Bank"); and
WHEREAS, the Boards of Directors of First Midwest, FMB Subsidiary and
SparBank deem it advisable and in the best interests of the stockholders of
First Midwest and SparBank that First Midwest and SparBank become affiliated by
causing SparBank to be merged with and into, and under the charter of, FMB
Subsidiary in accordance with the General Corporation Law of the State of
Delaware ("GCL") with FMB Subsidiary deemed to be the continuing and surviving
entity (the "Merger"), pursuant to which the stockholders of SparBank (the
"Stockholders") will receive shares of common stock ($.01 par value per share)
of First Midwest (the "First Midwest Common Stock"), as provided herein, in
exchange for their shares of common stock (no par value per share) of SparBank
(the "SparBank Common Stock"); and
WHEREAS, First Midwest and SparBank desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
desire to set forth various conditions precedent to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties agree as follows:
I.
THE MERGER
1.01 Effects of the Merger.
---------------------
(a) Surviving Corporation. Subject to the terms and conditions of this
Agreement, SparBank shall be merged with and into, and under the charter of, FMB
Subsidiary at
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the Effective Time (as defined below) in accordance with the GCL
with FMB Subsidiary being the continuing and surviving corporation (sometimes
referred to hereinafter as the "Surviving Corporation"), and the separate
existence of SparBank shall cease.
(b) Effective Time. The Merger shall become effective when the Certificate
of Merger shall be accepted for filing by the Secretary of State of the State of
Delaware (the "Effective Time"). The parties shall execute, acknowledge and
file, in accordance with Sections 103 and 251 of the GCL, the Certificate of
Merger upon the satisfaction of all conditions precedent to the consummation of
the transactions contemplated by this Agreement.
(c) Rights and Liabilities. The Surviving Corporation shall be called "FMB
Acquisition Corporation" and shall possess all of the properties, privileges,
immunities, powers, franchises and rights of a public as well as a private
nature and be subject to all of the liabilities, restrictions and duties of FMB
Subsidiary and SparBank and be governed by the laws of the State of Delaware.
(d) Certificate of Incorporation. The Certificate of Incorporation of FMB
Subsidiary shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with the provisions thereof and the GCL.
(e) By-laws. The By-laws of FMB Subsidiary in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving Corporation until
altered, amended or repealed as provided therein, or in the Certificate of
Incorporation of the Surviving Corporation or the GCL.
(f) Directors and Officers. The directors of the Surviving Corporation
shall be the persons who were directors of FMB Subsidiary immediately prior to
the Effective Time. The officers of the Surviving Corporation shall be the
persons who were officers of FMB Subsidiary immediately prior to the Effective
Time.
1.02 Conversion of Stock. At the Effective Time:
-------------------
(a) FMB Subsidiary Common Stock. Each share of FMB Subsidiary Common
Stock which is issued immediately prior thereto (whether then outstanding or
held in the treasury of FMB Subsidiary) shall continue to be issued without any
change therein and shall continue as one share of Common Stock of the Surviving
Corporation.
(b) SparBank Treasury Shares. All shares of SparBank Common Stock which
are held in the treasury of SparBank immediately prior thereto shall be
canceled.
(c) SparBank Common Stock. Each share of SparBank Common Stock which is
issued and outstanding immediately prior to the Effective Time (other than
shares of SparBank Common Stock held by First Midwest which shall be canceled
and other than shares of SparBank Common Stock as to which a legally sufficient
demand for appraisal has been made under the GCL
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("Dissenting Shares")) shall be converted into and represent the right to
receive such number of shares of First Midwest Common Stock (before giving
effect to the payment of cash in lieu of fractional shares or to any reduction
in the number of shares issuable in the Merger as a result of the exercise of
dissenter's rights) equal to the quotient achieved when 3,230,769 is divided by
the number of shares of SparBank Common Stock issued and outstanding immediately
prior to the Effective Time (the "Exchange Ratio"). Pursuant to the First
Midwest Shareholder Rights Plan which was adopted on February 15, 1989, amended
on November 15, 1995, and is proposed to be amended as provided in Section 6.20
hereof (the "Rights Plan"), each share of First Midwest Common Stock issued
pursuant to this Section 1.02(c) shall be accompanied by a Right (as defined in
the Rights Plan). The shares of First Midwest Common Stock to be issued
pursuant to this Section 1.02(c) shall be issued to the Stockholders in a
private offering exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), at the Effective Time, but such shares will be
subject to registration rights as set forth in the Investment Agreement and the
Registration Rights Agreement attached hereto, respectively, as Exhibits 6.19(a)
and 6.19(b).
(d) Actions Affecting First Midwest Common Stock. If, prior to the
Effective Time, shares of First Midwest Common Stock shall be changed into a
different number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or there occurs a distribution of warrants or rights with respect
to First Midwest Common Stock, or a stock dividend, stock split or other general
distribution of First Midwest Common Stock is declared with a record date prior
to the Effective Time, then in any such event the number of shares of First
Midwest Common Stock issuable in the Merger in accordance with Section 1.02(c)
hereof shall be appropriately adjusted.
1.03 Time and Place of Closing.
-------------------------
(a) Closing; Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") will be held on a date mutually agreed upon by
First Midwest and SparBank following the satisfaction or waiver of all
conditions pursuant to the Merger set forth herein (the "Closing Date"). In the
absence of such agreement, the Closing shall be held on the thirtieth day after
the last to occur of: (i) the receipt of all consents and approvals of
government regulatory authorities as legally required to consummate the Merger
and the expiration of all statutory waiting periods; and (ii) the requisite
approval of the Merger by the Stockholders.
(b) Closing Location. The Closing shall take place at the offices of
Hinshaw & Culbertson or such other place as First Midwest and SparBank may
mutually agree prior to the Closing Date.
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1.04 Exchange of SparBank Common Stock.
---------------------------------
(a) Exchange Procedures. At the Closing, the Stockholders shall deliver to
First Midwest the certificates which as of the Effective Time represented all of
the outstanding shares of SparBank Common Stock (the "Certificates"). Upon
surrender of a Certificate at the Closing, the holder of such Certificate shall
be entitled to receive (as provided in Section 1.02(c) hereof) in exchange
therefor First Midwest Common Stock representing the number of shares of First
Midwest Common Stock into which the shares of SparBank Common Stock, theretofore
represented by the Certificate so surrendered, shall have been converted
pursuant to the provisions of this Article I, plus an amount of cash for any
fractional share of First Midwest Common Stock which such holder would be
entitled to receive pursuant to Section 1.04(d) hereof.
(b) Failure to Exchange SparBank Common Stock. No dividends or other
distributions declared after the Effective Time with respect to First Midwest
Common Stock payable to the holders of record thereof after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
First Midwest Common Stock represented thereby until the holder of record shall
surrender such Certificate. Subject to the effect, if any, of applicable law,
after the subsequent surrender and exchange of a Certificate, the holder thereof
shall be entitled to receive any such dividends or distributions, without
interest thereon, which theretofore became payable with respect to the First
Midwest Common Stock represented by such Certificate. All dividends or other
distributions declared on or after the Effective Time with respect to the First
Midwest Common Stock and payable to the holders of record thereof on or after
the Effective Time which are payable to the holder of a Certificate not
theretofore surrendered and exchanged for First Midwest Common Stock pursuant to
this Section 1.04 shall be held by First Midwest, in trust, for the benefit of
such holders.
(c) Full Payment. All shares of First Midwest Common Stock issued upon the
surrender for exchange of SparBank Common Stock in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of SparBank Common Stock. The shares of First Midwest
Common Stock for which the shares of SparBank Common Stock shall be exchanged
shall thereupon be validly issued and outstanding, fully paid and non-
assessable, and shall not be liable to any further call, nor shall the holder
thereof be liable for any further payments with respect thereto.
(d) Fractional Shares. No certificates or scrip representing fractional
shares of First Midwest Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of First Midwest shall
relate to any fractional share, and such fractional share interests will not
entitle the owner thereof to vote or any rights of a stockholder of First
Midwest. In lieu of any fractional share, First Midwest shall pay to each
holder of shares of SparBank Common Stock who otherwise would be entitled to
receive a fractional share of First Midwest Common Stock an amount of cash
(without interest) equal to the product achieved when such fraction is
multiplied by $32.50.
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(e) List of SparBank Stockholders. At the Effective Time, SparBank shall
deliver a certified copy of a list of the holders of record of SparBank Common
Stock as of the Effective Time to First Midwest, after which there shall be no
further registrations or transfers on the stock transfer books of SparBank of
the shares of SparBank Common Stock that were out standing immediately prior
thereto. If, after the Effective Time, Certificates representing such shares
are presented to SparBank, they shall be canceled and exchanged as provided in
this Article I.
1.05 Dissenting Shares. Shares of SparBank Common Stock outstanding
immediately prior to the Effective Time held by SparBank stockholders who shall
not have voted in favor of the Merger or consented thereto in writing and shall
have delivered to SparBank a written demand (and shall not have withdrawn such
demand prior to the Effective Time) for appraisal of their shares in the manner
provided in Section 262 of the GCL shall not be converted in the Merger, but
shall be entitled to receive such consideration as shall be provided in such
Section 262.
1.06 Merger of the Bank. The parties understand that it is the present
intention of First Midwest to merge the Bank into one of First Midwest's
national bank subsidiaries (retaining the Bank's existing offices as branches)
at or after the Effective Time. SparBank shall take all such actions as are
reasonably requested by First Midwest so that First Midwest may accomplish such
merger as aforesaid. Nothing contained in this Section 1.06 is intended to
impose an obligation on SparBank to alter the manner in which SparBank or any
SparBank Subsidiary conducts business. First Midwest represents and warrants
to, and covenants with, SparBank that it will offer either cash or shares of
First Midwest Common Stock to the minority stockholders of the Bank for their
shares of Bank Common Stock in the merger which will be substantially equivalent
in value to the consideration First Midwest is offering to the Stockholders
hereunder as of the date hereof.
II.
REPRESENTATIONS AND WARRANTIES OF FIRST MIDWEST
First Midwest represents and warrants to SparBank that:
2.01 Organization. (a) First Midwest 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, properties and businesses and to carry on its
businesses substantially as they have been and are now being conducted. First
Midwest is duly qualified to do business and is in good standing in each
jurisdiction where the character of the 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 so qualify would not have a Material Adverse Effect (as
herein defined) on First Midwest or its ability to consummate the transactions
contemplated herein. First Midwest has all requisite corporate power and
authority to enter into this Agreement, the Investment Agreement and the
Registration Rights Agreement and, upon the approval of all requisite state and
federal regulatory agencies, to consummate the transactions
5
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contemplated hereby and thereby. First Midwest is duly registered as a bank
holding company under the BHC.
(b) As used in this Agreement, the term "Material Adverse Effect" with
respect to an entity 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, assets, liabilities, business, operations
or results of operations, of such entity 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 consolidated subsidiaries
resulting from a change in law, rule, regulation, generally accepted accounting
principles ("GAAP") or regulatory accounting principles, as such would apply to
the financial statements of such entity on a consolidated basis, unless such
change would cause the entity to reduce its consolidated stockholders' equity by
more than $5,000,000 in the case of First Midwest, or $1,000,000 in the case of
SparBank; (ii) a change with respect to, or effect on, such entity and its
consolidated subsidiaries resulting from expenses (such as legal, accounting and
investment bankers fees) incurred in connection with this Agreement or expenses
(such as legal, accounting and investment bankers fees) incurred in connection
with the transactions contemplated by this Agreement; or (iii) a change with
respect to, or effect on, such entity and its consolidated subsidiaries
resulting from any other matter affecting depository institutions generally
(including, without limitation, financial institutions and their holding
companies) including, without limitation, changes in general economic conditions
and changes in prevailing interest and deposit rates, unless such matter would
cause the entity to reduce its consolidated stockholders' equity by more than
$5,000,000 in the case of First Midwest, or $1,000,000 in the case of SparBank.
As a condition to First Midwest's obligation to consummate the Merger, if a
Material Adverse Effect or a series of Material Adverse Effects as described in
(i) or (iii) above occurs to SparBank between the date hereof and the Effective
Time, such Material Adverse Effect (or series of Material Adverse Effects) shall
constitute a basis for First Midwest's refusing to consummate the Merger
pursuant to Section 7.01(d) hereof only if such Material Adverse Effect (or such
series of Material Adverse Effects) would cause SparBank to fail to satisfy the
Minimum Capital Level (as defined in Section 7.01(g) hereof).
2.02 Authorization. The execution, delivery and performance of this
Agreement, the Investment Agreement and the Registration Rights Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly approved and authorized by First Midwest's Board of Directors, and all
necessary corporate action on the part of First Midwest has been taken. This
Agreement has been duly executed and delivered by First Midwest and, subject to
the approval of all requisite state and federal regulatory agencies, this
Agreement (and upon their due execution and delivery, the Investment Agreement
and the Registration Rights Agreement) constitute the valid and binding
obligations of First Midwest (except to the extent that enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles and doctrines).
2.03 Conflicts. Subject to the second sentence of this Section 2.03, the
execution and delivery of this Agreement, the Investment Agreement and the
Registration Rights Agreement do
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not, and the consummation of the transactions contemplated hereby and thereby
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 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 By-laws of First Midwest or similar documents of any First
Midwest Subsidiary (as defined in Section 2.07 hereof) or any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to First Midwest or any First Midwest Subsidiary or their
respective properties, other than any such conflicts, violations or defaults
which (i) individually or in the aggregate do not have a Material Adverse Effect
on First Midwest, (ii) will be cured or waived prior to the Effective Time or
(iii) except as disclosed in the Disclosure Schedule of First Midwest. 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 First Midwest in connection with the execution and delivery of this
Agreement, the Investment Agreement and the Registration Rights Agreement or the
consummation by First Midwest of the transactions contemplated hereby or thereby
the absence of which would have a Material Adverse Effect upon First Midwest or
be a basis for any governmental authority to prevent the consummation of the
transactions contemplated hereby or thereby, except for: (a) the filing by First
Midwest of an application on Form Y-3 with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the BHC for prior approval of
the transactions contemplated by this Agreement and the receipt of such
approval; (b) the filing by First Midwest of an application with the Illinois
Commissioner of Banks and Real Estate ("CBRE") for prior approval of the
transactions contemplated by this Agreement and the receipt of such approval;
(c) the filing by Geraldine C. Cowlin of a change in control application with
the Federal Reserve Board and the receipt of the approval of the Federal Reserve
Board; (d) the filing by First Midwest of the Registration Statement relating to
the First Midwest Common Stock to be issued as provided in the Investment
Agreement attached hereto as Exhibit 6.19(b) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") and various blue sky
authorities, which Registration Statement shall include a prospectus as required
by Section 6.02 hereof and the Investment Agreement (the "Prospectus"); (e) the
filing of the Certificate of Merger with respect to the Merger with the
Secretary of State of the State of Delaware; (f) the filing by First Midwest of
an application with the Office of the Comptroller of the Currency (the "OCC") in
order to consummate the transaction described in Section 1.06 hereof and the
receipt of the OCC's approval; (g) any filings, approvals or no-action letters
with or from state securities authorities; (h) any anti-trust filings, consents,
waivers or approvals; and (i) the filing by First Midwest of an application to
list the shares of First Midwest Common Stock to be issued to the Stockholders
on the NASDAQ Stock Market's National Market (the "NASDAQ National Market"),
subject to official notice of issuance.
2.04 Antitakeover Provisions Inapplicable. No "business combination,"
"moratorium," "control share" or other state antitakeover statute or regulation
(i) prohibits or restricts First Midwest's ability to perform its obligations
under this Agreement or its ability to consummate the transactions contemplated
hereby, (ii) would have the effect of invalidating or voiding this
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Agreement or any provision hereof, or (iii) would subject SparBank to any
material impediment or condition in connection with the exercise of any of its
rights under this Agreement.
2.05 Capitalization. (a) As of the date hereof, the authorized capital
stock of First Midwest consists of (i) 30,000,000 shares of First Midwest Common
Stock, $.01 par value per share, of which no more than 16,644,775 shares are
issued and outstanding and 861,610 shares are held as treasury shares and (ii)
1,000,000 shares of preferred stock, without par value, of which none are issued
and outstanding, 200,000 are reserved for issuance under the terms and
conditions of the Rights Plan and 300,000 will be reserved for issuance under
the terms and conditions of the Rights Plan as of the Effective Time. All of
the issued and outstanding shares of First Midwest Common Stock have been, and
all of the shares of the First Midwest Common Stock to be issued in the Merger
will be, at the Effective Time, duly and validly authorized and issued, and are
or will be, as the case may be, fully paid and non-assessable. None of the
outstanding shares of First Midwest Common Stock has been issued in violation of
any preemptive rights of the current or past stockholders of First Midwest and
none of the outstanding shares of First Midwest Common Stock is or will be
entitled to any preemptive rights in respect of the Merger or any of the other
transactions contemplated by this Agreement.
(b) As of March 31, 1997, First Midwest had reserved 2,096,875 shares of
First Midwest Common Stock for issuance under stock option plans for the benefit
of employees of First Midwest, pursuant to which options covering 1,052,782
shares of First Midwest Common Stock were outstanding as of March 31, 1997 (the
"First Midwest Stock Option Plans"). Except as set forth in this Section and
except as provided under the Rights Plan, there are no shares of capital stock
or other equity securities of First Midwest 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 First Midwest, or contracts,
commitments, understandings, or arrangements by which First Midwest 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.
2.06 First Midwest Financial Statements; Material Changes. First Midwest
has heretofore delivered to SparBank its audited consolidated financial
statements for the years ended December 31, 1996, December 31, 1995, and
December 31, 1994, and First Midwest's consolidated financial statements for the
quarter ended March 31, 1997 (the "First Midwest Financial Statements"). The
First Midwest Financial Statements (x) are true and correct in all material
respects; (y) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and, except in the case of the
unaudited consolidated financial statements, for the absence of footnotes and
for normal and recurring year-end adjustments which are not material); and (z)
fairly present the consolidated financial position of First Midwest as of the
dates thereof and the consolidated results of its operations, stockholders'
equity and changes in financial position for the periods then ended. Since
December 31, 1996 to the date hereof, First Midwest and the First Midwest
Subsidiaries have not undergone or suffered any changes in their respective
condition
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(financial or otherwise), properties, assets, liabilities, business or
operations which have been, in any case or in the aggregate, materially adverse
to First Midwest on a consolidated basis except as disclosed on the Disclosure
Schedule of First Midwest. No facts or circumstances have been discovered by
First Midwest from which it reasonably appears that there is a significant risk
and reasonable probability that First Midwest will suffer or experience a
Material Adverse Effect.
2.07 First Midwest Subsidiaries. (a) All of the First Midwest
Subsidiaries as of the date of this Agreement are listed in the Disclosure
Schedule of First Midwest. First Midwest owns directly or indirectly all of the
issued and outstanding shares of capital stock of the First Midwest
Subsidiaries. The Disclosure Schedule of First Midwest accurately identifies
the number of shares of authorized and outstanding capital stock of the First
Midwest Subsidiaries. Except as set forth in the Disclosure Schedule of First
Midwest, neither First Midwest nor the First Midwest Subsidiaries owns directly
or indirectly any debt or equity securities, or other proprietary interest in
any other corporation, joint venture, partnership, entity, association or other
business. No capital stock of any of the First Midwest Subsidiaries is or may
become required to be issued (other than to First Midwest) by reason of any
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 any First Midwest Subsidiary.
There are no contracts, commitments, understandings or arrangements relating to
the rights of First Midwest to vote or to dispose of shares of the capital stock
of any First Midwest Subsidiary. Except as provided in 12 U.S.C. Section 55 in
the case of First Midwest Subsidiaries that are national banks and except as
disclosed on the Disclosure Schedule of First Midwest, all of the shares of
capital stock of each First Midwest Subsidiary held by First Midwest or a First
Midwest Subsidiary are fully paid and non-assessable and are owned by First
Midwest free and clear of any claim, lien or encumbrance.
(b) Each First Midwest Subsidiary is either a national banking
association, a state bank or a corporation and is 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 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 so qualify, either individually or in the
aggregate, would not have a Material Adverse Effect on First Midwest or its
ability to consummate the transactions contemplated herein. Each First Midwest
Subsidiary has the corporate power and authority necessary for it to own,
operate or lease its assets, properties and businesses and to carry on its
business as it has been and is now being conducted.
(c) For purposes of this Agreement, "First Midwest Subsidiaries" shall
mean all those corporations, banks, associations, and other entities of which
First Midwest owns or controls 5% or more of the outstanding equity securities
either directly or through an unbroken chain of entities as to each of which 5%
or more of the outstanding equity securities is owned directly or indirectly by
its parent; 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, through a small business investment
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corporation, or otherwise as an investment by an entity that invests in
unaffiliated companies in the ordinary course of business.
(d) Except as set forth on the Disclosure Schedule of First Midwest,
each of the First Midwest Subsidiaries that is a bank is an "insured depository
institution" as defined in the Federal Deposit Insurance Act (the "FDIA") and
applicable regulations thereunder, the deposits of which are insured by the FDIC
through the Bank Insurance Fund or the Savings and Loan Insurance Fund to the
full extent permitted under applicable law.
2.08 First Midwest Filings. First Midwest has previously made available, or
will make available prior to the Effective Time, to SparBank true and complete
copies of its (i) proxy statements relating to all meetings of stockholders
(whether special or annual) during the calendar years 1995, 1996 and 1997 and
(ii) all other reports, as amended, or filings, as amended, required to be filed
under the Securities and Exchange Act of 1934, as amended (the "Securities
Exchange Act"), by First Midwest with the SEC since January 1, 1994 including
without limitation on Forms 10-K, Forms 10-Q and Forms 8-K.
