UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. __)
(Initial Filing)
D&N FINANCIAL CORPORATION
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(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
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(Title of Class of Securities)
232864108
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(CUSIP Number)
Dana M. Cluckey
President and Chief Operating Officer
Republic Bancorp Inc.
1070 East Main Street
Owosso, Michigan 48867
(517) 725-7337
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy to:
Brad B. Arbuckle, Esq.
Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48304
(248) 645-5000
December 1, 1998
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box / /.
(Continued on following pages)
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SCHEDULE 13D
CUSIP NO. 232864108
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1 NAME OF REPORTING PERSON:
Republic Bancorp Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (entities only):
38-2604669
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS: WC, OO (See Item 3).
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: Ohio.
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7 SOLE VOTING POWER: 1,823,837 (See Item 5).
NUMBER OF SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 0 (See Item 5).
OWNED BY EACH ------------------------------------------------------
REPORTING PERSON 9 SOLE DISPOSITIVE POWER: 1,823,837 (See Item 5).
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER: 0 (See Item 5).
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,823,837 (See Item 5).
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:
/x/ (See Item 5).
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 19.9% (See Item 5).
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14 TYPE OF REPORTING PERSON: CO (See Item 3).
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (this "Statement") relates to the common
stock, $0.01 par value per share ("DNFC Common Stock"), of D&N Financial
Corporation, a corporation incorporated under the laws of the State of
Delaware ("DNFC"). The principal executive offices of DNFC are located at 400
Quincy Street, Hancock, Michigan 49930.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c), (f): This Statement is being filed by Republic Bancorp Inc., a
Michigan corporation ("Republic"). Republic is a bank holding company and its
principal business and principal executive offices are located at 1070 East
Main Street, Owosso, Michigan 48867.
The names of the directors and executive officers of Republic and their
respective business addresses or residences, citizenship and present
principal occupations or employment, as well as the names, principal
businesses and addresses of any corporations or other organizations in which
such employment is conducted, are set forth on Schedule I hereto, which
Schedule I is incorporated herein by reference.
Other than the directors and executive officers, there are no persons or
corporations controlling or ultimately in control of Republic.
(d), (e): During the last five years, neither Republic nor, to its knowledge,
any of the persons listed in Schedule I hereto has (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which proceeding such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As more fully described in Item 4 hereof, pursuant to a Stock Option
Agreement dated December 1, 1998 between DNFC and Republic (the "DNFC Stock
Option Agreement"), DNFC has granted to Republic an irrevocable option (the
"DNFC Stock Option") pursuant to which Republic has the right, upon the
occurrence of certain events (none of which has yet occurred) to purchase up
to 19.9% (currently being approximately 1,823,837 shares on a fully diluted
basis, see Item 5 below) of DNFC Common Stock at a per share price equal to
$21.625 (as adjusted; the "Option Price"). If the DNFC Stock Option were
exercisable and Republic were to exercise such option in full on the date
hereof, the funds required to purchase the shares of DNFC Common Stock
issuable upon such exercise would be $39,440,475.13. It is currently
anticipated that such funds would be provided from Republic's working capital
or by borrowings from other sources yet to be determined.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (j): MERGER AGREEMENT.
DNFC and Republic have entered into an Agreement and Plan of Merger dated as
of December 1, 1998 (the "Merger Agreement") pursuant to which DNFC will,
subject to the conditions and upon the terms stated therein, merge with and
into Republic through a tax-free, stock-for-stock exchange (the "Merger").
Republic will be the surviving corporation in the Merger. The Merger
Agreement provides that the
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articles of incorporation and bylaws of Republic in effect as of the
effective time of the Merger (the "Effective Time") will be the articles of
incorporation and bylaws of the surviving corporation.
Under the terms of the Merger Agreement, upon consummation of the Merger all
shares of DNFC Common Stock issued and outstanding immediately prior to the
Effective Time (as defined in the Merger Agreement) of the Merger shall be
converted into the right to receive 1.82 shares of Republic Common Stock.
Based on the closing price of Republic's Common Stock on November 30, 1998 of
$16.5625 per share, the value of the transaction on such date was
approximately $286 million.
The Merger, which would be accounted for as a pooling of interests, is
expected to close in the second quarter of 1999. The Merger Agreement and the
DNFC Stock Option Agreement have been approved by the boards of directors of
both companies. Consummation of the Merger is subject to certain customary
conditions, including, among others, the adoption of the Merger Agreement by
the DNFC and Republic shareholders and receipt of regulatory approvals.
OPTION AGREEMENT.