2.09 First Midwest Reports. Since January 1, 1992, or the date of
acquisition by First Midwest if later, each of First Midwest and the First
Midwest 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 (i) the SEC, including,
but not limited to Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii)
the Federal Reserve Board, (iii) the OCC, (iv) the FDIC, (v) any applicable
state banking, insurance, securities, or other regulatory authorities (except in
each case filings which are not material), (vi) the NASD, and (vii) the CBRE. 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. Except for
normal examinations conducted by the Internal Revenue Service, state and local
taxing authorities, the OCC, the Federal Reserve Board, the CBRE or the FDIC in
the regular course of the business of First Midwest or the First Midwest
Subsidiaries, no federal, state or local governmental agency, commission or
other entity has initiated any proceeding or, to the best knowledge of First
Midwest, investigation into the business or operations of First Midwest or the
First Midwest Subsidiaries within the past five (5) years except as set forth on
the Disclosure Schedule of First Midwest. There is no unresolved violation,
criticism or exception by the SEC, the OCC, the Federal Reserve Board, the CBRE,
the FDIC or other agency, commission or entity with respect to any report or
statement referred to herein that has had or, insofar as reasonably can be
foreseen in the future, is expected to have a Material Adverse Effect on First
Midwest.
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2.10 Compliance With Laws. (a) Except as disclosed in the Disclosure
Schedule of First Midwest, the businesses of First Midwest and the First Midwest
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity, including, without limitation, any
banking laws (including those pertaining to the Bank Secrecy Act, the investment
of funds, the lending of money, the collection of interest and the extension of
credit), 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 employee
benefits, and any statutes or ordinances relating to the properties occupied or
used by First Midwest or any First Midwest Subsidiary, except for possible
violations which either singly or in the aggregate do not and, insofar as
reasonably can be foreseen in the future, will not have a Material Adverse
Effect on First Midwest.
(b) The policies, programs and practices of First Midwest and the
First Midwest Subsidiaries relating to wages, hours of work, and other terms and
conditions of employment are in compliance in all material respects with
applicable laws, orders, regulations, public policies and ordinances governing
employment and terms and conditions of employment. There are no disputes,
claims, or charges pending or, to First Midwest's knowledge, threatened, against
First Midwest or any First Midwest Subsidiary alleging breach of any express or
implied employment contract or commitment, or material breach of any applicable
law, order, regulation, public policy or ordinance relating to employment or
terms and conditions of employment, which would be material to the financial
condition of First Midwest on a consolidated basis.
(c) First Midwest and each of the First Midwest Subsidiaries, where
applicable, is in substantial compliance with the applicable provisions of the
Community Reinvestment Act of 1977 and the regulations promulgated thereunder.
As of the date of this Agreement, First Midwest has not been advised of the
existence of any act or circumstance or set of facts or circumstances which, if
true, would cause First Midwest or any of the First Midwest Subsidiaries to fail
to be in substantial compliance with such provisions. None of the First Midwest
Subsidiaries which are insured depository institutions have received a rating
from the applicable regulatory authority which is less than "satisfactory" since
January 1, 1994.
2.11 Disclosure. None of the information supplied by First Midwest for
inclusion in the Registration Statement, will, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
2.12 Litigation. Except as disclosed in the Disclosure Schedule of First
Midwest, there is no suit, action, investigation or proceeding, legal, quasi-
judicial, administrative or otherwise, pending or, to the best of the knowledge
of First Midwest, threatened against or affecting First Midwest or any First
Midwest Subsidiary, or any of their respective officers, directors, employees
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or agents, in their capacities as such, which, if adversely determined, would
have a Material Adverse Effect on First Midwest or which would materially affect
the ability of First Midwest 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 First Midwest or any First
Midwest 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.
2.13 Licenses. First Midwest and the First Midwest Subsidiaries hold all
licenses, certificates, permits, franchises and all patents, trademarks, service
marks, trade names, copyrights or rights thereto, and adequate 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.
2.14 Taxes. (a) Except as disclosed in the Disclosure Schedule of First
Midwest, First Midwest and the First Midwest Subsidiaries have each timely filed
all tax and information returns required to be filed and have paid (or First
Midwest has paid on behalf of the First Midwest Subsidiaries), or have accrued
on their respective books and set up an adequate reserve for the payment of, all
taxes reflected on such returns as required to be paid in respect of the periods
covered by such returns and have accrued on their respective books and set up an
adequate reserve for the payment of all income and other taxes anticipated to be
payable in respect of periods through the end of the calendar month next
preceding the date hereof. Neither First Midwest nor any First Midwest
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 First Midwest or any First Midwest 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 disclosed in the Disclosure
Schedule of First Midwest, the income tax returns of First Midwest have not been
audited by the Internal Revenue Service since 1986 and the Illinois income tax
returns are currently being audited by the Illinois Department of Revenue for
the years 1993, 1994 and 1995. Neither First Midwest nor any First Midwest
Subsidiary is a party to any action or proceeding by any governmental authority
for the assessment or the collection of taxes. Deferred taxes of First Midwest
have been accounted for in accordance with generally accepted accounting
principles.
(b) First Midwest has not filed any consolidated federal income tax
return with an "affiliated group" (within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code")), where First Midwest was
not the common parent of the group. Neither First Midwest nor any First Midwest
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 First Midwest or a First Midwest Subsidiary.
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(c) Each of First Midwest and the First Midwest Subsidiaries has
withheld amounts from its employees, stockholders or holders of public deposit
accounts in compliance with the tax withholding provisions of applicable
federal, state and local laws, has filed all federal, state and local returns
and reports for all years for which any such return or report would be due with
respect to employee 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 and, except as set forth in the Disclosure Schedule of
First Midwest, has notified all employees, stockholders and holders of public
deposit accounts of their obligations to file all forms, statements and reports
with it in accordance with applicable federal, state and local tax laws and has
taken reasonable steps to insure that such employees, stockholders and holders
of public deposit accounts have filed all such forms, statements and reports
with it.
(d) For the purposes of this Agreement, the terms "tax" and "taxes"
include without limitation, any federal, state, local or foreign income,
leasing, franchise, excise, gross receipts, sales, use, occupational,
employment, real property, ad valorem, tangible and intangible personal property
and state taxes, payments in lieu of taxes, levies, duties, imposts, business,
operations or financial conditions assessments, fees, charges and withholdings
of any nature whatsoever, together with any related penalties, fines, additions
to tax or interest thereon.
2.15 Insurance. First Midwest and the First Midwest Subsidiaries maintain
insurance with an insurer which in the best judgment of management of First
Midwest is sound and reputable, on their respective assets, and upon their
respective businesses and operations, against loss or damage, risks, hazards and
liabilities of the kinds customarily insured against by prudent corporations
engaged in the same or similar businesses. First Midwest and the First Midwest
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 First Midwest and the First Midwest Subsidiaries have
been filed in due and timely fashion.
2.16 Loans; Investments. (a) Except as otherwise disclosed in the
Disclosure Schedule of First Midwest, each material loan reflected as an asset
on the First Midwest Financial Statement, dated as of March 31, 1997, is
evidenced by appropriate and sufficient documentation and constitutes, to the
best of the knowledge of First Midwest, the legal, valid and binding obligation
of the obligor named therein, enforceable in accordance with its terms except to
the extent that the enforce ability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
or doctrines; to the best of the knowledge of First Midwest, no obligor named
therein is seeking to avoid the enforceability of the terms of any loan under
any such laws or equitable principles or doctrines and no loan is subject to any
defense, offset or counterclaim. All such loans originated by First Midwest or a
First Midwest Subsidiary, and to the best of the knowledge of First Midwest, all
of such loans purchased by First Midwest or a First Midwest Subsidiary, were
made or purchased in accordance with the customary lending standards of First
Midwest and in the ordinary course of business of First Midwest. Except as set
forth in the Disclosure Schedule of First Midwest, all such loans are, and at
the Effective Time will be, free and clear of any security interest, lien,
encumbrance or other charge, and First Midwest and each
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First Midwest Subsidiary have complied, and at the Effective Time will have
complied, in all material respects, with all laws and regulations relating to
such loans. Except as set forth in the Disclosure Schedule of First Midwest,
there are no loans or other assets of First Midwest or any First Midwest
Subsidiary in excess of $1,000,000 that have been classified by examiners as
"Other Assets Specially Mentioned," "Substandard," "Doubtful" or "Loss" as of
March 31, 1997.
(b) All guarantees of indebtedness owed to First Midwest or any First
Midwest Subsidiary, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and federal
agencies, are, to the best of the knowledge of First Midwest, 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 and except as would not have a Material
Adverse Effect on First Midwest.
(c) In originating, underwriting, servicing, and discharging loans,
mortgages, land contracts, and contractual obligations relating thereto, either
for their own account or for the account of others, First Midwest and the First
Midwest Subsidiaries have complied with all applicable terms and conditions of
such obligations and with all applicable laws, regulations, rules, contractual
requirements, and procedures with respect to such servicing, except where the
failure to comply would not have a Material Adverse Effect on First Midwest.
(d) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which First Midwest or any
First Midwest Subsidiary is a party or by which any of their properties or
assets may be bound were entered into the ordinary course of business and, to
the best knowledge of First Midwest, in accordance with then customary practice
and applicable rules, regulations and policies of bank 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. First
Midwest and First Midwest 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 First Midwest,
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 rate risk
management agreement; or (ii) any party to the mortgage backed security
financing arrangements described in footnote 3 to the First Midwest Financial
Statement, dated as of December 31, 1996, to accelerate, discontinue, terminate
or otherwise modify any such agreement or arrangement or would require First
Midwest or any First Midwest Subsidiary to recognize any gain or loss with
respect to such arrangement.
(e) Except as set forth in the Disclosure Schedule of First Midwest
and except for pledges to secure public and trust deposits, none of the
investments reflected in the First Midwest Financial Statement, dated as of
December 31, 1996, under the headings "Securities," and none of the investments
made by First Midwest since December 31, 1996, is subject to any restriction,
whether contractual or statutory, which materially impairs the ability of First
Midwest freely to dispose of such investment at any time. With respect to all
material repurchase agreements to which
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First Midwest or any First Midwest Subsidiary is a party, First Midwest or such
Subsidiary has a valid, perfected first lien or security interest in the
government securities or other collateral securing each such repurchase
agreement, and the value of the collateral securing each such repurchase
agreement equals or exceeds the amount of the debt secured by such collateral
under such agreement.
2.17 Allowance for Possible Loan Losses. The allowance for possible loan
losses shown on the First Midwest Financial Statements, dated as of December 31,
1996 (and as shown on any financial statements to be delivered by First Midwest
to SparBank pursuant to Section 6.07 hereof), to the best of the knowledge of
First Midwest, as of such date 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 generally accepted accounting principles applicable to financial
institutions. To the best of the knowledge of First Midwest, the aggregate
principal amount of loans contained (or to be contained) in the loan portfolio
of First Midwest as of December 31, 1996 (and as of the dates of any financial
statements to be delivered by First Midwest to SparBank pursuant to Section 6.07
hereof), in excess of such reserve, was (and will be) fully collectible.
2.18 First Midwest Benefit Plans. (a) The term "First Midwest Benefit
Plans" as used herein refers to all compensation, consulting, employment,
termination or collective bargaining agreements, and each stock option, stock
purchase, stock appreciation right, 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 or written, covering employees, former
employees, directors, or former directors of First Midwest or any First Midwest
Subsidiary or their respective beneficiaries, including, but not limited to, any
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which First
Midwest or any First Midwest Subsidiary maintains, to which First Midwest or any
First Midwest Subsidiary contributes, or under which any employee, former
employee, director or former director of First Midwest or any First Midwest
Subsidiary is covered or has benefit rights and pursuant to which any liability
of First Midwest or any First Midwest Subsidiary exists or is reasonably likely
to occur, 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. No First Midwest Benefit Plan is a multi-employer plan within the
meaning of Section 3(37) of ERISA.
(b) Each of the First Midwest Benefit Plans that is intended to be a
pension, profit sharing, stock bonus, thrift, savings or employee stock
ownership plan that is qualified under Section 401(a) of the Code ("First
Midwest Qualified Plans") has been determined by the Internal Revenue Service to
qualify under Section 401(a) of the Code, or an application for determination of
such qualification has been timely made to the Internal Revenue Service prior to
the end of the applicable
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remedial amendment period under Section 401(b) of the Code, and, to the best of
First Midwest's knowledge, there exist no circumstances (other than
circumstances caused by the transactions contemplated in this Agreement or any
related actions) likely to materially adversely affect the qualified status of
any such First Midwest Qualified Plan. All such First Midwest Qualified Plans
established or maintained by First Midwest or the First Midwest Subsidiaries or
to which First Midwest or the First Midwest Subsidiaries contribute are in
compliance in all material respects with all applicable requirements of ERISA,
where applicable, and are in compliance in all material respects with all
applicable requirements (including qualification and non-discrimination
requirements in effect as of the Effective Time) of the Code for obtaining the
tax benefits the Code thereupon permits with respect to such First Midwest
Qualified Plans. Each First Midwest Qualified Plan that is a defined benefit
pension plan which is subject to Title IV of ERISA has assets with an aggregate
value that are not less than the actuarially determined present value of its
liability for accrued benefits as determined on the basis of the actuarial
assumptions used for the most recent valuation of such Plan, and no such Plan
has an accumulated funding deficiency within the meaning of Section 412(a) of
the Code. All accrued contributions and other payments required to be made by
First Midwest or any First Midwest Subsidiary to any First Midwest Benefit Plan
through December 31, 1996, have been made or reserves adequate for such purposes
as of December 31, 1996, have been set aside therefor and reflected in the First
Midwest Financial Statement, dated as of December 31, 1996. Neither First
Midwest nor any First Midwest Subsidiary is in material default in performing
any of its respective contractual obligations under any of the First Midwest
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 First Midwest,
threatened litigation or pending claim (other than benefit claims made in the
ordinary course) by or on behalf of or against any of the First Midwest Benefit
Plans (or with respect to the administration of any of such Plans) now or
heretofore maintained by First Midwest or any First Midwest Subsidiary which
allege violations of applicable state or federal law which are reasonably likely
to result in a liability on the part of First Midwest or any First Midwest
Subsidiary or any such Plan, which would be material to the financial condition
of First Midwest on a consolidated basis.
(d) First Midwest and the First Midwest Subsidiaries and all other
persons having fiduciary or other responsibilities or duties with respect to any
First Midwest 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 Internal
Revenue Service under ERISA, the Code or any other applicable law. No
"reportable event" (as defined in Section 4043(c) of ERISA) has occurred with
respect to any First Midwest Qualified Plan. Neither First Midwest, any First
Midwest Subsidiary nor any First Midwest 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(a) of the Code), or
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any liability under Section 601 of ERISA or Section 4980 of the Code that would
be material to the financial condition of First Midwest on a consolidated basis.
(e) Neither First Midwest nor any First Midwest Subsidiary has
incurred, nor to the best knowledge of First Midwest or any First Midwest
Subsidiary is reasonably likely to incur, any liability under Title IV of ERISA
in connection with any Plan subject to the provisions of Title IV of ERISA now
or heretofore maintained or contributed to by it or by any First Midwest
Subsidiary that would be material to the financial condition of First Midwest on
a consolidated basis.
(f) First Midwest and the First Midwest 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 First Midwest Benefit Plan with the
Internal Revenue Service, the PBGC, and the Department of Labor, and as
prescribed by the Code or ERISA, or regulations issued thereunder. All such
filings, as amended, were complete and accurate in all material respects as of
the dates of such filings, and there were no misstatements or omissions in any
such filing which would be material to the financial condition of First Midwest
on a consolidated basis.
2.19 Compliance With Environmental Laws. (a) Except as set forth in the
Disclosure Schedule of First Midwest: (i) to the best of the knowledge of First
Midwest, the operations of First Midwest and each of the First Midwest
Subsidiaries comply in all material respects with all applicable past and
present Environmental Laws (as defined below); (ii) to the best of the knowledge
of First Midwest, none of the operations of First Midwest or any First Midwest
Subsidiary, no assets presently or formerly owned or leased by First Midwest or
any First Midwest 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 the subject of any claims alleging damages to health or property,
pursuant to which First Midwest, any First Midwest 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 First Midwest or any First Midwest Subsidiary,
no assets presently owned or, to the best of the knowledge of First Midwest,
formerly owned by First Midwest or any First Midwest Subsidiary, and, to the
best of the knowledge of First Midwest, 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 First Midwest or any First Midwest Subsidiary, or,
to the best of the knowledge of First Midwest, 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 First Midwest nor any First Midwest Subsidiary, nor, to the best of
the knowledge of First Midwest, 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 or
toxic waste or reporting a spill or release of a Hazardous Substance, or any
other substance into the environment.
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(b) With respect to (i) the real estate owned (including OREO) or
leased by First Midwest or any First Midwest Subsidiary; and (ii) any real
estate formerly owned (including OREO) or leased by First Midwest or any First
Midwest Subsidiary (the "First Midwest Premises") to the best of the knowledge
of First Midwest: (x) no part of the First Midwest Premises has been used for
the generation, manufacture, handling, storage, or disposal of Hazardous
Substances; (y) except as set forth in the Disclosure Schedule of First Midwest,
the First Midwest Premises do not contain, and have never contained, an
underground storage tank; and (z) the First Midwest 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 the Disclosure Statement
of First Midwest as an exception to the foregoing, to the best of the knowledge
of First Midwest, such underground storage tank presently or previously located
on the First Midwest Premises is or has been maintained or removed, as
applicable, in compliance with Environmental Laws, and has not been the source
of any release of a Hazardous Substance into the environment, unless otherwise
set forth in the Disclosure Schedule of First Midwest.
(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
First Midwest or any First Midwest Subsidiary 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 First Midwest or any First Midwest Subsidiary a lien
thereon or security interest therein; provided, however, that the term
"Mortgaged Premises" shall not include one to four unit single family
residences. For purposes of this Section, "Participating Facility" means any
property in which First Midwest or any First Midwest Subsidiary 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.,
(S)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.
2.20 Disclosure Schedule of First Midwest. The Disclosure Schedule of
First Midwest contains, and shall be supplemented by First Midwest, as required
by Section 6.10 hereof, so as to contain at the Closing Date, in addition to the
other instruments, documents, lists and other matters mentioned herein, copies
of each of the following documents, certified by an officer of First Midwest to
be true and correct copies of such documents on the dates of such certificates.
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(a) Complete and correct copies of the Certificate of Incorporation,
Charters and By-laws of First Midwest and each First Midwest Subsidiary and
specimen certificates of each type of security issued by First Midwest.
(b) A list and description of all policies of insurance maintained by
First Midwest or any First Midwest Subsidiary and a list and description of all
unsettled or outstanding material claims of First Midwest or any First Midwest
Subsidiary which have been, or to the best of the knowledge of First Midwest,
will be, filed with the companies providing insurance coverage for First Midwest
or any First Midwest Subsidiary (except for routine claims for health benefits).
(c) All judgments, orders, injunctions, court decrees or settlement
agreements arising out of or relating to the labor and employment practices or
decisions of First Midwest or any First Midwest Subsidiary which, by their
terms, continue to bind or affect First Midwest or any First Midwest Subsidiary.
(d) All orders, decrees, memorandums, agreements or understandings
with regulatory agencies binding upon or affecting the current operations of
First Midwest or any First Midwest Subsidiary or any of their directors or
officers in their capacities as such.
2.21 Defaults. There has not been any material default in any obligation
to be performed by First Midwest or any First Midwest Subsidiary under any
material contract or commitment, and neither First Midwest nor any First Midwest
Subsidiary has waived, and will not waive prior to the Effective Time, any
material right under any material contract or commitment. To the best of the
knowledge of First Midwest, no other party to any material contract or
commitment is in material default in any material obligation to be performed by
such party.
2.22 Materiality. For purposes of Sections 2.20 and 2.21, a contract,
commitment or agreement is material if it involves the payment by or liability
(contingent or otherwise) of First Midwest or any First Midwest Subsidiary in
any amount in excess of $5,000,000 or if such contract together with other
related contracts involving less than $5,000,000 and not listed in the
Disclosure Schedule of First Midwest for that reason, exceed $5,000,000 in the
aggregate.
2.23 Operations Since December 31, 1996. Between December 31, 1996, and
the date hereof, there has not been, except as set forth on the Disclosure
Schedule of First Midwest or on any mutually accepted up-date thereof:
(a) any payment of dividends by First Midwest or any First Midwest
Subsidiary or any distribution by any of them, whether directly or indirectly,
of any assets of any kind whatsoever, on or in redemption or as the purchase
price of, any of their respective capital stocks, or any prepayment of any
indebtedness to any stockholder.
(b) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase thereof), by
First Midwest or any First Midwest
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Subsidiary for borrowed money, or otherwise, other than in the ordinary course
of business, none of which (except those which are being disputed in good faith)
is in default;
(c) the establishment of any new, or increase in the formula for
contributions to or benefits under any existing, retirement, pension, profit
sharing, stock bonus, savings or thrift plan, or any similar plan of deferred
compensation, whether funded or unfunded and whether qualified or unqualified
(within the meaning of the Code) by First Midwest or any First Midwest
Subsidiary;
(d) any change in First Midwest's independent auditors, historic
methods of accounting (other than as required by generally accepted accounting
principles or regulatory accounting principles), or in its system for
maintaining its equipment and real estate; or
(e) any event or condition of any character (other than changes in
legal, economic or other conditions which are not specially or uniquely
applicable to First Midwest or any First Midwest Subsidiary) which has had, or
insofar as may reasonably be foreseen in the future, may have a Material Adverse
Effect on First Midwest.
2.24 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 First Midwest and the First Midwest Subsidiaries, been so
reflected, disclosed or reserved against in the audited consolidated financial
statements of First Midwest as at December 31, 1996 or in the notes thereto, and
First Midwest and the First Midwest Subsidiaries have no other liabilities
except (a) Liabilities incurred since December 31, 1996 in the ordinary course
of business or (b) as disclosed in the Disclosure Schedule of First Midwest.
2.25 Assets. (a) First Midwest and the First Midwest Subsidiaries have
good, sufficient and marketable title to their real properties, including
leaseholds, and their other assets and properties, all as reflected as owned by
First Midwest or any First Midwest Subsidiary in the First Midwest Financial
Statement, dated as of December 31, 1996, except for (i) assets and properties
disposed of since such date in the ordinary course of business and (ii) liens,
none of which, in the aggregate, except as set forth in the Disclosure Schedule
of First Midwest, are material to the assets of First Midwest on a consolidated
basis. All buildings, structures, fixtures and appurtenances comprising part of
the real properties of First Midwest and the First Midwest Subsidiaries (whether
owned or leased by First Midwest or any First Midwest Subsidiary) are in good
operating condition and have been well maintained, reasonable wear and tear
excepted. Title to all real property listed as being owned by First Midwest and
the First Midwest Subsidiaries on the Disclosure Schedule of First Midwest is
held in fee simple. First Midwest and the First Midwest Subsidiaries have title
or other rights to their assets sufficient in all material respects for the
conduct of their respective businesses as presently conducted, and, except as
set forth in the Disclosure Schedule of First
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Midwest, free, clear and discharged of, and from any and all liens, charges,
encumbrances, security interests and/or equities which are material to First
Midwest on a consolidated basis.
(b) All leases pursuant to which First Midwest or any First Midwest
Subsidiary, as lessee, leases real or personal property which are material to
the business of First Midwest on a consolidated basis are, to the best of the
knowledge of First Midwest, valid, effective, and enforceable against the lessor
in accordance with their respective terms. There is not under any of such
leases any existing default, or any event which with notice or lapse of time or
both would constitute a default, with respect to either First Midwest or any
First Midwest Subsidiary, or to the best knowledge of First Midwest, the other
party.
2.26 Insider Interests. All outstanding loans and other contractual
arrangements (including deposit relationships) between First Midwest or any
First Midwest Subsidiary and any officer, director or employee of First Midwest
or any First Midwest Subsidiary 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. No officer,
director or employee of First Midwest or any First Midwest Subsidiary has any
material interest in any property, real or personal, tangible or intangible,
used in or pertaining to the business of First Midwest or any First Midwest
Subsidiary.
2.27 Pooling and Tax. Except as described in Section 6.15 hereof, to the
best of the knowledge of First Midwest, neither it nor any First Midwest
Subsidiary has engaged in any act that would preclude or adversely affect the
Merger from qualifying for "pooling of interests" accounting treatment or as a
tax-free or deferred reorganization under Section 368(a) of the Code, and First
Midwest knows of no basis or reason why the conditions set forth in Sections
7.01(f) and 7.03(d) will not be satisfied.
III.
REPRESENTATIONS AND WARRANTIES OF SPARBANK
SparBank represents and warrants to First Midwest that:
3.01 Organization. SparBank 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, properties and businesses and to carry on its businesses
substantially as they have been and are now being conducted. SparBank is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the 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
so qualify would not have a Material Adverse Effect on SparBank or its ability
to consummate the transactions contemplated herein. SparBank has all requisite
corporate power and authority to enter into this Agreement and, upon the
approval of all requisite state and federal regulatory agencies and the
stockholders of SparBank as hereinafter
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provided, to consummate the transactions contemplated hereby. SparBank is duly
registered as a bank holding company under the BHC.
3.02 Authorization. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and unanimously approved and authorized by SparBank's Board of Directors,
and all necessary corporate action on the part of SparBank has been taken,
subject to the approval of this Agreement by the stockholders of SparBank. This
Agreement has been duly executed and delivered by SparBank and, subject to the
approval of all requisite state and federal regulatory agencies, and the
approval by the stockholders of SparBank, constitutes the valid and binding
obligation of SparBank (except to the extent that enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles or doctrines).
3.03 Conflicts. Subject to the second sentence of this Section 3.03, the
execution and delivery of this Agreement do 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 or result in the creation
of any material lien, charge or encumbrance on any property or assets under any
provision of the Certificate of Incorporation or By-laws of SparBank or similar
documents of any SparBank Subsidiary (as defined in Section 3.07 hereof), or any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to SparBank or any SparBank Subsidiary or their
respective properties, other than any such conflicts, violations or defaults
which (i) individually or in the aggregate do not have a Material Adverse Effect
on SparBank, (ii) will be cured or waived prior to the Effective Time or (iii)
except as disclosed in the Disclosure Schedule of SparBank. 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 SparBank in connection with the execution and delivery of this Agreement or
the consummation by SparBank of the transactions contemplated hereby the absence
of which would have a Material Adverse Effect upon SparBank or be a basis for
any governmental authority to prevent the consummation of the transactions
contemplated hereby, except for: (a) the filing by First Midwest of an
application on Form Y-3 with the Federal Reserve Board under the BHC for prior
approval of the transactions contemplated by this Agreement and the receipt of
such approval; (b) the filing by First Midwest of an application with the CBRE
for prior approval of the transactions contemplated by this Agreement and the
receipt of such approval; (c) the filing by Geraldine C. Cowlin of a change in
control application with the Federal Reserve Board and the receipt of the
approval of the Federal Reserve Board; (d) the filing by First Midwest of the
Registration Statement with the SEC; (e) the filing of the Certificate of Merger
with respect to the Merger with the Secretary of State of the State of Delaware;
(f) the filing of an application with the OCC to consummate the transactions
described in Section 1.06 hereof and the receipt of the OCC's approval; (g) any
filings, approvals or non-action letters with or from state securities
authorities; (h) any anti-trust filings, consents, waivers or approvals; and (i)
the filing by First Midwest of an application to list the shares of First
Midwest Common Stock to be issued to the Stockholders on the NASDAQ National
Market, subject to official notice of issuance.
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3.04 Antitakeover Provisions Inapplicable. No "business combination,"
"moratorium," "control share" or other state antitakeover statute or regulation,
(i) prohibits or restricts SparBank's ability to perform its obligations under
this Agreement or its ability to consummate the transactions contemplated
hereby, (ii) would have the effect of invalidating or voiding this Agreement, or
any provision hereof, or (iii) would subject First Midwest to any material
impediment or condition in connection with the exercise of any of its rights
under this Agreement. The Board of Directors of SparBank has unanimously
approved the execution of this Agreement.
3.05 Capitalization and Stockholders. (a) As of the date hereof, the
authorized capital stock of SparBank consists of (i) 320,000 shares of SparBank
Common Stock, no par value per share, of which no more than 148,723 shares are
issued and outstanding and 3 shares are held as treasury shares and (ii) 20,000
shares of preferred stock, no par value, none of which are issued and
outstanding. All of the issued and outstanding shares of SparBank Common Stock
have been duly and validly authorized and issued, and are fully paid and non-
assessable. None of the outstanding shares of SparBank Common Stock are subject
to any preemptive rights of the current or past stockholders of SparBank.
(b) There are no shares of capital stock or other equity securities
of SparBank 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 SparBank, or contracts, commitments, understandings, or arrangements by
which SparBank 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.
(c) The Disclosure Schedule of SparBank accurately identifies the
names and addresses of all of the Stockholders who, to SparBank's knowledge,
beneficially own more than 5% of the shares of SparBank Common Stock and the
number of shares of Common Stock of SparBank held by each such Stockholder and
by each director and senior officer of SparBank. From the date hereof until the
Effective Time, SparBank shall, upon request, provide First Midwest with a
complete list of all of its Stockholders of record, including the names,
addresses and number of shares of SparBank Common Stock held by each
Stockholder. Without the advance written consent of SparBank, First Midwest will
not disclose or make use of the information provided by SparBank pursuant hereto
except as may be required in connection with regulatory or other filings
permitted by this Agreement, or as is otherwise specifically permitted by this
Agreement.
3.06 SparBank Financial Statements; Material Changes. SparBank has
heretofore delivered to First Midwest its audited, consolidated financial
statements for the years ended December 31, 1995 and December 31, 1994, and
SparBank's unaudited consolidated financial statements for the year ended
December 31, 1996 and the quarter ended March 31, 1997 (the "SparBank Financial
Statements"). The SparBank Financial Statements (x) are true and correct in all
material respects; (y) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and, except in the case of the
unaudited consolidated financial statements, for the
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absence of footnotes and for normal and recurring year-end adjustments which are
not material); and (z) fairly present the consolidated financial position of
SparBank as of the dates thereof and the consolidated results of its operations,
stockholders' equity and changes in financial position for the periods then
ended. Since December 31, 1996 to the date hereof, SparBank and the SparBank
Subsidiaries have not undergone or suffered any changes in their respective
condition (financial or otherwise), properties, assets, liabilities, business or
operations which have been, in any case or in the aggregate, materially adverse
to SparBank on a consolidated basis except as disclosed in the SparBank
Financial Statements or on the Disclosure Schedule of SparBank. No facts or
circumstances have been discovered by SparBank from which it reasonably appears
that there is a significant risk and reasonable probability that SparBank will
suffer or experience a Material Adverse Effect.
3.07 SparBank Subsidiaries. (a) All of the SparBank Subsidiaries as of the
date of this Agreement are listed in the Disclosure Schedule of SparBank.
SparBank owns directly or indirectly all of the issued and outstanding shares of
capital stock of the SparBank Subsidiaries, except for the 600 shares of Bank
Common Stock held by minority stockholders of the Bank. The Disclosure Schedule
of SparBank accurately identifies the number of shares of authorized and
outstanding capital stock of the SparBank Subsidiaries. Except as set forth in
the Disclosure Schedule of SparBank, neither SparBank nor the SparBank
Subsidiaries owns directly or indirectly any debt or equity securities, or other
proprietary interest in any other corporation, joint venture, partnership,
entity, association or other business. No capital stock of any of the SparBank
Subsidiaries is or may become required to be issued (other than to SparBank) by
reason of any 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 any
SparBank Subsidiary. There are no contracts, commitments, understandings or
arrangements relating to the rights of SparBank to vote or to dispose of shares
of the capital stock of a SparBank Subsidiary. All of the shares of capital
stock of each SparBank Subsidiary held by SparBank or a SparBank Subsidiary are
fully paid and non-assessable and are owned by SparBank free and clear of any
claim, lien or encumbrance, except as disclosed on the Disclosure Schedule of
SparBank.
(b) Each SparBank Subsidiary is either an Illinois banking
corporation or a corporation and is 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 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 so qualify, either individually or in the aggregate, would
not have a Material Adverse Effect on SparBank or its ability to consummate the
transactions contemplated herein. Each SparBank Subsidiary has the corporate
power and authority necessary for it to own, operate or lease its assets,
properties and business and to carry on its business substantially as they have
been and are now being conducted.
(c) For purposes of this Agreement, "SparBank Subsidiaries" shall
mean all those corporations, banks, savings banks, associations, and other
entities of which SparBank owns or controls 5% or more of the outstanding equity
securities either directly or through an unbroken chain
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of entities as to each of which 5% or more of the outstanding equity securities
is owned directly or indirectly by its parent; 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, through a small business
investment corporation, or otherwise as an investment by an entity that invests
in unaffiliated companies in the ordinary course of business.
(d) Except as set forth on the Disclosure Schedule of SparBank, each
of the SparBank Subsidiaries that is a bank is an "insured depository
institution" as defined in the FDIA and applicable regulations thereunder, the
deposits of which are insured by the FDIC through the Bank Insurance Fund to the
full extent permitted under applicable law.
3.08 SparBank Reports. Since January 1, 1992, or the date of acquisition
by SparBank if later, each of SparBank and the SparBank 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 (i) the Federal Reserve Board, (ii) the FDIC, (iii) the
CBRE and (iv) any applicable state banking, insurance, securities, or other
regulatory authorities (except in each case filings which are not material). 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. Except for
normal examinations conducted by the Internal Revenue Service, state and local
taxing authorities, the CBRE, the FRB or the FDIC in the regular course of the
business of SparBank or the SparBank Subsidiaries, no federal, state or local
governmental agency, commission or other entity has initiated any proceeding or,
to the best knowledge of SparBank, investigation into the business or operations
of SparBank or the SparBank Subsidiaries within the past five (5) years except
as set forth on the Disclosure Schedule of SparBank. There is no unresolved
violation, criticism or exception by the Federal Reserve Board, the CBRE, the
FDIC or other agency, commission or entity with respect to any report or
statement referred to herein that has or, insofar as reasonably can be seen in
the future, is expected to have a Material Adverse Effect on SparBank.
3.09 Compliance With Laws. (a) Except as disclosed in the Disclosure
Schedule of SparBank, the businesses of SparBank and the SparBank Subsidiaries
are not being conducted in violation of any law, ordinance or regulation of any
governmental entity, including, without limitation, any laws affecting financial
institutions (including those pertaining to the Bank Secrecy Act, the investment
of funds, the lending of money, the collection of interest and the extension of
credit), 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
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to employee benefits, and any statutes or ordinances relating to the properties
occupied or used by SparBank or any SparBank Subsidiary, except for possible
violations which either singly or in the aggregate do not and, insofar as
reasonably can be foreseen in the future, will not have a Material Adverse
Effect on SparBank.
(b) The policies, programs and practices of SparBank and the SparBank
Subsidiaries relating to wages, hours of work, and other terms and conditions of
employment are in compliance in all material respects with applicable laws,
orders, regulations, public policies and ordinances governing employment and
terms and conditions of employment. There are no disputes, claims, or charges,
pending or, to SparBank's knowledge, threatened, against SparBank or any
SparBank Subsidiary alleging breach of any express or implied employment
contract or commitment, or material breach of any applicable law, order,
regulation, public policy or ordinance relating to employment or terms and
conditions of employment, and, to the best of the knowledge of SparBank, there
is no basis for any valid claim or charge with regard to such matters.
(c) SparBank and each of the SparBank Subsidiaries, where applicable,
is in substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder. As of the
date of this Agreement, SparBank has not been advised of the existence of any
act or circumstance or set of facts or circumstances which, if true, would cause
SparBank or any of the SparBank Subsidiaries to fail to be in substantial
compliance with such provisions. None of the SparBank Subsidiaries have received
a rating from the applicable regulatory authority which is less than
"satisfactory" since January 1, 1994.
3.10 Litigation. Except as disclosed in the Disclosure Schedule of
SparBank there is no suit, action, investigation or proceeding, legal, quasi-
judicial, administrative or otherwise, pending or, to the best of the knowledge
of SparBank, threatened against or affecting SparBank or any SparBank
Subsidiary, or any of their respective officers, directors, employees or agents,
in their capacities as such, which, if adversely determined, would have a
Material Adverse Effect on SparBank or which would materially affect the ability
of SparBank 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 SparBank or any SparBank 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.
3.11 Licenses. SparBank and the SparBank Subsidiaries hold all licenses,
certificates, permits, franchises and all patents, trademarks, service marks,
trade names, copyrights or rights thereto, and adequate 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.
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3.12 Taxes. (a) Except as disclosed in the Disclosure Schedule of
SparBank, SparBank and the SparBank Subsidiaries have each timely filed all tax
and information returns required to be filed and have paid (or SparBank has paid
on behalf of its Subsidiaries), or have accrued on their respective books and
set up an adequate reserve for the payment of, all taxes reflected on such
returns as required to be paid in respect of the periods covered by such returns
and have accrued on their respective books and set up an adequate reserve for
the payment of all income and other taxes anticipated to be payable in respect
of periods through the end of the calendar month next preceding the date hereof.
Neither SparBank nor any SparBank 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 SparBank or any SparBank 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. The income tax returns
of SparBank and each SparBank Subsidiary have not been audited by the Internal
Revenue Service for any of the last sixteen (16) years and the Illinois income
tax returns are currently being audited by the Illinois Department of Revenue
for the years 1993, 1994 and 1995. Neither SparBank nor any SparBank Subsidiary
is a party to any action or proceeding by any governmental authority for the
assessment or the collection of taxes. Deferred taxes of SparBank have been
accounted for in accordance with generally accepted accounting principles.
(b) SparBank has not filed any consolidated federal income tax return
with an "affiliated group" (within the meaning of Section 1504 of the Code)
where SparBank was not the common parent of the group. Neither SparBank nor any
SparBank 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 SparBank or a SparBank Subsidiary.
(c) Each of SparBank and the SparBank Subsidiaries has withheld
amounts from its employees, stockholders or holders of public deposit accounts
in compliance with the tax withholding provisions of applicable federal, state
and local laws, has filed all federal, state and local returns and reports for
all years for which any such return or report would be due with respect to
employee 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 and, except as set forth in the Disclosure Schedule of SparBank, has
notified all employees, stockholders and holders of public deposit accounts of
their obligations to file all forms, statements or reports with it in accordance
with applicable federal, state and local tax laws and has taken reasonable steps
to insure that such employees, stockholders and holders of public deposit
accounts have filed all such forms, statements and reports with it.
3.13 Insurance. SparBank and the SparBank Subsidiaries maintain insurance
with an insurer which in the best judgment of management of SparBank is sound
and reputable, on their respective assets, and upon their respective businesses
and operations, against loss or damage, risks, hazards and liabilities of the
kinds customarily insured against by prudent corporations engaged in the same or
similar businesses. SparBank and the SparBank 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
SparBank and the SparBank Subsidiaries have
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been filed in due and timely fashion. Neither SparBank nor any SparBank
Subsidiary has had an insurance policy canceled by the issuer of the policy
within the past five (5) years.
3.14 Loans; Investments. (a) Except as otherwise disclosed in the
Disclosure Schedule of SparBank, each material loan reflected as an asset on the
SparBank Financial Statement, dated as of March 31, 1997, is evidenced by
appropriate and sufficient documentation and constitutes, to the best of the
knowledge of SparBank, 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;
to the best of the knowledge of SparBank, no obligor named therein is seeking to
avoid the enforceability of the terms of any such loan under any such laws or
equitable principles or doctrines and no such loan is subject to any defense,
offset or counterclaim. All such loans originated by SparBank or a SparBank
Subsidiary, and to the best of the knowledge of SparBank, all such loans
purchased by SparBank or a SparBank Subsidiary, were made or purchased in
accordance with customary lending standards of SparBank or the purchasing
SparBank Subsidiary and in the ordinary course of business of SparBank or the
SparBank Subsidiary. Except as set forth in the Disclosure Schedule of SparBank,
all such loans are, and at the Effective Time will be, free and clear of any
security interest, lien, encumbrance or other charge, and SparBank and each
SparBank Subsidiary have complied, and at the Effective Time will have complied,
in all material respects, with all laws and regulations relating to such loans.
Except as set forth in the Disclosure Schedule of SparBank, there are no loans
or other assets of SparBank or any SparBank Subsidiary in excess of $200,000
that have been classified by examiners as "Other Assets Specially Mentioned,"
"Substandard," "Doubtful" or "Loss" as of March 31, 1997. Set forth on
Disclosure Schedule of SparBank is a complete list of SparBank's and each
SparBank Subsidiary's OREO as of March 31, 1997.
(b) All guarantees of indebtedness owed to SparBank or any SparBank
Subsidiary, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and federal
agencies, are, to the best of the knowledge of SparBank, 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 and except as would not be material to SparBank on a
consolidated basis.
(c) In originating, underwriting, servicing, and discharging loans,
mortgages, land contracts, and contractual obligations relating thereto, either
for their own account or for the account of others, SparBank and the SparBank
Subsidiaries have complied with all applicable terms and conditions of such
obligations and with all applicable laws, regulations, rules, contractual
requirements, and procedures with respect to such servicing, except where the
failure to comply would not have a Material Adverse Effect on SparBank.
(d) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which SparBank or any of
SparBank Subsidiaries is a party or by which any of their properties or assets
may be bound were entered into in the ordinary course
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of business and, to the best knowledge of SparBank, in accordance with then
customary practice and applicable rules, regulations and policies of bank
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. SparBank and the SparBank 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 SparBank, 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 mortgage backed
security financing arrangements, to accelerate, discontinue, terminate or
otherwise modify any such agreement or arrangement or would require SparBank or
any SparBank Subsidiary to recognize any gain or loss with respect to such
arrangement.
(e) Except as set forth in the Disclosure Schedule of SparBank and
except for pledges to secure public and trust deposits, none of the investments
reflected in the SparBank Financial Statement, dated as of December 31, 1996,
under the headings "Investment Securities," and none of the investments made by
SparBank or any SparBank Subsidiary since December 31, 1996, is subject to any
restriction, whether contractual or statutory, which materially impairs the
ability of SparBank or any SparBank Subsidiary freely to dispose of such
investment at any time. With respect to all material repurchase agreements to
which SparBank or any SparBank Subsidiary is a party, SparBank or such
Subsidiary has a valid, perfected first lien or security interest in the
government securities or other collateral securing each such repurchase
agreement, and the value of the collateral securing each such repurchase
agreement equals or exceeds the amount of the debt secured by such collateral
under such agreement. Except as set forth in the Disclosure Schedule of SparBank
and except for transactions aggregating less than $100,000, neither SparBank nor
any SparBank Subsidiary has sold or otherwise disposed of any assets in a
transaction in which the acquiror of such assets or other person has the right,
either conditionally or absolutely, to require SparBank or any SparBank
Subsidiary to repurchase or otherwise reacquire any such assets. Set forth on
the Disclosure Schedule of SparBank is a complete and accurate list of each
investment and debt security, mortgage-backed and related securities, marketable
equity securities and securities purchased under agreements to resell owned by
SparBank or any SparBank Subsidiary, showing as of April 30, 1997, the carrying
values and estimated fair values of investment and debt securities, the gross
carrying value and estimated fair value of the mortgage-backed and related
securities and the estimated cost and estimated fair value of the marketable
equity securities.
(f) All United States Treasury securities, obligations of other
United States Government agencies and corporations, obligations of States of the
United States and their political subdivisions, and other investment securities
classified as "held to maturity" and "available for sale" held by SparBank and
the SparBank Subsidiaries, as reflected in the SparBank Financial Statement,
dated December 31, 1996, were classified and accounted for in accordance with
F.A.S.B. 115 and the intentions of management.
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3.15 Allowance for Possible Loan Losses. The allowance for possible loan
losses shown on the SparBank Financial Statement, dated as of December 31, 1996
(and as shown on any financial statements to be delivered by SparBank to First
Midwest pursuant to Section 6.07 hereof), to the best of the knowledge of
SparBank, as of such date 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 an additional amount of unallocated reserves for
unanticipated future losses at a level considered adequate under the standards
applied by applicable federal and/or state regulatory authorities and based upon
generally accepted practices applicable to financial institutions. To the best
of the knowledge of SparBank, the aggregate principal amount of loans contained
(or to be contained) in the loan portfolio of SparBank as of December 31, 1996
(and as of the dates of any financial statements to be delivered by SparBank to
First Midwest pursuant to Section 6.07 hereof), in excess of such reserve, was
(and will be) fully collectible.