GENERAL. Pursuant to the DNFC Stock Option Agreement, DNFC granted Republic
an irrevocable option to purchase up to 19.9% (currently being approximately
1,823,837 shares on a fully diluted basis without giving effect to the
issuance of any shares subject to the DNFC Stock Option, see Item 5. below)of
DNFC Common Stock, at a price equal to $21.625 per share. The number of
shares and the purchase price are subject to adjustment as described in the
DNFC Stock Option.
One effect of the DNFC Stock Option is to increase the likelihood that the
Merger will be consummated in part by making it both more difficult and more
expensive for another party to attempt to obtain control of or acquire DNFC.
EXERCISE OF OPTION. The DNFC Stock Option may be exercised, in whole or part,
and from time to time, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), so long as written notice of such
exercise is sent within six months following such Subsequent Triggering Event
(or such later period as is provided in the DNFC Stock Option).
Each of the following is an Exercise Termination Event: (i) the Effective
Time; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Republic pursuant to Section
4.4(e) of the Merger Agreement (but only if the breach giving rise to the
termination was willful) (a "Listed Termination"); (iii) the passage of 15
months (or such longer period as is provided in the DNFC Stock Option) after
termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a Listed Termination or (iv)
the date on which the shareholders of Republic shall have voted and failed to
approve the Merger (unless (A) DNFC shall then be in material breach of its
covenants or agreements contained in the Merger Agreement or (B) on or prior
to such date, the stockholders of DNFC shall have also voted and failed to
approve and adopt the Merger Agreement). As used in the DNFC Stock Option
Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving DNFC or any DNFC
subsidiary (other than mergers, consolidations or similar transactions
involving solely DNFC and/or one or more wholly-owned (except for directors'
qualifying shares and a de minimis number of other shares) subsidiaries of
the DNFC, provided, any such transaction is not entered into in violation of
the terms of the Merger Agreement), (x) a purchase, lease or other
acquisition of all or any substantial part of the assets or deposits of DNFC
or any DNFC subsidiary, or (y) a purchase or other acquisition (including by
way of merger, consolidation,
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share exchange or otherwise) of securities representing 10% or more of the
voting power of DNFC or any DNFC subsidiary.
The term "Initial Triggering Event" means any of the following events or
transactions occurring on or after the date of the DNFC Stock Option
Agreement:
(i) DNFC or any significant subsidiary of DNFC without having
received Republic's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person other than Republic or any of its
subsidiaries or the Board of Directors of DNFC (the "DNFC Board")
shall have recommended that the shareholders of DNFC approve or
accept any Acquisition Transaction other than the Merger;
(ii) Any person other than the Republic or any Republic subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of
DNFC Common Stock;
(iii) The shareholders of DNFC shall have voted and failed to adopt
the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or
shall have been cancelled prior to termination of the Merger
Agreement if, prior to such meeting (or if such meeting shall not
have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person
(other than Republic or any of its subsidiaries) shall have made, or
publicly disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) The DNFC Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse
in any respect to Republic its recommendation that the shareholders
of DNFC approve the transactions contemplated by the Merger
Agreement;
(v) DNFC or any DNFC subsidiary, without having received Republic's
prior written consent, shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with
any person other than Republic or a Republic subsidiary;
(vi) DNFC shall have provided information to or engaged in
negotiations with a third party relating to a possible Acquisition
Transaction;
(vii) Any person other than Republic or any Republic Subsidiary
shall have made a proposal to DNFC or its shareholders to engage in
an Acquisition Transaction and such proposal shall have been
publicly announced;
(viii) Any person other than Republic or any Republic Subsidiary
shall have filed with the Securities and Exchange Commission (the
"SEC") a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would
constitute an Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such
an exchange offer);
(ix) DNFC shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Republic would be
entitled to terminate the Merger Agreement (whether immediately or
after the giving of notice or passage of time or both); or
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(x) Any person other than Republic or any Republic subsidiary other
than in connection with a transaction to which Republic has given
its prior written consent shall have filed an application or notice
with a federal or state thrift or bank regulatory or antitrust
authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
The term "Subsequent Triggering Event" shall mean any of the following events
or transactions occurring after the date of the DNFC Stock Option: (i) The
acquisition by any person (other than Republic or any Republic Subsidiary) of
beneficial ownership of 25% or more of the then outstanding DNFC Common
Stock; or (ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) of the definition of "Acquisition Transaction"
shall be 25%.