3.16 SparBank Benefit Plans. (a) The SparBank Disclosure Schedule contains
a list and a true and correct copy (or, a description with respect to any oral
employee benefit plan, practice, policy or arrangement), including all
amendments thereto, of each compensation, consulting, employment, termination or
collective bargaining agreement, and each stock option, stock purchase, stock
appreciation right, recognition and retention, 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 or written, covering
employees, former employees, directors or former directors of SparBank or any
SparBank Subsidiary or their respective beneficiaries, including, but not
limited to, any employee benefit plans within the meaning of Section 3(3) of
ERISA, which SparBank or any SparBank Subsidiary maintains, to which SparBank or
any SparBank Subsidiary contributes, or under which any employee, former
employee, director or former director of SparBank or any SparBank Subsidiary is
covered or has benefit rights and pursuant to which any liability of SparBank or
any SparBank Subsidiary exists or is reasonably likely to occur (the "SparBank
Benefit Plans"), and current summary plan description, trust agreement,
insurance contracts, actuarial reports and valuations, financial statements and
IRS Forms 5500 or 5500-C with respect thereto. Except as set forth in the
Disclosure Schedule of SparBank, SparBank neither maintains nor has entered into
any SparBank Benefit Plan or other document, plan or agreement which contains
any change in control provisions which would cause an increase or acceleration
of benefits or benefit entitlements to employees or former employees of SparBank
or any SparBank Subsidiary or their respective beneficiaries, or other
provisions, which would cause an increase in the liability of SparBank, any
SparBank Subsidiary or of First Midwest as a result of the transactions
contemplated by this Agreement or any related action thereafter (a "Change in
Control Benefit"). The term "SparBank Benefit Plans" as used herein refers to
all plans contemplated under the preceding sentences of this Section 3.16,
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 the Disclosure Schedule of SparBank, no Benefit
Plan is a multi-employer plan within the meaning of Section 3(37) of ERISA. All
payments and
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other compensation paid or payable by SparBank or any SparBank Subsidiary under
this Agreement, any SparBank Benefit Plan or otherwise, to or for the benefit of
any employee or director of SparBank or any SparBank Subsidiary, are in
compliance with all applicable rules, regulations and bulletins promulgated by
the FDIC.
(b) Each of the SparBank Benefit Plans that is intended to be a
pension, profit sharing, stock bonus, thrift, savings or employee stock
ownership plan that is qualified under Section 401(a) of the Code ("SparBank
Qualified Plans") has been determined by the Internal Revenue Service to qualify
under Section 401(a) of the Code, or an application for determination of such
qualification has been timely made to the Internal Revenue Service 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
the Disclosure Schedule of SparBank), and, to the best of SparBank's knowledge,
there exist no circumstances (other than circumstances caused by transactions
contemplated in this Agreement or any related actions) likely to materially
adversely affect the qualified status of any such SparBank Qualified Plan. All
such SparBank Qualified Plans established or maintained by SparBank or the
SparBank Subsidiaries or to which SparBank or the SparBank 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 in effect as of the Effective Time) of the Code for obtaining the
tax benefits the Code thereupon permits with respect to such SparBank Qualified
Plans. Each SparBank Qualified Plan that is a defined benefit pension plan which
is subject to Title IV of ERISA has assets with an aggregate value that are not
less than the actuarially determined present value of its liability for accrued
benefits as determined on the basis of the actuarial assumptions used for the
most recent valuation of such Plan and no such Plan has an accumulated funding
deficiency within the meaning of Section 412(a) of the Code. All accrued
contributions and other payments required to be made by SparBank or any SparBank
Subsidiary to any SparBank Benefit Plan through December 31, 1996, have been
made or reserves adequate for such purposes as of December 31, 1996, have been
set aside therefor and reflected in the SparBank Financial Statement, dated as
of December 31, 1996. Neither SparBank nor any SparBank Subsidiary is in
material default in performing any of its respective contractual obligations
under any of the SparBank 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 SparBank,
threatened litigation or pending claim (other than benefit claims made in the
ordinary course) by or on behalf of or against any of the SparBank Benefit Plans
(or with respect to the administration of any of such Plans) now or heretofore
maintained by SparBank or any SparBank Subsidiary which allege violations of
applicable state or federal law which are reasonably likely to result in a
liability on the part of SparBank or any SparBank Subsidiary or any such Plan.
(d) SparBank and the SparBank Subsidiaries and all other persons
having fiduciary or other responsibilities or duties with respect to any
SparBank Benefit Plan are and have
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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 PBGC and the Internal
Revenue Service under ERISA, the Code or any other applicable law. No
"reportable event" (as defined in Section 4043(c) of ERISA) has occurred with
respect to any SparBank Benefit Plan. No SparBank 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(a) of the Code) or any
liability under Section 601 of ERISA or Section 4980 of the Code.
(e) Neither SparBank nor any SparBank Subsidiary has incurred, nor to
the best knowledge of SparBank or any SparBank Subsidiary is reasonably likely
to incur, any liability under Title IV of ERISA in connection with any Plan
subject to the provisions of Title IV of ERISA now or heretofore maintained or
contributed to by SparBank or by any SparBank Subsidiary.
(f) Neither SparBank nor any SparBank Subsidiary has made any
payments, or is or has been a party to any agreement or any SparBank Benefit
Plan, that under any circumstances could obligate SparBank or any SparBank
Subsidiary to make payments that are or will not be deductible because of
Section 280G of the Code.
(g) The Disclosure Schedule of SparBank describes any obligation that
SparBank or any SparBank 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 coverages and their ages.
(h) The Disclosure Schedule of SparBank lists: (i) each officer of
SparBank and any SparBank Subsidiary and each director of SparBank who is
eligible to receive a Change in Control Benefit, showing the amount of each such
Change in Control Benefit, estimated compensation for 1997 based upon
compensation received to the date of this Agreement, and the individual's rate
of compensation in effect on the date of this Agreement, the individual's
participation in any bonus or other employee benefit plan, and such individual's
compensation from SparBank or any SparBank Subsidiary for each of the calendar
years 1992 through 1996 as reported by SparBank or a SparBank Subsidiary on Form
W-2 or Form 1099; (ii) each other employee of SparBank or the SparBank
Subsidiaries who may be eligible for a Change in Control Benefit, showing the
number of years of service of each such employee together with his or her
estimated compensation for 1997; and (iii) each officer or director for whom a
deferred compensation agreement is maintained, showing the amounts due
thereunder and the payment schedule thereof, and the amounts accrued in the
SparBank Financial Statement, dated December 31, 1996.
(i) SparBank and the SparBank 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 SparBank Benefit Plan with the Internal Revenue
Service, the PBGC, the Department of Labor, as prescribed
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by the Code or ERISA, or regulations issued thereunder. All such filings, as
amended, were complete and accurate in all material respects as of the dates of
such filings, and there were no misstatements or omissions in any such filing
which would be material to the financial condition of SparBank on a consolidated
basis.
3.17 Compliance with Environmental Laws. (a) Except as set forth in the
Disclosure Schedule of SparBank: (i) to the best of the knowledge of SparBank,
the operations of SparBank and each of the SparBank Subsidiaries comply in all
material respects with all applicable past and present Environmental Laws; (ii)
to the best of the knowledge of SparBank, none of the operations of SparBank or
any SparBank Subsidiary, no assets presently or formerly owned or leased by
SparBank or any SparBank Subsidiary and, to the best of the knowledge of
SparBank, no Mortgaged Premises or 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 the subject of any claims
alleging damages to health or property, pursuant to which SparBank, any SparBank
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 SparBank or
any SparBank Subsidiary, no assets presently owned or, to the best of the
knowledge of SparBank, formerly owned by SparBank or any SparBank Subsidiary,
and, to the best of the knowledge of SparBank, no Mortgaged Premises or a
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, or any other substance
into the environment, nor has SparBank or any SparBank Subsidiary, or, to the
best of the knowledge of SparBank, 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 SparBank nor any SparBank Subsidiary, nor, to the best of the
knowledge of SparBank, 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 (i) the real estate owned (other than OREO) or
leased by SparBank or any SparBank Subsidiary; (ii) OREO presently or formerly
held by SparBank; and (iii) to the best of SparBank's knowledge, any real estate
formerly owned (other than OREO) or leased by SparBank or any SparBank
Subsidiary (the "SparBank Premises") to the best of the knowledge of SparBank:
(x) no part of the SparBank Premises has been used for the generation,
manufacture, handling, storage, or disposal of Hazardous Substances; (y) except
as disclosed in the Disclosure Schedule of SparBank, the SparBank Premises do
not contain, and have never contained, an underground storage tank; and (z)
except as disclosed in the Disclosure Schedule of SparBank, the SparBank
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 the Disclosure Statement of SparBank as an exception to the foregoing, to the
best of the knowledge of SparBank, such underground storage tank presently or
previously located on the SparBank Premises is or has been maintained or
removed, as applicable, in compliance with Environmental Laws, and has not
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been the source of any release of a Hazardous Substance into the environment,
unless otherwise set forth in the Disclosure Schedule of SparBank.
(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
SparBank or any SparBank Subsidiary 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 SparBank or any SparBank Subsidiary a lien thereon or
security interest therein; provided, however, that the term "Mortgaged Premises"
shall not include one to four unit single family residences. For purposes of
this Section, "Participating Facility" means any property in which SparBank or
any SparBank Subsidiary 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., (S)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.
3.18 Disclosure Schedule of SparBank. The Disclosure Schedule of SparBank
contains, and shall be supplemented by SparBank, as required by Section 6.10
hereof, so as to contain at the Closing Date, in addition to the other
instruments, documents, lists and other matters mentioned herein, copies of each
of the following documents, certified by an officer of SparBank to be true and
correct copies of such documents on the dates of such certificates.
(a) A list and description of (i) each outstanding loan agreement,
mortgage, pledge agreement or other similar document or commitments to extend
credit to any officer or director of SparBank or any SparBank Subsidiary, and
(ii) a listing of all deposits or deposit surrogates (with the exception of
checking and savings accounts with a balance of less than $5,000), including the
amount, type and interest being paid thereon, to which SparBank or any SparBank
Subsidiary is a party under which it may (contingently or otherwise) have any
liability involving any officer or director of SparBank or a SparBank
Subsidiary.
(b) A list and description of each outstanding letter of credit and
each commitment to issue a letter of credit in excess of $100,000 to which
SparBank or any SparBank Subsidiary is a party and/or under which it may
(contingently or otherwise) have any liability.
(c) A list and description of each material contract or agreement
(not otherwise included in the Disclosure Schedule of SparBank or specifically
excluded therefrom in accordance
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with the terms of this Agreement) involving goods, services or occupancy and
which (i) has a term of more than six (6) months; (ii) cannot be terminated on
thirty (30) days (or less) written notice without penalty; and (iii) involves an
annual expenditure by SparBank or any SparBank Subsidiary in excess of $25,000.
(d) A list and description of each contract or commitment (other than
Permitted Liens as defined in Section 3.21(c)) hereof affecting ownership of,
title to, use of, or any interest in real estate which is currently owned by
SparBank or any SparBank Subsidiary, and a list and description of all real
estate owned, leased or licensed by SparBank or any SparBank Subsidiary.
(e) A list of all fees, salaries, bonuses and other forms of
compensation including but not limited to, country club memberships, automobiles
available for personal use, and credit cards available for personal use,
provided by SparBank or any SparBank Subsidiary to any employee, officer, or
director or former employee, officer or director of SparBank or any SparBank
Subsidiary who earned in excess of $50,000 in 1996.
(f) A list and description of each material commitment made by
SparBank or any SparBank Subsidiary to or with any director, officer or employee
of SparBank or any SparBank Subsidiary extending for a period of more than three
(3) months from the date hereof or providing for earlier termination only upon
the payment of a penalty or equivalent thereto.
(g) Complete and correct copies of the Certificate of Incorporation,
Charters and By-laws and specimen certificates of each type of security issued
by SparBank and each SparBank Subsidiary.
(h) A list and description of each other contract or commitment
providing for payment based in any manner upon outstanding loans or profits of
SparBank or any SparBank Subsidiary.
(i) A list and description of all powers of attorney granted by
SparBank or any SparBank Subsidiary which are currently in force.
(j) A list and description of all policies of insurance currently
maintained by SparBank or any SparBank Subsidiary and those policies maintained
during the past five (5) years and a list and description of all unsettled or
outstanding claims of SparBank or any SparBank Subsidiary which have been, or to
the best of the knowledge of SparBank, will be, filed with the companies
providing insurance coverage for SparBank or any SparBank Subsidiary (except for
routine claims for health benefits).
(k) A copy of any collective bargaining agreement to which SparBank
or any SparBank Subsidiary is a party and all affirmative action plans or
programs covering employees of SparBank or any SparBank Subsidiary, as well as
all employee handbooks, policy manuals, rules and standards of employment
promulgated by SparBank or any SparBank Subsidiary.
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(l) A list and description of each lease or license with respect to
real or personal property, whether as lessor, lessee, licensor or licensee, with
annual rental or other payments due thereunder in excess of $25,000 to which
SparBank or any SparBank Subsidiary is a party, which does not expire within six
(6) months from the date hereof and cannot be terminated upon thirty (30) days
(or less) written notice without penalty.
(m) All employment, consulting and professional services contracts to
which SparBank or any SparBank Subsidiary is a party.
(n) All judgments, orders, injunctions, court decrees or settlement
agreements arising out of or relating to the labor and employment practices or
decisions of SparBank or any SparBank Subsidiary which, by their terms, continue
to bind or affect SparBank or any SparBank Subsidiary.
(o) All orders, decrees, memorandums, agreements or understandings
with regulatory agencies binding upon or affecting the current operations of
SparBank or any SparBank Subsidiary or any of their directors or officers in
their capacities as such.
(p) A list and description of all trademarks, trade names, service
marks, patents, or copyrights, whether registered or the subject of an
application for registration, which are owned by SparBank or any SparBank
Subsidiary or licensed from a third party (including computer software programs,
codes and related materials);
(q) All policies formally adopted by the Board of Directors of
SparBank or any SparBank Subsidiary as currently in effect and, with respect to
environmental matters, and copies of all policies that have been in effect
during the last five (5) years regarding the performance of environmental
investigations of properties accepted as collateral for loans, including the
effective dates of all such policies.
(r) A list and description of all other agreements to which SparBank
or any SparBank Subsidiary is a party (which do not expire within six (6) months
from the date hereof and cannot be terminated upon thirty (30) days (or less)
written notice without penalty) which individually during its term could commit
SparBank or any SparBank Subsidiary to an expenditure (either individually or
through a series of installments) in excess of $25,000 or which create a
material right or benefit to receive payments, goods or services not referred to
elsewhere in this Section 3.18 including without limitation:
(i) all agreements of guaranty or indemnification
running to any person;
(ii) all agreements containing any covenant limiting
the right of SparBank or any SparBank
Subsidiary to engage in any line of business or
to compete with any person;
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(iii) all agreements with respect to licenses, permits
and similar matters that are necessary to the
operations of SparBank or any SparBank
Subsidiary (including computer software
programs, source codes and related materials);
(iv) all agreements which require the consent or
approval of any other party in order to
consummate the Merger;
(v) all agreements relating to the servicing of loans
and all mortgage forward commitments and similar
agreements pursuant to which SparBank or any
SparBank Subsidiary sells to others mortgages
which it originates;
(vi) all contracts relating to the purchase or sale
of financial or other futures, or any put or
call option relating to cash, securities or
commodities and all interest rate swap
agreements or other agreements relating to the
hedging of interest rate risks and all
agreements or arrangements described in
Section 3.14(d) hereof; and
(vii) all contracts or agreements (with the exception
of the Freddie Mac Seller's Guide), including
but not limited to contracts or agreements
pursuant to which SparBank or any SparBank
Subsidiary has sold, transferred, assigned or
agreed to service any loan, which provide for
any recourse or indemnification obligation on
the part of SparBank or any SparBank
Subsidiary; the name and address of each person
which might or could be entitled to recourse
against or indemnification from SparBank or any
SparBank Subsidiary; and the monetary amount of
each actual or potential recourse or
indemnification obligation under each such
contract or agreement.
3.19 Defaults. There has not been any material default in any obligation to
be performed by SparBank or any SparBank Subsidiary under any material contract
or commitment, and neither SparBank nor any SparBank Subsidiary has waived, and
will not waive prior to the Effective Time, any material right under any
material contract or commitment. To the best of the knowledge of SparBank, no
other party to any material contract or commitment is in material default in any
material obligation to be performed by such party.
3.20 Materiality. For purposes of Sections 3.18 and 3.19, a contract,
commitment or agreement is material if it involves the payment by or liability
(contingent or otherwise) of SparBank or any SparBank Subsidiary in any amount
in excess of $1,000,000 or if such contract together with
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other related contracts involving less than $1,000,000 and not listed in the
Disclosure Schedule of SparBank for that reason, exceed $1,000,000 in the
aggregate.
3.21 Operations Since December 31, 1996. Between December 31, 1996, and the
date hereof, there has not been, except as otherwise contemplated by this
Agreement or as set forth on the Disclosure Schedule of SparBank or on any
mutually accepted up-date thereof:
(a) any increase in the compensation payable or to become payable by
SparBank or any SparBank Subsidiary to any executive officer or director other
than annual increases which became effective as of January 1, 1997;
(b) any payment of dividends by SparBank or any SparBank Subsidiary
or any distribution by any of them, whether directly or indirectly, of any
assets of any kind whatsoever, on or in redemption or as the purchase price of,
any of their respective capital stocks, or any prepayment of any indebtedness to
any stockholder;
(c) any mortgage, pledge or subjection to lien, charge or encumbrance
of any kind of or on any asset, tangible or intangible, of SparBank or any
SparBank Subsidiary, except the following (each of which, whether arising before
or after the date hereof, is herein referred to as a "SparBank Permitted Lien"):
(i) liens arising out of judgments or awards in respect of which SparBank or any
SparBank Subsidiary is in good faith prosecuting an appeal or proceedings for
review and in respect of which it has secured a subsisting stay of execution
pending such appeal or proceedings; (ii) liens for taxes, assessments, and other
governmental charges or levies, the payment of which is not past due, or as to
which SparBank or any SparBank Subsidiary is diligently contesting in good faith
and by appropriate proceedings 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 in the operation of the business of SparBank or any SparBank Subsidiary
or the merchantability or the value of such property or interest therein for the
purpose of such business; (v) purchase money mortgages or other purchase money
or vendor's liens or security interests (including, without limitation, finance
leases), provided that no such mortgage, lien or security interest shall extend
to or cover any other property of SparBank or any SparBank Subsidiary other than
that so purchased; and (vi) pledges and liens given to secure deposits and other
liabilities of SparBank or any SparBank Subsidiary arising in the ordinary
course of banking business;
(d) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase thereof), by
SparBank or any SparBank Subsidiary for borrowed money, or otherwise, other than
in the ordinary course of business, none of which (except those which are being
disputed in good faith) is in default;
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(e) the establishment of any new, or increase in the formula for
contributions to or benefits under any existing, retirement, pension, profit
sharing, stock bonus, savings or thrift plan, or any similar plan of deferred
compensation, whether funded or unfunded and whether qualified or unqualified
(within the meaning of the Code) by SparBank or any SparBank Subsidiary;
(f) any action by SparBank or any SparBank 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 SparBank or any SparBank 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, SparBank shall promptly notify First Midwest;
(g) any change in SparBank's independent auditors, historic methods
of accounting (other than as required by generally accepted accounting
principles or regulatory accounting principles), or in its system for
maintaining its equipment and real estate;
(h) any purchase, whether for cash or secured or unsecured
obligations (including finance leases), by SparBank or any SparBank Subsidiary
of any fixed asset which either (i) has a purchase price individually or in the
aggregate in excess of $25,000 or (ii) is outside of the ordinary course of
business;
(i) any sale or transfer of any asset in excess of $25,000 of
SparBank or any SparBank Subsidiary or outside of the ordinary course of
business with the exception of loans and marketable securities sold in the
ordinary course of business at market prices;
(j) any cancellation or compromise of any debt to, claim by or right
of, SparBank any SparBank Subsidiary except in the ordinary course of business;
(k) any amendment or termination of any material contract or
commitment (as defined in Section 3.20 above) to which SparBank or any SparBank
Subsidiary is a party, other than in the ordinary course of business; or
(l) any event or condition of any character (other than changes in
legal, economic or other conditions which are not specially or uniquely
applicable to SparBank or any SparBank Subsidiary) which has had, or insofar as
may reasonably be foreseen in the future, may have a Material Adverse Effect on
SparBank.
3.22 Corporate Records. The corporate record books, transfer books and
stock ledgers of SparBank or any SparBank Subsidiary are complete and accurate
in all material respects and reflect all meetings, consents and other material
actions of the organizers, incorporators, stockholders, Boards of Directors and
committees of the Boards of Directors of SparBank and each
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such Subsidiary, and all transactions in their respective capital stocks, since
their respective inceptions.
3.23 Undisclosed Liabilities. All of the Liabilities have, in the case of
SparBank and the SparBank Subsidiaries, been reflected, disclosed or reserved
against in the consolidated financial statements of SparBank as at December 31,
1996 or in the notes thereto, and SparBank and the SparBank Subsidiaries have no
other Liabilities except (a) Liabilities incurred since December 31, 1996 in the
ordinary course of business or (b) as disclosed in the Disclosure Schedule of
SparBank.
3.24 Assets. (a) SparBank and the SparBank Subsidiaries have good,
sufficient and marketable title to their real properties, including any
leaseholds and ground leases, and their other assets and properties, all as
reflected as owned by SparBank or any SparBank Subsidiary in the SparBank
Financial Statement, dated as of December 31, 1996 except for (i) assets and
properties disposed of since such date in the ordinary course of business and
(ii) SparBank Permitted Liens none of which, in the aggregate, except as set
forth in the Disclosure Schedule of SparBank, are material to the assets of
SparBank on a consolidated basis. All buildings, structures, fixtures and
appurtenances comprising part of the real properties of SparBank and the
SparBank Subsidiaries used in the conduct of their respective businesses
(whether owned or leased by SparBank or any SparBank Subsidiary) are in good
operating condition and have been well maintained, reasonable wear and tear
excepted. Title to all real property listed as being owned by SparBank and the
SparBank Subsidiaries on the Disclosure Schedule of SparBank is held in fee
simple. SparBank and the SparBank 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 Disclosure
Schedule of SparBank, free, clear and discharged of, and from any and all liens,
charges, encumbrances, security interests and/or equities which are material to
SparBank on a consolidated basis.
(b) All leases pursuant to which SparBank or any SparBank Subsidiary,
as lessee, leases real or personal property which are material to the business
of SparBank on a consolidated basis are, to the best of the knowledge of
SparBank, valid, effective, and enforceable against the lessor in accordance
with their respective terms. There is not under any of such leases any existing
default, or any event which with notice or lapse of time or both would
constitute a default, with respect to either SparBank or any SparBank
Subsidiary, or to the best knowledge of SparBank, the other party. Except as
disclosed in the Disclosure Schedule of SparBank, none of such leases contains a
prohibition against assignment by SparBank or any SparBank Subsidiary, by
operation of law or otherwise, or any other provision which would preclude
SparBank or any SparBank Subsidiary from possessing and using the leased
premises for the same purposes and upon the same rental and other terms upon the
consummation of the Merger as are applicable to the possession and use by
SparBank or any SparBank Subsidiary as of the date of this Agreement. Except as
disclosed in the Disclosure Schedule of SparBank, neither SparBank nor any
SparBank Subsidiary has made a prior assignment for collateral purposes of any
such lease.
3.25 Indemnification. To the best of the knowledge of SparBank, except as
set forth in the Disclosure Schedule of SparBank, no action or failure to take
action by any director, officer,
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employee or agent of SparBank or any SparBank Subsidiary has occurred which
would give rise to a claim or a potential claim by any such person for
indemnification from SparBank or any SparBank Subsidiary under the corporate
indemnification provisions of SparBank or any SparBank Subsidiary in effect on
the date of this Agreement.
3.26 Insider Interests. All outstanding loans and other contractual
arrangements (including deposit relationships) between SparBank or any SparBank
Subsidiary and any officer, director or employee of SparBank or any SparBank
Subsidiary conform to the 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. No officer, director or
employee of SparBank or any SparBank Subsidiary has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of SparBank or any SparBank Subsidiary.
3.27 Pooling and Tax. To the best knowledge of SparBank, neither it nor any
SparBank Subsidiary has engaged in any act that would preclude or adversely
affect the Merger from qualifying for pooling of interests accounting treatment
or as a tax-free or deferred reorganization under Section 368(a) of the Code,
and SparBank knows of no basis or reason attributable to SparBank why the
conditions set forth in Sections 7.01(f) and 7.03(d) will not be satisfied.
IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE STOCKHOLDERS
Each Stockholder who is a party to this Agreement hereby severally (and not
jointly) represents, warrants to, and covenants with, First Midwest as follows:
4.01 Binding Effect. He or she has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement constitutes his or her legally binding and
valid obligation enforceable in accordance with its terms (except to the extent
that enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or
doctrines) .
4.02 Ownership of SparBank Common Stock. He or she is the record owner of,
and has good and valid title to, those shares of SparBank Common Stock set forth
opposite his or her name on the Disclosure Schedule of SparBank (the
"Stockholder's Shares"); he or she has full right, power and authority to
deliver such shares in the Merger for conversion into the shares of First
Midwest Common Stock pursuant to the terms of this Agreement; and will deliver
at the Closing the Certificates pursuant to this Agreement, free and clear of
any and all claims, liens, charges, encumbrances, restrictions, agreements and
defects of any kind or nature whatsoever.
4.03 Approval of the Merger; Tender of Shares. Concurrently with the
execution of this Agreement, each Stockholder who is a party to this Agreement
shall execute a written consent
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approving the Merger. Each Stockholder who is a party to this Agreement shall
vote his or her Stockholder's Shares on any other matters consistent with First
Midwest's objective of acquiring all of the issued and outstanding shares of
SparBank Common Stock.
4.04 Execution of Investment Agreement and Registration Rights Agreement.
Concurrently with the execution and delivery of this Agreement, each Stockholder
who is a party to this Agreement shall execute and deliver to First Midwest the
Investment Agreement substantially in the form attached hereto as Exhibit
6.19(a) and the Registration Rights Agreement substantially in the form attached
hereto as Exhibit 6.19(b).
4.05 Cooperation. He or she will cooperate fully in his or her capacity as
a Stockholder with First Midwest to facilitate consummation of the Merger and
the other transactions provided for in this Agreement; provided, however, that
nothing in this Section 4.05 shall require any Stockholder to take any action as
a director of SparBank in breach of his or her fiduciary obligations to SparBank
and its Stockholders; provided, further, that nothing in this Section 4.05 shall
be construed as permitting a director of SparBank to take any action which
violates Section 5.05 hereof.
4.06 Actions Prior to Effective Time. From and after the date of the
execution of this Agreement and until the Effective Time, he or she shall use
his or her best efforts in his or her capacity as a stockholder to cause
SparBank to comply with the terms and conditions of this Agreement including,
but not limited to, those set out in Articles V, VI and VII hereof.
4.07 Providing of Information; Regulatory Applications. Upon the request of
First Midwest, he or she will furnish to First Midwest all information
concerning themselves as is required to be set forth in any application or
statement made by First Midwest to any governmental agency or authority in
connection with the transactions contemplated by this Agreement, including,
without limitation, applications, if any, for approval under the BHC. Upon the
request of First Midwest, Geraldine C. Cowlin shall file, as soon as practicable
and with the assistance of First Midwest, a change in control application with
the Federal Reserve Board.
4.08 Other Negotiations. During the period from the date of this Agreement
to the Effective Time, he or she shall not, and shall not permit any investment
banker, attorney, accountant, agent or other representative of his or hers to,
directly or indirectly, solicit, initiate, entertain, encourage, facilitate, or
participate in any other way in, or approve an Acquisition Transaction as that
term is defined in Section 5.05 hereof, and he or she shall not participate in
an Acquisition Transaction. Each Stockholder shall promptly communicate to First
Midwest the terms of any proposal which he or she may receive in respect of an
Acquisition Transaction and any request by or indication of interest on the part
of any third party with respect to the initiation of any Acquisition Transaction
or discussions with respect thereto.
4.09 Disposition of a Stockholder's Shares. From and after the date of this
Agreement until the Effective Time, he or she shall not sell, transfer, pledge
or otherwise dispose of any of his or her Stockholder's Shares without the prior
written consent of First Midwest; provided, however, that a Stockholder may
transfer his or her Stockholder's Shares to a spouse or lineal descendant
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(including a trust for the benefit of such spouse or lineal descendant) if such
transferee shall agree in a manner acceptable to First Midwest to take such
Stockholder's Shares subject to the terms, conditions and restrictions of this
Agreement.
V.
COVENANTS
5.01 Conduct of Business by SparBank Until the Effective Time. During the
period commencing on the date hereof and continuing until the Effective Time,
SparBank agrees (except as expressly contemplated by this Agreement or to the
extent that First Midwest shall otherwise consent in writing which consent shall
not be unreasonably withheld or delayed) that:
(a) Except as contemplated by this Agreement, SparBank and the
SparBank Subsidiaries will carry on their respective businesses in, and only in,
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, maintain their respective books in accordance with
generally accepted accounting principles, conduct their respective businesses
and operations only in accordance with safe and sound banking and business
practices, and, to the extent consistent with such businesses, use all
reasonable efforts to preserve intact their present business organizations, to
generally keep available the services of their present officers and employees
and to preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their respective goodwill and going
business shall be unimpaired at the Effective Time. SparBank will cooperate with
First Midwest and use its reasonable best efforts to (i) maintain all existing
customer relationships and, (ii) inform First Midwest as soon as it becomes
aware of the potential loss or diminution in the relationship with any
consequential customer, the term "consequential customer" to include, but not be
limited to, the twenty (20) largest loan, depository and trust customers.
(b) SparBank will, and will cause its Subsidiaries to, use their best
efforts to comply promptly with all requirements which federal or state law may
impose on any of them with respect to the Merger and will promptly cooperate
with and furnish information to First Midwest in connection with any such
requirements imposed upon any of them in connection with the Merger.
(c) SparBank will, and will cause its Subsidiaries to, use their best
efforts to obtain (and to cooperate with First Midwest in obtaining) any
consent, authorization or approval of, or any exemption by, any governmental
authority or agency, or other third party, required to be obtained or made by
any of them in connection with the Merger or the taking of any action
contemplated hereby. SparBank will not, nor will it permit any of its
Subsidiaries to, knowingly or willfully take any action that would adversely
affect the ability of such party to perform its obligations under this
Agreement.
(d) SparBank will not declare or pay any dividends on or make other
distributions in respect of its capital stock, except that SparBank will be
permitted to declare and pay (i) a regular
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semi-annual dividend per share equal to $10.00 for the semi-annual period ending
June 30, 1997, and (ii) as of the Closing Date (if the Closing occurs before
December 31, 1997), a per share dividend for the period from July 1, 1997
through the close of business on the day preceding the Closing Date (the
"Dividend Period") equal to the amount achieved when the sum of (A) the SparBank
Dividend Amount (as defined below) and (B) the First Midwest Dividend Amount (as
defined below) is reduced by (C) the First Midwest Dividend Paid (as defined
below). The SparBank Dividend Amount shall be calculated by multiplying $10.00
by a fraction the numerator of which is the number of days in the Dividend
Period and the denominator of which is 184. If the Closing Date occurs before
First Midwest's September 1997 dividend record date, the First Midwest Dividend
Amount shall be calculated by multiplying $.40 by a fraction the numerator of
which is equal to 184 minus the number of days in the Dividend Period and the
denominator of which is 184 and then by multiplying such product by the Exchange
Ratio. If the Closing Date occurs after First Midwest's September 1997 dividend
record date, the First Midwest Dividend Amount shall be calculated by
multiplying $.20 by a fraction the numerator of which is equal to 92 minus the
number of days between October 1, 1997 and the Closing Date and the denominator
of which is 92 and multiplying such product by the Exchange Ratio. The First
Midwest Dividend Paid shall equal product of the per share dividend to be
declared and paid by First Midwest to the holders of record of First Midwest
Common Stock as of any record date occurring after the Closing Date but on or
before December 31, 1997 multiplied by the Exchange Ratio. If the Closing occurs
after December 31, 1997, SparBank shall pay a dividend equal to $10.00 per share
for the semi-annual period ending December 31, 1997.
If the Closing occurs after December 31, 1997 but before June 30, 1998, the
SparBank Dividend Amount shall be calculated by multiplying $10.00 by a fraction
the numerator of which is the number of days in the period from January 1, 1998
through the Closing Date and the denominator of which is 181. If the Closing
Date occurs before First Midwest's dividend record date for the first quarter of
1998, the First Midwest Dividend Amount shall be calculated by multiplying $0.40
by a fraction the numerator of which is equal to 181 minus the number of days in
the period from January 1, 1998 through the Closing Date and the denominator of
which is 181 and then by multiplying such product by the Exchange Ratio. If the
Closing Date occurs after First Midwest's dividend record date for the first
quarter of 1998, the First Midwest Dividend Amount shall be calculated by
multiplying $0.20 by a fraction the numerator of which is equal to 91 minus the
number of days between April 1, 1998 and the Closing Date and the denominator of
which is 91 and then by multiplying such product by the Exchange Ratio. The
First Midwest Dividend Paid shall equal the product of the per share dividends
to be declared and paid by First Midwest to the holders of record of First
Midwest Common Stock as of any record date occurring after both December 31,
1997 and the Closing Date but on or before June 30, 1998 multiplied by the
Exchange Ratio. In the event that First Midwest shall increase or decrease the
amount of its quarterly dividend from its current rate of $.20 per share, the
amounts used in the calculation of the First Midwest Dividend Amount shall be
adjusted accordingly.
(e) SparBank will not, and will not permit its Subsidiaries to, sell,
lease or otherwise dispose of any assets, except in the ordinary course of
business, which are material,
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individually or in the aggregate, to the business or financial condition of
SparBank on a consolidated basis.
(f) SparBank will not, and will not permit its Subsidiaries to,
acquire by merging or consolidating with, purchasing substantially all of the
assets of or otherwise, any business or any corporation, partnership,
association or other business organization or division thereof.
(g) SparBank will not, and will not permit its Subsidiaries to,
issue, sell, authorize or propose the issuance of, or purchase or propose the
purchase of, permit the conversion of or otherwise acquire or transfer for any
consideration any shares of their respective capital stocks of any class or
securities convertible into, or rights, warrants or options to acquire, any such
shares or other convertible securities, or to increase or decrease the number of
shares of capital stock by split- up, reclassification, reverse split, stock
dividend or change in par or stated value, except as contemplated herein.
(h) SparBank will not, and will not permit its Subsidiaries to, incur
any indebtedness for money borrowed or issue or sell any debt securities other
than in the ordinary course of business or consistent with past practices as to
inter-company borrowings or permit or suffer the imposition on any shares of
stock held by it or by one of its Subsidiaries of any material lien, charge or
encumbrance.
(i) SparBank will not, and will not permit any of its Subsidiaries
to, grant to any director, officer or employee any increase in compensation
(except in accordance with past practices or plans or agreements), or pay any
bonus (except in accordance with past practices or plans or agreements) or
increase in any severance or termination pay, or enter into or amend any
employment or severance agreement with any such person, except as contemplated
herein, and except for, after consultation with First Midwest, reasonable stay-
bonuses for employees to induce continued employment.
(j) Except as disclosed in the Disclosure Schedule of SparBank,
neither SparBank, nor any of its Subsidiaries, will enter into any material
lease or license with respect to any property, whether real or personal, or any
other contract, agreement or commitment for goods or services which has a term
of six (6) months after the date hereof and involves the payment by SparBank or
any SparBank Subsidiary of more than $25,000 in the aggregate.
(k) SparBank will not, and will not permit its Subsidiaries to, adopt
or amend in any material respect any collective bargaining, employee pension,
profit-sharing, retirement, insurance, incentive compensation, severance,
vacation, stock option, or other plan, agreement, trust, fund or arrangement for
the benefit of employees, except as contemplated herein.
(l) SparBank will, and will cause its Subsidiaries to, use their best
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
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insurance presently in effect, including the insurance of accounts with the
FDIC. SparBank will, and will cause its 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 with respect to all matters
known by SparBank which could reasonably give rise to a claim prior to the
Effective Time.
(m) SparBank will not, and will not permit its Subsidiaries to, amend
their respective Certificates of Incorporation, Charters, or by-laws, except as
contemplated by this Agreement.
(n) SparBank will cause the Bank to conduct its lending activities
only in accordance with the Bank's lending policy, which is included in the
Disclosure Schedule of SparBank, and will not amend such policy prior to the
Effective Time.
(o) SparBank will cause the Bank to conduct its investment activities
only in accordance with the Bank's investment policy, which is included in the
Disclosure Schedule of SparBank, and will not amend such policy prior to the
Effective Time.
(p) SparBank will not, and will not permit any of its Subsidiaries to
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 risks.
(q) SparBank will not, and will not permit any of its Subsidiaries to,
enter into, increase or renew any loan or credit commitment (including letters
of credit) to any executive officer or director of SparBank or any of its
Subsidiaries, any five (5) percent stockholder of SparBank, or any entity
controlled, directly or indirectly, by any of the foregoing or engage in any
transaction with any of the foregoing which is of the type of nature sought to
be regulated in 12 U.S.C. 371c and 12 U.S.C. 371c-1. For purposes of this
Section, "control" shall have the meaning associated with that term under 12
U.S.C. 371c.
(r) SparBank will promptly advise First Midwest orally and in writing
of any event or series of events which has resulted in or is reasonably likely
to result in a Material Adverse Effect on SparBank or which may adversely affect
the satisfaction of any condition to the consummation of the Merger or the
ability of SparBank to perform its obligations under this Agreement.
5.02 Environmental Investigation. (a) First Midwest shall engage an
environmental consultant to conduct a preliminary ("Phase I") environmental
assessment of each of the parcels of real estate used in the operation of the
businesses of SparBank and any SparBank Subsidiary and any other real estate
owned by SparBank or any SparBank Subsidiary (including OREO). The fees and
expenses of the consultant with respect to the Phase I assessments shall be paid
equally by First Midwest and SparBank. The consultant shall complete and
deliver the Phase I assessments not later
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than sixty (60) days after the date of this Agreement. If any environmental
conditions are found, suspected, or would tend to be indicated by the report of
the consultant, regardless of whether they may be contrary to the
representations and warranties of SparBank set forth herein without regard to
any exceptions that may be contained in the Disclosure Schedule of SparBank,
then the parties shall obtain from one or more mutually acceptable consultants
or contractors, as appropriate, an estimate of the cost of any further
environmental investigation, sampling, analysis, remediation, or other follow-up
work necessary to comply with applicable laws and regulations ("Required Follow-
up Work").
(b) Upon receipt of the estimate of the costs of all Required Follow-
up Work, the parties shall attempt to agree upon a course of action for such
Required Follow-up Work. All post- Phase I investigations or assessments (the
cost of which shall be paid equally by the parties), all work plans for any
post-Phase I assessments or remediation, and any removal or remediation actions
that may be performed, shall be mutually satisfactory to First Midwest and
SparBank. If the Required Follow-up Work would cost more than $1,000,000
(individually or in the aggregate) to complete, First Midwest and SparBank shall
discuss a mutually acceptable modification of this Agreement. First Midwest and
SparBank shall cooperate in the review, approval, and implementation of all
Required Follow-up Work.
(c) If the parties are unable to agree upon a course of action for the
Required Follow-up Work and/or a mutually acceptable modification to this
Agreement, and the condition or issue is not one for which it can be determined
to a reasonable degree of certainty that the risk and expense to which First
Midwest and its Subsidiaries would be subject as owner of the property involved
can be quantified, in good faith, and limited to an amount less than $1,000,000,
then First Midwest may abandon this Agreement by the earlier to occur of (i) one
hundred twenty (120) days after the receipt of the Phase I assessments, or (ii)
the receipt of all consents and approvals of government regulatory authorities
as legally required to consummate the Merger and the expiration of all statutory
waiting periods.
5.03 Indemnification. Except as may be limited by applicable law, First
Midwest hereby agrees to maintain all rights of indemnification currently
provided by SparBank and the SparBank Subsidiaries in favor of their current and
former employees, directors, officers and agents on terms no less favorable than
those provided in the Certificate of Incorporation or By-Laws of SparBank or
otherwise in effect on the date of this Agreement for a period of not less than
five (5) years from the Effective Time with respect to matters occurring prior
to the Effective Time. In the event First Midwest or any of its successors or
assigns (i) reorganizes or consolidates with or merges into or enters into
another business combination transaction with any other person or entity and is
not the resulting, continuing, or surviving corporation or entity of such
reorganization, consolidation, merger, or transaction, or (ii) liquidates,
dissolves, or transfers all or substantially all of its properties and assets to
any person or entity, then, and in each such case, proper provision will be made
so that such surviving corporation or transferee and its successors and assigns
assume the obligations set forth in this Section 5.03. First Midwest agrees
that, prior to or at the Effective Time, it will provide under its directors'
and officers' liability insurance prior acts and omissions coverage for current
and
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former employees, officers, directors and agents of SparBank and the SparBank
Subsidiaries for at least five (5) years.
5.04 Capital Stock. Except for or as otherwise permitted in or
contemplated by this Agreement, without the prior written consent of First
Midwest, from the date of this Agreement to the earlier of the Effective Time or
the termination of this Agreement, SparBank shall not, and shall not enter into
any agreement to, issue, sell or otherwise permit to become outstanding any
additional shares of SparBank Common Stock, preferred stock, or any other
capital stock of SparBank, or any stock appreciation rights, or any option,
warrant, conversion or other right to acquire any such stock, or any security
convertible into any such stock. No additional shares of SparBank Common Stock
shall become subject to new grants of employee stock options, stock appreciation
rights or similar stock based employee compensation rights.
5.05 Certain Actions. (a) Neither SparBank (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 an Acquisition Transaction (as
defined below) or a potential Acquisition Transaction with respect to SparBank
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 SparBank to abandon, terminate or fail to consummate this
Agreement, or compensating SparBank or any of its Subsidiaries under any of the
instances described in this clause. SparBank shall immediately instruct and
otherwise use its best efforts to cause its directors, officers, employees,
agents, advisors (including, without limitation, any investment banker,
attorney, or accountant retained by SparBank or any of its Subsidiaries),
consultants and other representatives to comply with such prohibitions. SparBank
shall immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any parties conducted heretofore with respect
to such activities. SparBank shall promptly notify First Midwest 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 SparBank in any document or other
disclosure to the extent required by applicable law if in the opinion of the
Board of Directors of SparBank, disclosure is required under applicable law as
to transactions contemplated hereby.
(b) "Acquisition Transaction" shall, with respect to SparBank, mean
any of the following: (i) a merger or consolidation, or any similar transaction
(other than the Merger) of any company with either SparBank or any significant
subsidiary (as defined in Rule 1.02 of Regulation S-X of the SEC) (a
"Significant Subsidiary") of SparBank, (ii) a purchase, lease or other
acquisition of all or substantially all the assets of either SparBank or any
Significant Subsidiary of SparBank, (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 Securities and Exchange Act of 1934, as amended (the
"Exchange Act") (including by way of merger, consolidation, share exchange, or
otherwise) which
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would cause such person or group to become the beneficial owner of securities
representing 9.9% or more of the voting power of either SparBank or any
Significant Subsidiary of SparBank, (iv) a tender or exchange offer to acquire
securities representing 9.9% or more of the voting power of SparBank, (v) a
public proxy or consent solicitation made to stockholders of SparBank seeking
proxies in opposition to any proposal relating to any of the transactions
contemplated by this Agreement that has been recommended by the Board of
Directors of SparBank, (vi) the filing of an application or notice with the
Federal Reserve Board, the CBRE or any other 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 proposal to SparBank or its
stockholders by public announcement or 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.
5.06 Title to Real Estate. As soon as practical after the date hereof,
but in any event no later than sixty (60) days after the date hereof, SparBank,
at its own expense, shall obtain and deliver to First Midwest, with respect to
all real estate owned (including OREO) or held pursuant to a ground lease by
SparBank and its Subsidiaries, an owner's preliminary report of title covering a
date subsequent to the date hereof, issued by Chicago Title Insurance Company or
such other title insurance company as is reasonably acceptable to First Midwest,
showing fee simple title in SparBank or its Subsidiaries in such real estate or
the appropriate leasehold interest of SparBank or its Subsidiaries subject only
to (i) the standard exceptions to title customarily contained in a policy on
ALTA 1970 Owner's Form B; (ii) liens of current state and local property taxes
which are not delinquent or subject to penalty; and (iii) other liens,
encumbrances, restrictions and conditions of record that do not materially
adversely affect the value or use of such real estate.
5.07 Conduct of Business by First Midwest Until the Effective Time. During
the period commencing on the date hereof and continuing until the Effective
Time, First Midwest agrees (except as expressly contemplated by this Agreement
or to the extent that SparBank shall otherwise consent in writing which consent
shall not be unreasonably withheld or delayed) that:
(a) Except as contemplated by this Agreement, First Midwest and its
Subsidiaries will carry on their respective businesses in, and only in, the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, maintain their respective books in accordance with
generally accepted accounting principles, conduct their respective businesses
and operations only in accordance with safe and sound banking and business
practices, and, to the extent consistent with such businesses, use all
reasonable efforts to preserve intact their present business organizations, to
generally keep available the services of their present officers and employees
and to preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their respective goodwill and going
business shall be unimpaired at the Effective Time.
(b) First Midwest will, and will cause its Subsidiaries to, use their
best efforts to comply promptly with all requirements which federal or state law
may impose on any of them with
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respect to the Merger and will promptly cooperate with and furnish information
to SparBank in connection with any such requirements imposed upon any of them in
connection with the Merger.
(c) First Midwest will, and will cause its Subsidiaries to, use their
best efforts to obtain (and to cooperate with SparBank in obtaining) any
consent, authorization or approval of, or any exemption by, any governmental
authority or agency, or other third party, required to be obtained or made by
any of them in connection with the Merger or the taking of any action
contemplated hereby. First Midwest will not, nor will it permit any of its
Subsidiaries to, knowingly or willfully take any action that would adversely
affect its ability to perform its obligations under this Agreement.
(d) First Midwest shall cooperate with SparBank to coordinate the
record and payment dates of their cash dividends for the semi-annual period in
which the Merger is consummated as provided in Section 5.01(d) hereof.
(e) First Midwest will promptly advise SparBank orally and in writing
of any event or series of events which has resulted in or is reasonably likely
to result in a Material Adverse Effect on First Midwest or which may adversely
affect the satisfaction of any conditions to the consummation of the Merger or
the ability of First Midwest to perform its obligations under this Agreement.
5.08 Maintenance of the Allowance for Possible Loan Losses. If the
consolidated allowance for possible loan losses of SparBank as of the calendar
month end immediately preceding the Effective Time is less than $2.0 million,
then SparBank shall at the request of First Midwest immediately before the
Effective Time adjust its consolidated allowance for possible loan losses up to
$2.0 million or such other number that is agreeable to First Midwest.
VI.
ADDITIONAL AGREEMENTS
6.01 Inspection of Records; Confidentiality. (a) First Midwest and
SparBank 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, developed by
either of them or their respective Subsidiaries or their respective accountants
or attorneys, and will permit each other and their respective representatives to
discuss such information directly with each other's officers, directors,
employees, attorneys and accountants. During such period, First Midwest and
SparBank shall each use their best efforts to furnish promptly to the other all
other information concerning its business, properties and personnel as such
other party may reasonably request. Any failure to comply with this covenant
shall be disregarded if promptly corrected without material adverse consequences
to the other party. The availability or actual delivery of information shall
not affect
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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. Nothing contained
herein shall be construed as prohibiting one party from terminating this
Agreement if there is a material change as of the date of this Agreement to the
information disclosed in the other party's initial Disclosure Schedule.
(b) In the event that this Agreement is terminated, each party shall
return all nonpublic documents furnished hereunder and all copies thereof, shall
destroy all documents or portions thereof prepared by such other party that
contain nonpublic information furnished by the other party pursuant hereto and,
in any event, shall hold all nonpublic information received pursuant hereto in
the same degree of confidence with which it maintains its own like information
unless or until such information is or becomes a matter of public knowledge or
is or becomes known to the party receiving the information through persons other
than the party providing such information. No investigation by either First
Midwest or SparBank shall affect the representations and warranties of the other
party and each such representation and warranty shall survive any such
investigation.
(c) SparBank shall allow a representative of First Midwest to attend
as an observer (i) all meetings of the Board of Directors of SparBank and its
Subsidiaries, (ii) all meetings of the committees of each such Board, including
without limitation the audit and executive committees thereof, and (iii) any
other meeting of SparBank officials at which policy is being made, in each case
other than such portions of meetings at which matters relating to this Agreement
or the performance hereof by the parties shall be discussed. SparBank shall
give reasonable notice to First Midwest of any such meeting and, if known, the
agenda for or business to be discussed at such meeting. SparBank shall provide
to First Midwest all information provided to the directors on all such Boards
and committees in connection with all such meetings or otherwise provided to the
directors, and shall provide any other financial reports or other analysis
prepared for senior management of SparBank, in each case except for information
relating to this Agreement or the performance hereof by the parties. It is
understood by the parties that First Midwest's representative will not have any
voting rights with respect to matters discussed at these meetings nor any right
to give any directions regarding the business and affairs of SparBank and that
First Midwest is not managing the business or affairs of SparBank. All
information obtained by First Midwest at these meetings shall be treated in
confidence as provided in Section 6.01(b) hereof.
6.02 Registration Statement. First Midwest shall file a Registration
Statement with the SEC within five (5) business days of the consummation of the
Merger which will contain the Prospectus to be used by the Stockholders to sell
the shares of First Midwest Common Stock they receive in the Merger as provided
in the Investment Agreement. First Midwest 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 First Midwest Common Stock in the Merger as required
by the Investment Agreement. SparBank shall furnish to First Midwest all
information concerning SparBank and the holders of its capital stock as First
Midwest may reasonably request in connection with such action.
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6.03 Affiliate Letters. SparBank shall use best efforts to obtain and
deliver to First Midwest as promptly as practicable after (and shall use its
reasonable best efforts to obtain and deliver within five (5) business days
after) the date hereof a signed representation letter substantially in the form
of Exhibit 6.03 hereto from each executive officer and director of SparBank and
each stockholder of SparBank who may reasonably be deemed an "affiliate" of
SparBank within the meaning of such term as used in Rule 145 under the
Securities Act and for purposes of qualifying for pooling of interests
accounting treatment for the Merger, and shall use its best efforts to obtain
and deliver to First Midwest a signed representation letter substantially in the
form of Exhibit 6.03 from any person who becomes an executive officer or
director of SparBank or any stockholder who becomes such an "affiliate" after
the date hereof as promptly as practicable after (and shall use its reasonable
best efforts to obtain and deliver within five business days after) such person
achieves such status.
6.04 Brokers. Each of First Midwest and SparBank represents, as to
itself, that no agent, broker, investment banker or other firm or person or
officer or director of either is or will be entitled to any broker's or finder's
fee or any other commission, bonus or similar fee in connection with any of the
transactions contemplated by this Agreement, other than ABN-AMRO Chicago
Corporation, which has provided advice to SparBank at its request in conjunction
with the Merger and whose fee for these services shall be paid by SparBank, and
Goldman, Sachs & Co., which has provided advice to First Midwest at its request
in conjunction with the Merger and whose fees for these services shall be paid
by First Midwest. SparBank further represents and warrants to First Midwest that
SparBank does not owe any fees to McDonald and Company.
6.05 Cooperation. Each party covenants that it will use its best efforts
to bring about the transactions contemplated by this Agreement as soon as
practicable, unless this Agreement is terminated as provided herein and that it
will not willfully or intentionally breach this Agreement. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of First Midwest or SparBank, as
the case may be, shall take all such necessary action. Each party shall use its
reasonable best efforts to preserve for itself and each other party each
available legal privilege with respect to confidentiality of their negotiations
and related communications including the attorney-client privilege.
6.06 Regulatory Applications. First Midwest shall, as soon as
practicable, file an application on Form Y-3 with the Federal Reserve Board, an
application with the CBRE and an appropriate application with the OCC. SparBank
shall cause Geraldine C. Cowlin to file, as soon as practicable, a change in
control application with the Federal Reserve Board, with such application being
prepared by First Midwest, subject to the approval of SparBank and Geraldine C.
Cowlin. First Midwest shall use its best efforts to respond as promptly as
practicable to all inquiries received concerning said applications; provided,
however, that First Midwest shall have no obligation to
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accept non-standard conditions or restrictions with respect to the aforesaid
approvals of governmental authorities if it shall reasonably determine that such
conditions or restrictions would have a Material Adverse Effect on First Midwest
or would be materially burdensome to First Midwest and its Subsidiaries taken as
a whole. In the event of an adverse or unfavorable determination by any
regulatory authority, or 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 First Midwest subject, however, to the provisions of Section
8.01(g) hereof. First Midwest shall deliver a copy of all regulatory
applications to SparBank in advance of filing them 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 First Midwest
shall deliver a final copy of all regulatory applications to SparBank promptly
after they are filed with the appropriate regulatory authority. First Midwest
shall advise SparBank periodically of the status of its regulatory applications.
6.07 Financial Statements and Reports. From the date of this Agreement
and prior to the Effective Time: (a) each party will deliver to the other, not
later than ninety (90) days after the end of any fiscal year, its audited
consolidated financial statements (in the case of First Midwest, its Annual
Report on Form 10-K as filed with the SEC (and all schedules and exhibits
thereto)) for the fiscal period then ended prepared in conformity with generally
accepted accounting principles; (b) each party will deliver to the other, not
later than thirty (30) days after the end of any fiscal quarter, in the case of
First Midwest, the Reports of Condition and Income as filed with the OCC by any
First Midwest Subsidiary that is a bank which shall be prepared in accordance
with the rules and regulations of the OCC and, in the case of SparBank, the
Reports of Condition and Income filed with the FDIC by any SparBank Subsidiary
that is a bank which shall be prepared in accordance with the rules and
regulations of the FDIC; (c) each party will deliver to the other, not later
than forty-five (45) days after the end of each quarter, its unaudited
consolidated financial statements for such quarter (in the case of First
Midwest, its Report on Form 10-Q as filed with the SEC) which shall be prepared
in conformity with generally accepted accounting principles; and (d) each party
will deliver to the other to the extent permitted by law any and all other
material reports filed with the SEC, the FDIC, the Federal Reserve Board, the
OCC or the CBRE or any other regulatory agency within three (3) business days of
the filing of any such report.
6.08 Notice. At all times prior to the Effective Time, each party shall
promptly notify the other in writing of the occurrence of any event which will
or may result in the failure to satisfy any of the conditions specified in
Sections 7.01, 7.02 or 7.03 hereof. In the event that either party becomes aware
of the occurrence or impending occurrence of any event which would constitute or
cause a breach by it of any of the representations and warranties or covenants
herein in any material respect, or would have constituted or caused a breach by
it of the representations and warranties or covenants herein in any material
respect, had such an event occurred or been known prior to the date hereof, said
party shall immediately give detailed and written notice thereof to the other
party, and shall, unless the same has been waived in writing by the other party,
use its reasonable efforts to
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remedy the same, provided that such efforts, if not successful, shall not be
deemed to satisfy any condition precedent to the Merger.
6.09 Press Releases. At all times prior to the Effective Time, each party
shall mutually agree with the other prior 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. No press
release or other information furnished to the press or any third party for
general circulation shall identify any of the Stockholders by name, other than
William C. Cowlin (who may be identified in his capacity as Chairman of the
Board of Directors of SparBank), or include any information concerning the
ownership of the SparBank Common Stock.
6.10 Delivery of Supplements to Disclosure Schedules. Five (5) business
days prior to the Effective Time, each party will supplement or amend its
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or which is
necessary to correct any information in the Disclosure Schedule or in any
representation and warranty made by the disclosing party which has been rendered
inaccurate thereby. For purposes of determining the accuracy of the
representations and warranties of First Midwest and SparBank contained,
respectively, in Articles II and III hereof in order to determine the
fulfillment of the conditions set forth in Section 7.01(a) and 7.02(a) hereof as
of the date of this Agreement, the Disclosure Schedules of each party shall be
deemed to include only that information contained therein on the date it is
initially delivered to the party.
6.11 Litigation Matters. SparBank will consult with First Midwest about
any proposed settlement, or any disposition of, any litigation involving amounts
in excess of $100,000.
6.12 Tax Opinions. First Midwest and SparBank agree to use their
reasonable efforts to obtain (i) a written opinion of Hinshaw & Culbertson
addressed to First Midwest and SparBank, dated the Closing Date, subject to the
customary representations and assumptions referred to therein, and substantially
to the effect that (a) the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Code and that First Midwest and
SparBank will each be a party to the reorganization, (b) the exchange in the
Merger of First Midwest Common Stock for SparBank Common Stock will not give
rise to the recognition of any income, gain or loss to First Midwest, SparBank,
or the stockholders of SparBank with respect to such exchange (except, with
respect to the stockholders of SparBank, to the extent of any cash paid in lieu
of fractional shares), (c) the adjusted tax basis of the First Midwest Common
Stock received by SparBank stockholders who exchange all of their SparBank
Common Stock in the Merger will be the same as the adjusted tax basis of the
shares of the SparBank Common Stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which cash is received),
and (d) the holding period of the shares of the Surviving Corporation Common
Stock received in the Merger will include the period during which the shares of
SparBank Common Stock surrendered in exchange therefor were held, provided such
shares of SparBank Common Stock were held as capital assets at the Effective
Time.
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6.13 Resolution of SparBank Benefit Plans. SparBank and First Midwest
shall cooperate in effecting the following treatment of the SparBank Benefit
Plans, except as mutually agreed upon by First Midwest and SparBank prior to the
Effective Time:
(a) At the Effective Time, First Midwest shall be substituted for
SparBank as the sponsoring employer under those SparBank Benefit Plans with
respect to which SparBank or any of its Subsidiaries is a sponsoring employer
immediately prior to the Effective Time, and shall assume and be vested with all
of the powers, rights, duties, obligations and liabilities previously vested in
SparBank or its Subsidiary with respect to each such plan. Except as otherwise
provided herein, each such plan and any SparBank Benefit Plan sponsored by
SparBank or any SparBank Subsidiary shall be continued in effect by First
Midwest or any applicable First Midwest Subsidiary after the Effective Time
without a termination or discontinuance thereof as a result of the Merger,
subject to the power reserved to First Midwest or any applicable First Midwest
Subsidiary under each such plan to subsequently amend or terminate the plan,
which amendments or terminations shall comply with applicable law. SparBank,
each SparBank Subsidiary, and First Midwest will use all reasonable efforts (i)
to effect said substitutions and assumptions, and such other actions
contemplated under this Agreement, and (ii) to amend such plans as to the extent
necessary to provide for said substitutions and assumptions, and such other
actions contemplated under this Agreement.
(b) At or as promptly as practicable after the Effective Time as First
Midwest shall reasonably determine, First Midwest shall provide, or cause any
First Midwest Subsidiary to provide, to each employee of SparBank and any
SparBank Subsidiary as of the Effective Time ("SparBank Employees") the
opportunity to participate in each employee benefit plan and program maintained
by First Midwest or the First Midwest Subsidiaries for similarly-situated
employees (the "First Midwest Benefit Plans") provided that with respect to such
First Midwest Benefit Plans, SparBank Employees shall be given credit for
service with SparBank or any SparBank Subsidiary in determining eligibility for
and vesting in benefits thereunder, but not for purposes of benefit accrual
(except that such service shall be taken into account for purposes of vacation
accrual); provided, further, that the compensation received by SparBank
Employees from SparBank or any SparBank Subsidiary shall be recognized under the
First Midwest Benefit Plans to the same extent that such compensation would be
recognized if said compensation had been received from First Midwest or a First
Midwest Subsidiary; provided, further, that SparBank Employees shall not be
subject to any waiting periods or pre-existing condition exclusions under the
First Midwest Benefit Plans to the extent that such periods are longer or
restrictions impose a greater limitation than the periods or limitations imposed
under the SparBank Benefit Plans; and provided further that to the extent that
the initial period of coverage for SparBank Employees under any First Midwest
Benefit Plan that is an "employee welfare benefit plan" as defined in Section
3(1) of ERISA is not a full 12- month period of coverage, SparBank Employees
shall be given credit under the applicable First Midwest Benefit Plans for any
deductibles and co-insurance payments made by such SparBank Employees under the
SparBank Benefit Plans during the balance of such 12-month period of coverage.
Nothing in the preceding sentence shall obligate First Midwest to provide or
cause to be provided any benefits duplicative to those provided under any
SparBank Benefit Plan continued
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pursuant to subparagraph (a) above. Except as otherwise provided in this
Agreement, the power of First Midwest or any SparBank or First Midwest
Subsidiary to amend or terminate any benefit plan or program, including any
SparBank Benefit Plan shall not be altered or affected. Moreover, this Agreement
shall not confer upon any SparBank Employee any rights or remedies hereunder and
shall not constitute a contract of employment or create any rights, to be
retained or otherwise, in employment at First Midwest, any SparBank Subsidiary
or any First Midwest Subsidiary.
(c) Prior to the Effective Time, SparBank and each SparBank Subsidiary
shall terminate and cause to be of no further force and effect the provisions of
any SparBank Benefit Plan which provide severance or separation pay to officer
or employees. At and after the Effective Time, First Midwest shall provide, or
cause to be provided, additional pension benefits and/or severance benefits to
eligible SparBank Employees as set forth in the letter of even date herewith
between First Midwest and SparBank.
6.14 Extent of Knowledge. For purposes of this Agreement and any other
certificate or document delivered by one party to the other pursuant hereto, the
"best of the knowledge" of First Midwest or SparBank shall be limited to matters
actually known to each officer holding the position of Executive Vice President
or above of First Midwest or the positions with SparBank or any SparBank
Subsidiary identified on Exhibit 6.14 hereof. Such term shall expressly exclude
matters which any such person should know but does not actually know and matters
which should be within such person's knowledge and belief but actually are not.
6.15 Pooling of Interests; Tax Treatment. Neither SparBank or any of the
SparBank Subsidiaries nor First Midwest or any of the First Midwest Subsidiaries
shall voluntarily take any action which would disqualify the Merger as a
"pooling of interests" for accounting purposes or as a "reorganization" that
would be tax free or deferred to the Stockholders pursuant to Section 368(a) of
the Code; provided, however, that either party, after consultation with the
other, may acquire additional treasury shares, provided that the acquiring party
acquires and disposes of such shares in a manner that does not disqualify the
Merger from being accounted for on a "pooling of interests" method of
accounting. SparBank acknowledges that First Midwest holds a sufficient number
of treasury shares which, because such shares were acquired within the last two
(2) years, could disqualify the Merger from being accounted for on the "pooling
of interests" method of accounting. First Midwest covenants that it will use its
best efforts to cause the Merger to qualify as a "pooling of interests" for
accounting purposes by disposing of some or all of such treasury shares.
6.16 Stock Exchange Listing. First Midwest shall use its best efforts to
list on the NASDAQ National Market, subject to official notice of issuance, the
shares of First Midwest Common Stock to be issued under this Agreement.
6.17 Publication of Combined Financial Results. First Midwest shall use
its reasonable best efforts to publish as soon as practicable, and shall publish
no later than ninety (90) days after the Effective Time, at least thirty (30)
days of post-Merger combined operations, combined sales and net income figures
and any other financial information necessary as contemplated by and in
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accordance with the terms of SEC Accounting Series Release No. 135 and any
related accounting rules.
6.18 Election of Director. Immediately following the Effective Time,
William J. Cowlin (or such other nominee of Geraldine C. Cowlin) shall be
appointed to the Board of Directors of First Midwest for a three (3) year term,
expiring at the annual meeting of the Stockholders of First Midwest held in the
year 2000. Mr. Cowlin (or such other nominee of Geraldine C. Cowlin) shall be
nominated as a Director by the Board of Directors of First Midwest following the
expiration of his first term for a second three (3) year term expiring at the
Annual Meeting of Stockholders of First Midwest held in the year 2003. First
Midwest agrees that prior to the consummation of the Merger, the Board of
Directors of First Midwest will amend its policy so as to permit William J.
Cowlin (or such other nominee of Geraldine C. Cowlin) to serve as a director
after he or she reaches the age of seventy (70).
6.19 Investment Agreement and Registration Rights Agreement. As of the
date hereof, First Midwest and the Stockholders shall enter into Investment
Agreement substantially in the form of Exhibit 6.19(a) and the Registration
Rights Agreement substantially in the form of Exhibit 6.19(b) hereof.
6.20 Amendment of Rights Plan. First Midwest shall adopt the amendment to
the Rights Plan substantially in the form of Exhibit 6.20 hereof.
VII.
CONDITIONS
7.01 Conditions to the Obligations of First Midwest. Notwithstanding
any other provision of this Agreement, the obligations of First Midwest to
consummate the Merger are subject to the following conditions precedent (except
as those which First Midwest may chose to waive):
(a) All of the representations and warranties made by SparBank in this
Agreement and in any documents or certificates provided by SparBank shall have
been true and correct in all material respects as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time,
except for information contained in a subsequent Disclosure Schedule of SparBank
relating to an event or series of events arising after the date hereof which
does not have a Material Adverse Effect on SparBank or as otherwise contemplated
by this Agreement or which does have a Material Adverse Effect but does not
cause SparBank to fail to satisfy the Minimum Capital Level (as defined in
Section 7.01(g)). For purposes of the foregoing, the representations and
warranties of SparBank shall be deemed true and correct in all material respects
if the aggregate effect of all inaccuracies or breaches thereof do not cause
SparBank to fail to satisfy the Minimum Capital Level; provided, however, that
this sentence shall not be construed as prohibiting First Midwest from
terminating this Agreement as provided in Section 7.01(g) hereof.
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(b) SparBank 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
Merger by any federal or state government or governmental agency or
instrumentality or court, which would prohibit First Midwest's ownership or
operation of all or a material portion of SparBank's business or assets, or
would compel First Midwest to dispose of or hold separate all or a material
portion of SparBank's business or assets, as a result of this Agreement, or
which would render First Midwest or SparBank unable to consummate the
transactions contemplated by this Agreement.
(d) Since the date hereof, SparBank shall not have suffered a Material
Adverse Effect which shall cause SparBank to fail to satisfy the Minimum Capital
Level (as defined below); provided, however, that this shall not be construed as
prohibiting First Midwest from terminating this Agreement as provided in Section
7.01(g) hereof.
(e) To the extent any material lease, license, loan, or financing
agreement or other contract or agreement to which SparBank or any of its
Subsidiaries, as the case may be, is a party requires the consent of or waiver
from the other party thereto as a result of the transactions contemplated by
this Agreement, such consent or waiver shall have been obtained, unless the
failure to obtain such consent or waiver would not have a Material Adverse
Effect on SparBank which would cause SparBank to fail to satisfy the Minimum
Capital Level; provided, however, that this shall not be construed as
prohibiting First Midwest from terminating this Agreement as provided in Section
7.01(g) hereof.
(f) First Midwest shall have received an opinion paid for by First
Midwest from Ernst & Young to the effect that the Merger shall be accounted for
on the "pooling of interests" method of accounting.
(g) First Midwest shall have received an audited consolidated balance
sheet of SparBank containing an unqualified opinion of Ernst & Young (the
"Balance Sheet"), as of the close of business as of the end of the month
occurring within forty-five (45) days of the closing (the "Balance Sheet Date").
SparBank shall cooperate and use its best efforts to cause its principal
accountants to cooperate in preparing the Balance Sheet.
The Stockholders' Equity of SparBank (defined for these purposes as
the sum of the capital stock, surplus and retained earnings of SparBank but
excluding from the calculation net unrealized gain (loss) on investment
securities available for sale) as of the Balance Sheet Date shall not be less
than $50.381 million (the "Minimum Capital Level"); provided, however, that for
purposes of calculating the Stockholders' Equity, the following expenses,
charges and similar amounts which are paid or accrued by SparBank or any of its
Subsidiaries shall be disregarded:
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(i) Expenses requested or required in writing by First Midwest;
(ii) Expenses paid or accrued to third parties in connection with
the Merger such as investment banker fees and expenses, legal
fees and expenses, accounting fees and expenses, costs of title
commitments and insurance incurred pursuant to Section 5.06
hereof, expenses for the preparation of the regulatory
applications and the Registration Statement;
(iii) Other expenses paid or accrued which are mutually agreed to in
writing by SparBank and First Midwest; and
(iv) Any severance benefits that are accrued or paid for by SparBank
as a result of actions taken pursuant to the letter agreement,
dated as of the date hereof, between SparBank and First
Midwest.
If Stockholders' Equity of SparBank (calculated in accordance with
this Section 7.01(g)) as of the Balance Sheet Date is less than the Minimum
Capital Level, First Midwest and SparBank shall discuss a mutually acceptable
modification of this Agreement. If they are unable to agree upon a mutually
acceptable modification of this Agreement, then First Midwest may terminate this
Agreement.
(h) Unless waived by First Midwest, First Midwest shall have received
a "comfort" letter from Ernst & Young dated no more than five (5) days prior to
the date of the Closing in form and substance customary for transactions of this
type and size, and reasonably satisfactory to First Midwest, which "comfort"
letter shall also state that the Stockholders' Equity of SparBank (calculated in
accordance with Section 7.01(g)) as of the date of the "comfort" letter is not
less than the Minimum Capital Level as of the Balance Sheet Date and that the
consolidated allowance for possible loan losses of SparBank is not less than
$2.0 million.
(i) Persons owning no more than two percent (2%) of the issued and
outstanding shares of SparBank Common Stock shall have perfected appraisal
rights under the GCL.
(j) The Stockholders shall have delivered at the Closing all of the
Certificates.
(k) First Midwest shall have received a certificate signed by the
President and Chief Executive Officer of SparBank, dated as of the Effective
Time, certifying that based upon their best knowledge, the conditions set forth
in Sections 7.01(a), (b), (d) and (e) hereof have been satisfied.
7.02 Conditions to the Obligations of SparBank and the Stockholders.
Notwithstand ing any other provision of this Agreement, the obligations of
SparBank and the Stockholders to consummate the Merger are subject to the
following conditions precedent (except as those which SparBank, may chose to
waive):
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(a) All of the representations and warranties made by First Midwest in
this Agreement and in any documents or certificates provided by First Midwest
shall have been true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective
Time, except for information contained in a subsequent Disclosure Schedule of
First Midwest relating to an event or series of events arising after the date
hereof which does not have a Material Adverse Effect on First Midwest or as
otherwise contemplated by this Agreement.
(b) First Midwest 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) Since the date hereof, First Midwest shall not have suffered a
Material Adverse Effect.
(d) The shares of First Midwest Common Stock to be issued to the
Stockholders upon consummation of the Merger shall have been authorized for
listing on the NASDAQ National Market, subject to official notice of issuance.
(f) As of the Closing Date, no "Acquisition Transaction" shall have
been announced or shall be otherwise pending with respect to First Midwest (and
with respect to items (i) and (ii) shall have been agreed to by First Midwest or
shall be the subject of negotiations in which First Midwest has agreed to
engage). Acquisition Transaction shall mean, with respect to First Midwest, any
of the following: (i) a merger or consolidation, or any similar transaction
(other than the Merger) of any company with either First Midwest or any
Significant Subsidiary of First Midwest (other than a transaction in which First
Midwest issues securities representing less than 25% of the voting power of
First Midwest, after giving effect to the issuance of shares of First Midwest
Common Stock in the Merger, to "persons" (as that term is defined in Section
13(d)(3) of the Exchange Act) who are not stockholders of First Midwest prior to
the issuance of such securities), (ii) a purchase, lease or other acquisition of
all of substantially all of the assets of either First Midwest or any
Significant Subsidiary of First Midwest, (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 owners of securities representing 25% or more of
the voting power of either First Midwest or any Significant Subsidiary of First
Midwest, after giving effect to the issuance of shares of First Midwest Common
Stock in the Merger, or (iv) a bona fide tender offer or exchange offer to
acquire securities representing 25% or more of the voting power of First
Midwest, after giving effect to the issuance of shares of First Midwest Common
Stock in the Merger.
(g) First Midwest shall have delivered an executed copy of the
Registration Statement as required by the Investment Agreement.
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(h) SparBank shall have received a certificate signed by the President
and Chief Executive Officer of First Midwest, dated as of the Effective Time,
that based upon their best knowledge, the conditions set forth in Sections
7.02(a), (b) and (c) have been satisfied.
7.03 Conditions to the Obligations of the Parties. Notwithstanding any
other provision of this Agreement, the obligations of First Midwest on the one
hand, and SparBank and the Stockholders on the other hand, to consummate the
Merger are subject to the following conditions precedent (except as those which
First Midwest and SparBank may chose to waive):
(a) 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 ef fect.
(b) This Agreement and the Merger shall have been duly approved by the
requisite vote of the Stockholders.
(c) First Midwest shall have received the approval of the Federal
Reserve Board, the CBRE and the OCC and any other applicable regulatory
authority to acquire SparBank and to consummate the transaction described in
Section 1.06 hereof (provided First Midwest at its sole option elects to proceed
with the transactions described in Section 1.06 hereof and elects to consummate
the transactions described therein immediately after the Effective Time) and all
required waiting periods shall have expired.
(d) Each party shall have received the tax opinion addressed to it
referred to in Section 6.12 of this Agreement.
(e) First Midwest and each of the Stockholders shall have executed the
Investment Agreement substantially in the form of Exhibit 6.19(a) hereof and the
Registration Rights Agreement substantially in the form of Exhibit 6.19(b)
hereof.
(f) First Midwest shall have adopted the amendment to the Rights Plan
substantially in the form of Exhibit 6.20 hereof.
VIII.
TERMINATION; AMENDMENT; WAIVER
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) By mutual written consent of the Board of Directors of First
Midwest and the Board of Directors of SparBank; or
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(b) At any time prior to the Effective Time, by First Midwest or SparBank
if there shall have been a final judicial or regulatory determination (as to
which all periods for appeal shall have expired and no appeal shall be pending)
that any material provision of this Agreement is illegal, invalid or
unenforceable (unless the enforcement thereof is waived by the affected party)
or denying any regulatory application the approval of which is a condition
precedent to either party's obligations hereunder; or
(c) At any time on or before the date specified in 8.01(g) hereof, by First
Midwest or SparBank in the event that any of the conditions precedent to the
obligations of the other to the Merger are rendered impossible to be satisfied
or fulfilled by said date (other than by reason of a breach by the party seeking
to terminate); or
(d) By either party at any time after the Stockholders fail to approve this
Agreement and the Merger pursuant to a written consent; or
(e) By First Midwest or SparBank, in the event of a material breach by the
other of any representation, warranty, covenant or agreement contained herein or
in any schedule or document delivered pursuant hereto, which breach would result
in the failure to satisfy the closing condition set forth in Section 7.01(a) or
7.01(b), in the case of First Midwest, or Section 7.02(a) or 7.02(b), in the
case of SparBank, and which breach cannot be or is not cured within thirty (30)
days after written notice of such breach is given by the non-breaching party to
the party committing such breach; or
(f) By First Midwest in the manner provided and within the time specified
in Section 5.02 hereof or Section 7.01(g) hereof; or
(g) By either First Midwest or SparBank on or after January 31, 1998 (or
February 28, 1998 in the event a protest is filed with bank regulatory
authorities alleging the failure of either party or either party's Subsidiaries
to comply with the Community Reinvestment Act of 1977) (or March 31, 1998 in the
event the Closing has not occurred prior thereto due to actions attributable to
SparBank or any of its Stockholders), 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 other agreement
contained herein).
In the event either First Midwest or SparBank elects to effect any termination
pursuant to Section 8.01(b) through 8.01(g) above, it shall give written notice
to the other 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.
8.02 Expenses. (a) Except as provided elsewhere herein and in Section
8.02(b) hereof, First Midwest and SparBank shall each bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel.
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(b) Notwithstanding the foregoing, either First Midwest or SparBank (the
"Expense Paying Party") shall pay all of the costs and expenses incurred by the
other (the "Reimbursed Party") (without duplication pursuant to this Agreement
or any other agreement or instrument) in connection with this Agreement and the
transactions contemplated hereunder, including fees and expenses of such
Reimbursed Party's financial or other consultants, investment bankers,
accountants, and counsel, if:
(i) the Reimbursed Party terminates this Agreement pursuant to
Section 8.01(e) hereof by reason of material breach by the Expense Paying
Party, and the Expense Paying Party is at the time of the termination not
also entitled to terminate this Agreement pursuant to Section 8.01(e)
hereof by reason of a material breach by the Reimbursed Party; or
(ii) if SparBank is the Expense Paying Party, the stockholders of
SparBank fail to approve the Merger and this Agreement and the Merger has
not been, or thereafter is not, consummated for any reason other than a
termination pursuant to Section 8.01(e) hereof because of a material breach
by First Midwest.
(iii) if First Midwest is the Expense Paying Party, the conditions
set forth in Sections 7.01(f) and 7.03(c) shall not have been satisfied, in
each case for reasons not directly attributable to SparBank or any of the
Stockholders and this Agreement and the Merger has not been, or thereafter
is not, consummated for any reason other than a termination pursuant to
Section 8.01(e) hereof because of a material breach by SparBank.
Nothing contained in this Section 8.02 shall constitute or shall be deemed to
constitute liquidated damages for the breach by a party of the terms of this
Agreement or otherwise limit the rights of the nonbreaching party to pursue the
breaching party for the breach of any representation warranty, covenant or
agreement.
(c) Final settlement with respect to payment of fees and expenses by the
parties pursuant to this Section shall be made within thirty (30) days of the
termination of this Agreement.
(d) In the event one of the parties hereto files suit to enforce this
Section or a suit seeking to recover costs and expenses or damages for breach of
this Agreement, the costs, fees, charges and expenses (including attorneys' fees
and expenses) of the prevailing party in such litigation (and any related
litigation) shall be borne by the losing party.
8.03 Survival of Agreements. In the event of termination of this Agreement
by either First Midwest or SparBank as provided in Section 8.01, this Agreement
shall forthwith become void and have no effect except that (i) the agreements
contained in Sections 6.01(b), 6.04, 6.05 and 8.02 hereof shall survive the
termination hereof; and (ii) a termination pursuant to Sections 8.01(c) or
8.01(e) hereof shall not relieve a breaching party from any liability for any
breach giving rise to such termination.
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8.04 Amendment. This Agreement may be amended by the parties hereto by
action taken by the Boards of Directors of SparBank and First Midwest at any
time before or after approval hereof by the Stockholders but, after such
approval, no amendment shall be made which changes the form of consideration or
adversely affects or decreases the value of the consideration to be received by
the Stockholders or which in any other way adversely affects the rights of such
Stockholders without the further approval of such Stockholders; provided,
further, that the Stockholders who are parties to this Agreement must agree to
any amendment of Article IV hereof. This Agreement may not be amended except by
an instrument in writing signed on behalf of First Midwest and SparBank and, in
the case of an amendment to Article IV hereof, by First Midwest and SparBank and
the Stockholders. First Midwest and SparBank may, without approval of their
respective Boards of Directors or the Stockholders, make such technical changes
to this Agreement, not inconsistent with the purposes hereof and thereof, as may
be required to effect or facilitate any governmental approval of acceptance of
the Merger or of this Agreement or to effect or facilitate any filing or
recording required for the consummation of any of the transactions contemplated
hereby.
8.05 Waiver. Any term, provision or condition of this Agreement (other than
the requirement of stockholder approval) may be waived in writing at any time by
the party which is, or the stockholders of which are, entitled to the benefits
hereof; provided, further, that the consent of the Stockholders who are parties
to this Agreement shall only be required with respect to waivers relating to
Article IV 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 either 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 First Midwest of SparBank or
SparBank of First Midwest prior to or after the date hereof shall estop or
prevent either party from exercising any right hereunder or be deemed to be a
waiver of any such right.
IX.
OPINIONS OF COUNSEL
Opinions of counsel shall be delivered at the Effective Time as set forth
in this Article IX. In rendering such opinions, each such counsel may rely as to
factual matters on information received from their client, its officers or
directors, or government officials, or any thereof, and upon such other evidence
as such counsel may deem necessary or desirable.
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9.01 Opinion of SparBank's Counsel. As a condition precedent to First
Midwest's obligations hereunder, SparBank shall cause to be delivered to First
Midwest an opinion of Schiff Hardin & Waite, counsel for SparBank, in form and
substance reasonably satisfactory to First Midwest's counsel and dated as of the
Effective Time, substantially to the following effect:
(a) SparBank is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
and is in good standing under the laws of the State of Illinois. SparBank (i) to
counsel's best knowledge and belief after reasonable inquiry, is not required to
be qualified as a foreign corporation in any other state by reason of the nature
of its business or its ownership or use of property, except where the failure to
be so qualified would not have a Material Adverse Effect on SparBank or its
ability to consummate the transactions contemplated herein, and (ii) to
counsel's best knowledge and belief after reasonable inquiry, has full corporate
power and all necessary and material licenses and permits to carry on its
businesses and to own and operate its properties and assets now owned or
operated by it. SparBank is a registered bank holding company under BHC.
(b) The Bank, is duly incorporated, validly existing and in good
standing under the banking laws of the State of Illinois. The Bank (i) to
counsel's best knowledge and belief after reasonable inquiry, is not required to
be qualified as a foreign corporation in any state by reason of the nature of
its business or its ownership or use of property, except where the failure to be
so qualified would not have a Material Adverse Effect on SparBank or its ability
to consummate the transactions contemplated herein, and (ii) to counsel's best
knowledge and belief after reasonable inquiry, has full corporate power and all
necessary and material licenses and permits to carry on its businesses and to
own and operate its properties and assets now owned or operated by it. The Bank
is a federally insured bank.
(c) The authorized capital stock of SparBank as of the close of
business on the day preceding the Closing consists of (i) 320,000 shares of
SparBank Common Stock, no par value, 148,723 of which are legally issued and
outstanding, fully paid, and non-assessable; and (ii) 20,000 shares of Preferred
Stock, no par value, of which, as of the close of business as of the day
preceding the Closing, no such shares are then issued and outstanding. To
counsel's best knowledge and belief after reasonable inquiry: (a) since the date
and time of the execution of this Agreement, no additional shares of SparBank
Common Stock or SparBank Preferred Stock have been authorized for issuance or
issued by SparBank; and (b) there are no other outstanding subscriptions,
options, warrants, or rights to acquire any capital stock of SparBank, or
agreements to which SparBank is a party or by which it is bound to issue capital
stock, except as set forth in the Disclosure Schedule of SparBank.
(d) SparBank or a SparBank Subsidiary is the owner of record of all of
the issued and outstanding shares of Common Stock of the wholly owned SparBank
Subsidiaries. To the best of counsel's knowledge, there are no outstanding
subscriptions, options, warrants, or rights to acquire any capital stock of any
of the SparBank Subsidiaries, or agreements to which SparBank or any SparBank
Subsidiaries is a party or by which any of them is bound requiring any of them
to issue capital stock of any SparBank Subsidiary, except as set forth in the
Disclosure Schedule of SparBank or in such opinion.
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(e) Said counsel knows of no corporate proceedings required by law or
by the provisions of this Agreement, the Investment Agreement or the
Registration Rights Agreement to be taken by SparBank in connection with the
transactions provided for by this Agreement, the Investment Agreement or the
Registration Rights Agreement which have to said counsel's knowledge not been
duly and validly taken.
(f) The execution and delivery of this Agreement by SparBank and the
performance by SparBank of its obligations hereunder have been duly authorized
by all requisite corporate action on the part of SparBank and its stockholders,
and this Agreement constitutes the legal, valid and binding obligation of
SparBank enforceable in accordance with its terms (except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles and
doctrines).
(g) This Agreement, the Investment Agreement and the Registration
Rights Agreement has been duly executed and delivered by each Stockholder. This
Agreement, the Investment Agreement and the Registration Rights Agreement
constitute each Stockholder's legally binding and valid obligation enforceable
in accordance with its terms (except to the extent that enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles or doctrines). Each Stockholder is the
record owner of those shares of SparBank Common Stock set forth opposite his or
her name on Exhibit 4.02 attached hereto.
(h) The execution and delivery of this Agreement by SparBank and the
execution and delivery of the Investment Agreement and the Registration Rights
Agreement by the Stockholders and the performance of SparBank's obligations
hereunder and the performance by the Stockholders of their obligations under the
Investment Agreement and the Registration Rights Agreement will not violate the
Certificate of Incorporation (charter), or By-laws of SparBank or any SparBank
Subsidiary, or any law, rule, regulation or, to counsel's best knowledge and
belief after reasonable inquiry, order to which any of them is subject or, to
counsel's best knowledge and belief after reasonable inquiry, any material
agreement to which any of them is a party or by which any of them is bound and
identified in the Disclosure Schedule of SparBank, except as set forth in the
Disclosure Schedule of SparBank.
(i) Such counsel, after reasonable inquiry, does not know of any
material litigation, proceedings or governmental investigation pending or
threatened against or relating to SparBank or any SparBank Subsidiary or any of
their respective properties or businesses or which challenges the Merger, except
as disclosed in the Disclosure Schedule of SparBank.
(j) To counsel's best knowledge and belief after reasonable inquiry,
the consummation of the transactions contemplated by this Agreement, the
Investment Agreement and the Registration Rights Agreement will not result in a
breach of any of the provisions of, nor will it constitute a default under, nor
will it invalidate or give any party a right to cancel or terminate, or
otherwise alter in any manner materially adverse to the interests of First
Midwest, any material
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agreement or material instrument to which SparBank or any SparBank Subsidiary is
a party and identified in the Disclosure Schedule of SparBank, except as set
forth in the Disclosure Schedule of SparBank.
(k) Except as made or received prior to the date hereof, no notice
to, filing with, exemption or review by or authorization, consent or approval
of, any public body or authority is required to be made by SparBank for the
consummation by SparBank of the Merger as contemplated by this Agreement which
has not been made or received by SparBank other than the Certificate of Merger.
9.02 Opinion of First Midwest's Counsel. As a condition precedent to
SparBank's obligations hereunder, First Midwest shall cause to be delivered to
SparBank an opinion of Hinshaw & Culbertson, counsel for First Midwest, in form
and substance reasonably satisfactory to SparBank's counsel and dated as of the
Effective Time, substantially to the following effect:
(a) First Midwest is duly organized, validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
and is in good standing under the laws of the State of Illinois. First Midwest
(i) is not required to be qualified as a foreign corporation in any other state
by reason of the nature of its business or its ownership or use of property,
except where the failure to be so qualified would not have a Material Adverse
Effect on First Midwest or its ability to consummate the transactions
contemplated herein, and (ii) to counsel's best knowledge and belief after
reasonable inquiry, has full corporate power and all necessary and material
licenses and permits to carry on its businesses and to own and operate its
properties and assets now owned or operated by it.
(b) The authorized capital stock of First Midwest as of the close of
business on the day preceding the Closing consists of (i) 30,000,000 shares of
First Midwest Common Stock, no par value, of which the number specified in the
opinion are then legally issued and outstanding, fully paid, and non-assessable,
and that the number of shares that are then reserved for issuance under the
First Midwest Stock Option Plans is as specified in the opinion; and (ii)
1,000,000 shares of Preferred Stock, of no par value, of which, as of the close
of business as of the day preceding the Closing, 300,000 shares are reserved for
issuance under the Rights Plan. Except as disclosed in such opinion, to
counsel's best knowledge: (a) since the date and time of execution of this
Agreement, no additional shares of First Midwest Common Stock or First Midwest
Preferred Stock have been authorized for issuance or issued by First Midwest,
except shares issued upon the exercise of stock options; and (b) there are no
other outstanding subscriptions, options, warrants, or rights to acquire any
capital stock of First Midwest, or agreements to which First Midwest is a party
or by which it is bound to issue capital stock, except as set forth in the
Disclosure Schedule of First Midwest or in such opinion.
(c) Said counsel knows of no corporate proceedings required by law or
by the provisions of this Agreement, the Investment Agreement or the
Registration Rights Agreement to be taken by First Midwest in connection with
the transactions provided for by this Agreement, the
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Investment Agreement or the Registration Rights Agreement which have to said
counsel's knowledge not been fully and validly taken except that the
Registration Statement has not been declared effective by the SEC.
(d) The execution and delivery of this Agreement, the Investment
Agreement and the Registration Rights Agreement by First Midwest and the
performance of its obligations hereunder and thereunder have been duly
authorized by all requisite corporate actions on the part of First Midwest and
its stockholders and this Agreement, the Investment Agreement and the
Registration Rights Agreement constitute the legal, valid and binding
obligations of First Midwest enforceable in accordance with their terms (except
to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles and doctrines).
(e) The execution and delivery of this Agreement, the Investment
Agreement and the Registration Rights Agreement by First Midwest and the
performance of its obligations hereunder or thereunder will not violate the
Certificate of Incorporation (charter) or by-laws of First Midwest or any First
Midwest Subsidiary, any law, rule, regulation, or to counsel's best knowledge
and belief after reasonable inquiry, order to which any of them is subject or,
to counsel's best knowledge and belief after reasonable inquiry, any material
agreement to which any of them is a party or by which any of them is bound,
except as disclosed in the Disclosure Schedule of First Midwest.
(f) Such counsel, after reasonable inquiry, does not know of any
material litigation, proceedings or governmental investigation pending or
threatened against or relating to First Midwest or its Subsidiaries or any of
their properties or businesses except as disclosed in the Disclosure Schedule of
First Midwest.
(g) To counsel's best knowledge and belief after reasonable inquiry,
the consummation of the transactions contemplated in this Agreement, the
Investment Agreement or the Registration Rights Agreement will not result in a
breach of any of the provisions of, nor will it constitute a default under, nor
will it invalidate or give any party a right to cancel or terminate, or
otherwise alter in any manner materially adverse to the interests of SparBank,
any material agreement or material instrument to which First Midwest or any
First Midwest Subsidiary is a party, except as disclosed in the Disclosure
Schedule of First Midwest.
(h) There is no fact known to counsel, after reasonable inquiry,
which would cause such counsel to believe that the Registration Statement will
not be declared effective.
(i) The shares of First Midwest Common Stock to be issued pursuant to
Section 1.02(c) hereof will be validly issued, fully paid and nonassessable.
(j) Except as made or received prior to the date hereof, no notice
to, filing with, exemption or review by or authorization, consent or approval
of, any public body or authority is
68
<PAGE>
required to be made by First Midwest for the consummation by First Midwest of
the Merger as contemplated by this Agreement which has not been made or received
by First Midwest other than the Certificate of Merger.
X.
GENERAL PROVISIONS
10.01 Survival. All representations, warranties, covenants and
agreements of the parties in this Agreement or in any instrument delivered by
the parties pursuant to this Agreement (other than the agreements, covenants and
obligations set forth herein which are contemplated to be performed after the
Effective Time) shall not survive the Effective Time, provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive First Midwest or SparBank (or any of their
respective directors, officers, employees or agents) of any defense in law or
equity which otherwise would be available against the claims of any person,
including, without limitation, any stockholder or former stockholder of either
First Midwest or SparBank, the aforesaid representations, warranties, and
covenants being material inducements to consummation by First Midwest, SparBank
and the Surviving Corporation of the transactions contemplated hereby.
10.02 Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given to
any party or parties (a) upon delivery to the address of the party or parties as
specified below if delivered in person or by courier or if sent by certified or
registered mail (return receipt requested), or (b) upon dispatch if transmitted
by telecopy or other means of facsimile transmission and such transmission is
confirmed successfully by the transmitting machine, provided that such
transmission is received during normal business hours and that any transmission
received outside of normal business hours shall be deemed to be received at the
start of normal business hours commencing immediately after the dispatch of the
transmission, in each case addressed as follows:
69
<PAGE>
(a) if to First Midwest: Donald J. Swistowicz
Executive Vice President
First Midwest Bancorp, Inc.
300 Park Boulevard, Suite 405
Itasca, Illinois 60143-0459
Telephone: (630) 875-7460
Telecopier: (630) 875-7474
copy to: Timothy M. Sullivan
Hinshaw & Culbertson
222 North LaSalle Street, Suite 300
Chicago, IL 60601-1081
Telephone: (312) 704-3852
Telecopier: (312) 704-3001
(b) if to SparBank: William J. Cowlin
Chairman
SparBank, Incorporated
Law Offices of William J. Cowlin
41 North Virginia
Crystal Lake, Illinois 60014
Telephone: (815) 459-4900
Telecopier: (815) 459-4904
(c) copies to: Gary L. Mowder
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Telephone: (312) 258-5514
Telecopier: (312) 258-5600
10.03 Specific Enforceability. The parties recognize and hereby
acknowledge that it is impossible to measure in money the damages that would
result to a party by reason of the failure of either of the parties to perform
any of the obligations imposed on it by this Agreement and that in any event
damages would be an inadequate remedy in this instance. Accordingly, if any
party should institute an action or proceeding seeking specific enforcement of
the provisions hereof, the party against which such action or proceeding is
brought hereby waives the claim or defense that the party instituting such
action or proceeding has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a remedy
at law exists and shall waive or not assert any requirement to post bond in
connection with seeking specific performance.
70
<PAGE>
10.04 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.
10.05 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.
10.06 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.
10.07 Entire Agreement; Binding Effect; Non-Assignment; Counterparts.
Except as otherwise expressly provided herein, this Agreement (including the
documents and instruments referred to herein) (a) 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; and (b) 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 parties hereto; provided,
however, that the Stockholders need not consent to an assignment by First
Midwest if such assignment has been approved by SparBank. This Agreement may be
executed in two or more counterparts which together shall constitute a single
agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
FIRST MIDWEST BANCORP, INC.
By /s/ ROBERT P. O'MEARA
---------------------
President
/s/ ALAN R. MILASIUS
- --------------------
Secretary
SPARBANK, INCORPORATED
By /s/ GERALDINE C. COWLIN
-----------------------
/s/ ALAN R. MILASIUS President
- --------------------
Secretary
71
<PAGE>
FMB ACQUISITION CORPORATION
By /s/ ROBERT P. O'MEARA
---------------------
President
/s/ ALAN R. MILASIUS
- --------------------
Assistant Secretary
The undersigned Stockholders of SparBank, Inc., have executed this
Agreement solely for the purpose of making the representations, warranties and
covenants set forth in Article IV hereof.
/s/ Geraldine C. Cowlin /s/ William J. Cowlin
- ----------------------- ---------------------
Geraldine C. Cowlin William J. Cowlin
72
<PAGE>
CONTACT: James M. Roolf
FOR IMMEDIATE RELEASE (630) 875-7452
TRADED: NASDAQ/NMS
SYMBOL: FMBI
FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK
ITASCA, IL., JUNE 20, 1997 -- First Midwest Bancorp, Inc. (NASDAQ:FMBI) today
announced that it has entered into a definitive agreement to acquire SparBank,
Incorporated, the holding company of the $445 million McHenry State Bank ("MSB")
located in the McHenry, Illinois.
The agreement provides that SparBank shareholders will receive 21.72 shares of
First Midwest common stock for each share of SparBank common stock resulting in
the issuance of 3,230,769 First Midwest shares. Based on First Midwest's June 19
closing price of $32.75 per share, the transaction is valued at approximately
$105 million. The acquisition will be structured as a tax free exchange and
accounted for as a pooling of interests. It is expected to be closed by
September 30, 1997 following receipt of customary regulatory approvals.
MSB is a historically superior performer that has consistently earned in the
range of 1.30% to 1.50% of average earning assets. It is McHenry County's
largest bank and enjoys a 16% county deposit share. McHenry County is a dynamic,
fast growing area of northwest suburban Chicago that ranks as Illinois' 4th
wealthiest county with average household income of $80,000 and its 9th largest
with a population approaching 250,000.
The transaction is anticipated to be neutral to First Midwest's 1997 earnings
and accretive to its 1998 earnings by approximately 2-3%. The 1998 accretion
results primarily from annualized net cost savings of approximately $1.8
million, representing some 18% of MSB's current expense base, which will be
realized when MSB is merged into First
-1-
<PAGE>
Midwest in first quarter 1998 in addition to modest first year revenue
enhancements. A pre-tax merger related charge of approximately $6.5 million will
be recognized in the quarter the transaction is closed that includes costs
related to systems conversions, elimination of excess operating capacity,
professional fees, and a one-time provision to bring MSB's loan loss reserves to
First Midwest required levels.
Commenting on the acquisition, First Midwest Bancorp President and CEO, Robert
P. O'Meara, said, "We could not be more excited about this significant and
strategically important acquisition of the largest bank in such a vibrant, fast
growing part of suburban Chicago. It expands our existing overall suburban
Chicago presence and complements particularly well our $1.1 billion asset, 13
banking office business in adjoining Lake County. A superior performer known for
its customer service and community focus, McHenry State Bank is the bank in
McHenry County. This is what every acquisition should be about!"
The acquisition will increase First Midwest's north suburban Chicago presence by
approximately 41% to $1.6 billion in assets and its overall suburban Chicago
presence by approximately 20% to $2.8 billion. Further, MSB's four branches will
bring First Midwest suburban Chicago banking office network to 38 and its total
network to 54. The acquisition represents a continuation of First Midwest's
primary focus on the market of suburban Chicago, a market that is both one of
the fastest growing and least banking consolidated in the country.
The agreement has been approved by both the Board of Directors and shareholders
of SparBank as well as by the Board of Directors of First Midwest. First Midwest
shareholder approval is not necessary. In connection with the signing of the
agreement, First Midwest's Board of Directors also rescinded the balance of the
900,000 share stock repurchase program authorized in November 1996.
With the acquisition First Midwest's assets increase to approximately $3.5
billion, continuing it as the third largest banking company headquartered in
Illinois. It provides
-2-
<PAGE>
commercial banking, trust, investment management, mortgage and related financial
services to a variety of consumer, business and governmental customers operating
50 banking offices in 31 communities, primarily in northern Illinois. First
Midwest is headquartered in suburban Chicago where 34 of its banking offices and
approximately 80% of its overall business is situated.
(Accompanying this news release is an overview of the transaction and proforma
Statements of Income and Condition of First Midwest and SparBank for the quarter
ended and as of March 31, 1997.)
-3-
<PAGE>
FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK
PROFILE OF PARTIES
------------------
First Midwest Bancorp, Inc.
- ---------------------------
. Headquarters: Itasca (suburban Chicago), Illinois
. 3/31/97 Assets: $3.0 bil.
. Performance, Quarter ended 3/31/97:
Net Income: $8.7 mil
Return on Average Assets: 1.17%
Return on Average Equity: 13.66%
Efficiency Ratio: 59.10%
Book Value Per Share: $15.46
. Customers: 417,000 Households: 161,000 Businesses: 14,000
. Banking offices: Total 50; 34 in suburban Chicago.
----------------------------------------------------------------------
SparBank, Incorporated (McHenry State Bank)
- -------------------------------------------
. Headquarters: City of McHenry, McHenry County, Illinois
. 3/31/97 Assets: $445 mil.
. Performance, Quarter ended 3/31/97:
Net Income: $1.7 mil
Return on Average Assets: 1.52%
Return on Average Equity: 13.44%
Efficiency Ratio: 53.96%
. Customers: 46,000 Households: 18,000 Businesses: 1,800
. Banking offices: 4, all in McHenry County (suburban Chicago).
-4-
<PAGE>
FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK
-------------------------------------------
TRANSACTION SUMMARY
-------------------
Agreement: Definitive acquistion agreement executed.
Structure: Common stock-for common-stock exchange on a
tax-free basis.
Exchange Ratio: 21.72 shares of First Midwest for each share of
SparBank; 3,230,769 shares of First Midwest to be
issued.
Terms: Fixed exchange ratio; no collar or walk away provision.
Accounting Treatment: Pooling of interests.
Purchase Price: $105 mil based on First Midwest's 6/19/97 closing
price.
Price/Earnings: 16.1x trailing 12 months earnings as of 3/31/97.
Price/Tangible Book: 2.2x tangible book value at 3/31/97.
Approvals: . Customary regulatory approvals.
. Already approved by Board and Shareholders of
SparBank.
. Already approved by Board of First Midwest; First
Midwest shareholder approval not necessary.
Due Diligence: Completed.
Expected Closing: September 30, 1997.
Anticipated Accretion: 1997: neutral 1998: 2-3%
Other: First Midwest has rescinded its stock buyback
authorization.
-5-
<PAGE>
FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK
-------------------------------------------
McHENRY STATE BANK
------------------
Overview
- --------
. $450 mil Assets
. Largest Bank in McHenry County
. $370 mil Deposits
. 16% McHenry County Deposit Share - #2 Share Rank
. $180 mil Trust Assets Under Management/Administration
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
- -------------------------------
Quarter
ended Years Ended December 31,
March 31, -------------------------------
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Performance Ratios
- ------------------
Return on average assets 1.55% 1.36% 1.28% 1.47%
Return on average stockholders' equity 13.25% 12.68% 12.83% 15.63%
Net interest margin - tax equivalent 3.86% 4.12% 4.08% 4.61%
Efficiency ratio 53.31% 50.23% 52.42% 51.09%
Statement of Condition Highlights
- ---------------------------------
Total assets $444,463 $455,713 $454,031 $441,387
Total loans $269,801 $266,278 $278,913 $262,168
Total deposits $368,674 $376,624 $386,162 $373,632
Statement of Condition Ratios at Period End
- -------------------------------------------
Loans to assets 60.70% 58.43% 61.43% 59.40%
Loans to deposits 73.18% 70.70% 72.23% 70.17%
Earning assets to total assets 95.39% 94.78% 93.71% 93.07%
Capital Ratios at Period End
- ----------------------------
Tier 1 capital to risk-adjusted assets 18.48% 17.95% 16.70% 16.86%
Leverage ratio 11.37% 10.74% 10.09% 9.69%
Asset Quality Ratios at Period End
- ----------------------------------
Reserve for loan losses to loans 0.78% 0.77% 0.74% 0.83%
Nonperforming loans to loans 1.15% 1.17% 0.00% 0.24%
Nonperforming assets to loans and foreclosed real estate 1.21% 1.23% 0.34% 0.35%
</TABLE>
-6-
<PAGE>
Map of state of Illinois highlighting FMBI's current suburban Chicago presence
of 34 offices in LaSalle, Grundy, Will, DuPage, Kane and Lake Counties. In
addition, the map emphasizes McHenry County (the county in which SparBank is
located) reflecting FMBI's expanded suburban Chicago presence adjacent to Lake
and Kane counties as a result of the announced acquisition.
McHenry County Profile
Population 234,000
County Rank/1/ 9
Growth 1997-2007 19%
Households 80,000
County Rank/1/ 9
Growth 1997-2007 21%
Average HH Income $80,000
County Rank/1/ 4
Growth 1997-2007 48%
Employment 104,000
County Rank/1/ 11
Growth 1997-2007 17%
Retail Sales $1.7 Bil
County Rank/1/ 11
Growth 1997-2007 23%
Bank Deposits $2.4 Bil
MSB Dep Share/2/ 16%
MSB Dep Share Rank/2/ 2
1. Of 102 Illinois Counties
2. MSB - McHenry State Bank
Sources: Woods & Poole Economics, Inc; Sheshunoff June 30, 1996
7
<PAGE>
FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC.
Proforma Consolidated Statements of Income
(Unaudited)
Quarter ended March 31, 1997
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
First
Midwest SparBank Proforma
----------- ---------- ----------
<S> <C> <C> <C>
Total interest income....................................... $57,899 $7,896 $65,795
Total interest expense...................................... 26,608 3,822 30,430
---------- --------- ----------
Net interest income..................................... 31,291 4,074 35,365
Provision for loan losses................................... 2,078 30 2,108
---------- --------- ----------
Net interest income after
provision for loan losses............................. 29,213 4,044 33,257
---------- --------- ----------
Noninterest income
- ------------------
Service charges on deposit accounts......................... 2,638 211 2,849
Trust and investment management fees........................ 1,632 268 1,900
Other service charges, commissions and fees................. 1,581 130 1,711
Mortgage banking revenues................................... 1,279 0 1,279
Other income................................................ 966 269 1,235
Security transactions, net.................................. 365 (3) 362
---------- --------- ----------
Total noninterest income.............................. 8,461 875 9,336
---------- --------- ----------
Noninterest expense
- -------------------
Employee-related costs...................................... 12,832 1,507 14,339
Occupancy and equipment..................................... 3,517 405 3,922
Computer processing costs................................... 1,618 318 1,936
Advertising and promotions.................................. 886 41 927
Professional services....................................... 707 94 801
All other costs............................................. 4,209 303 4,512
---------- --------- ----------
Total noninterest expense............................. 23,769 2,668 26,437
---------- --------- ----------
Income before income tax expense........................ 13,905 2,251 16,156
Income tax expense ......................................... 5,179 568 5,747
---------- --------- ----------
Net income.............................................. $8,726 $1,683 $10,409
========== ========= ==========
Net income per share (Proforma for SparBank)............ $0.52 $0.52 $0.52
========== ========= ==========
Weighted avg shares outstanding (Proforma for SparBank)..... 16,767,413 3,230,769 19,998,182
========== ========= ==========
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
First
Performance Ratios Midwest Sparbank Proforma
- --------------------------------------------------------------------- ---------- -----------
<S> <C> <C> <C>
Return on average assets ................................... 1.17% 1.52% 1.22%
Return on average stockholders' equity ..................... 13.66% 13.44% 13.62%
Net interest margin - tax equivalent........................ 4.57% 3.86% 4.48%
Efficiency ratio ........................................... 59.10% 53.96% 58.53%
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC.
Proforma Consolidated Statements of Condition
(Unaudited)
March 31, 1997
(dollars in thousands, except for per share data)
First
Assets Midwest SparBank Proforma
----------- ----------- ------------
<S> <C> <C> <C>
Cash and short-term investments..................................... $ 146,501 $ 8,905 $ 155,406
Securities available for sale and held to maturity.................. 719,611 154,173 873,784
Loans, net of unearned discount..................................... 2,058,677 269,275 2,327,952
Reserve for loan losses........................................ (33,747) (2,097) (35,844)
Goodwill............................................................ 12,350 45 12,395
All other intangible assets......................................... 6,742 0 6,742
Premises and equipment........................ 49,597 9,624 59,221
Accrued interest receivable and other assets........................ 52,017 4,762 56,779
----------- ----------- ------------
Total Assets.............................................. $ 3,011,748 $ 444,687 $ 3,456,435
=========== =========== ============
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing deposits................................... $ 380,451 $ 47,329 $ 427,780
Interest-bearing deposits...................................... 1,888,813 321,879 2,210,692
----------- ----------- ------------
Total deposits............................................ 2,269,264 369,208 2,638,472
Short-term borrowings.......................................... 451,018 19,752 470,770
Accrued interest payable and other liabilities................. 33,377 4,428 37,805
----------- ----------- ------------
Total liabilities......................................... 2,753,659 393,388 3,147,047
----------- ----------- ------------
Total stockholders' equity ......................................... 258,089 51,299 309,388
----------- ----------- ------------
Total Liabilities and Stockholders' Equity................ $ 3,011,748 $ 444,687 $ 3,456,435
=========== =========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
Book value per share (Proforma for SparBank)........................ $ 15.46 $ 15.88 $ 15.53
=========== =========== ============
Total shares outstanding (Proforma for SparBank) ................... 16,697,260 3,230,769 19,928,029
=========== =========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
First
Statement of Condition Ratios at Period End Midwest Sparbank Proforma
- -------------------------------------------------------------------- ----------- ------------ ------------
Loans to assets..................................................... 68.35% 60.55% 67.35%
Loans to deposits................................................... 90.72% 72.93% 88.23%
Earning assets to total assets...................................... 92.63% 95.22% 92.96%
Capital Ratios at Period End
- --------------------------------------------------------------------
Tier 1 capital to risk-adjusted assets.............................. 10.76% 18.48% 11.54%
Total capital to risk-adjusted assets............................... 11.98% 19.25% 12.79%
Leverage ratio...................................................... 8.28% 11.37% 8.69%
Asset Quality Ratios at Period End
- --------------------------------------------------------------------
Reserve for loan losses to loans.................................... 1.64% 0.78% 1.54%
Nonperforming loans to loans........................................ 0.62% 1.15% 0.68%
Nonperforming assets to loans and foreclosed real estate............ 0.95% 1.21% 0.98%
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC.
Proforma Perfomance Highlights
Quarter ended March 31, 1997
(dollars in thousands)
First
Midwest Sparbank Proforma
----------- --------- -----------
Performance Ratios
- -------------------------------------------
<S> <C> <C> <C>
Return on average assets .................. 1.17% 1.52% 1.22%
Return on average equity .................. 13.66% 13.44% 13.62%
Net interest margin - tax equivalent....... 4.64% 3.90% 4.48%
Efficiency ratio .......................... 59.10% 53.96% 58.53%
Statement of Condition Highlights
- ----------------------------------
Total assets............................... $3,011,748 $444,687 $3,456,435
Total loans................................ $2,058,677 $269,275 $2,327,952
Total deposits............................. $2,269,264 $369,208 $2,638,472
Stockholders' equity....................... $258,089 $51,299 $309,388
Statement of Condition Ratios at Period End
- -------------------------------------------
Loans to assets............................ 68.35% 60.55% 67.35%
Loans to deposits.......................... 90.72% 72.93% 88.23%
Earning assets to total assets............. 92.63% 95.22% 92.96%
Capital Ratios at Period End
- -------------------------------------------
Total equity to assets..................... 8.57% 11.54% 8.95%
Tier 1 capital to risk-adjusted assets..... 10.73% 18.48% 11.54%
Leverage ratio............................. 8.28% 11.37% 8.69%
Asset Quality Ratios at Period End
- -------------------------------------------
Reserve for loan losses to loans........... 1.64% 0.78% 1.54%
Nonperforming loans to loans............... 0.62% 1.15% 0.68%
Nonperforming assets to loans
and foreclosed real estate................. 0.95% 1.21% 0.98%
</TABLE>