OPTION REPURCHASE. At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the holder of the DNFC Stock Option
Agreement (the "Holder"), delivered prior to an Exercise Termination Event
(or such later period as provided in the Stock Option Agreement), DNFC (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which the DNFC Stock Option may then
be exercised and (ii) at the request of the owner of shares issued pursuant
to an exercise of the DNFC Stock Option ("Option Shares") from time to time
(the "Owner"), delivered prior to an Exercise Termination Event (or such
later period as provided in the DNFC Stock Option Agreement), DNFC (or any
successor thereto) shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the market/offer price multiplied by the number of Option
Shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of DNFC Common Stock at which a tender or exchange
offer therefor has been made, (ii) the price per share of DNFC Common Stock
to be paid by any third party pursuant to an agreement with DNFC, (iii) the
highest closing price for shares of DNFC Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of the DNFC Stock Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a
sale of all or any substantial part of DNFC's assets or deposits, the sum of
the net price paid in such sale for such assets or deposits and the current
market value of the remaining net assets of DNFC as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to DNFC, divided by the
number of shares of Common Stock of DNFC outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking
firm selected by the Holder or Owner, as the case may be, and reasonably
acceptable to DNFC.
SURRENDER. Republic may, at any time following a Repurchase Event and prior
to the occurrence of an Exercise Termination Event (or such later period as
provided in the DNFC Stock Option Agreement, relinquish the Option (together
with any Option Shares issued to and then owned by Republic) to DNFC in
exchange for a cash fee equal to the surrender price specified in the DNFC
Stock Option Agreement.
REGISTRATION RIGHTS. Upon request by Republic within the 12 month period
following the first exercise of the DNFC Stock Option (or later in the event
of a delay in obtaining certain regulatory approvals), DNFC will prepare and
file a registration statement with the SEC if such registration is necessary
to permit the sale or other disposition of the shares of DNFC Common Stock
purchased upon exercise of the DNFC Stock Option. DNFC will also permit
Republic to include the shares in certain registration statements initiated
by DNFC.
TERMINATION. Generally, the right to exercise the DNFC Stock Option
terminates upon the earliest of (a) the completion of the Merger, (b) 15
months after the termination of the Merger Agreement, (c) termination of the
Merger Agreement in accordance with its terms before the occurrence of a
Purchase
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Event, and (d) the date on which the shareholders of Republic shall have
voted and failed to approve the Merger. Republic may not exercise the DNFC
Stock Option if, at the time of exercise, it is in material breach of the
Merger Agreement. Moreover, DNFC's obligations under the DNFC Stock Option
will terminate and the DNFC Stock Option will no longer be exercisable if the
Merger Agreement is terminated and Republic is in material breach of the
Merger Agreement when it is terminated.
ADDITIONAL PROVISIONS. Certain rights and obligations of DNFC and Republic
under the DNFC Stock Option are subject to receipt of required regulatory
approvals.
COPIES OF THE MERGER AGREEMENT AND THE STOCK PURCHASE OPTION ARE ATTACHED AS
EXHIBITS TO THIS STATEMENT AND ARE INCORPORATED HEREIN BY REFERENCE. THE
FOREGOING SUMMARY OF SUCH DOCUMENTS IS NOT INTENDED TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ACTUAL DOCUMENTS BEING FILED
HEREWITH.
Except as set forth herein, Republic has no current plans or proposals with
respect to DNFC that relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a), (b): Republic may be deemed to be the beneficial owner of approximately
1,823,837 shares of DNFC Common issuable upon exercise of the DNFC Stock
Option. As provided in the DNFC Option Agreement, Republic may exercise the
DNFC Stock Option only upon the happening of one or more events, none of
which has occurred. See Item 4 hereof. Since the DNFC Stock Option is not
currently exercisable, Republic expressly disclaims beneficial ownership of
any of such shares of DNFC Common. If the DNFC Stock Option were currently
exercisable and exercised in full, the shares of DNFC Common issuable upon
exercise of the DNFC Stock Option would represent approximately 19.9% of the
total number of outstanding shares of DNFC Common.
Republic has no right to vote or dispose of the shares of DNFC Common Stock
issuable upon exercise of the DNFC Stock Option unless and until such time as
the DNFC Stock Option is exercised. If Republic were to exercise the DNFC
Stock Option, it would have sole power to vote and to dispose of the shares
of DNFC Common Stock issued as a result of such exercise. As of December 1,
1998, to its knowledge, Republic and its subsidiaries, hold no shares of DNFC
Common Stock (except in a fiduciary capacity held by Republic Bank in trust
for the benefit of others).
Except as set forth above, neither Republic nor, to its knowledge, any of the
persons listed on Schedule I hereto beneficially owns any shares of DNFC
Common Stock.
(c): Except for the issuance of the DNFC Stock Option, neither Republic nor,
to its knowledge, any of the persons listed on Schedule I hereto has effected
any transaction in shares of DNFC Common Stock for such person's own account
during the past 60 days. In the ordinary course of their trust and investment
management business, subsidiaries of Republic may have effected transactions
in shares of DNFC Common during the past 60 days on behalf of trust accounts
("Trust Accounts"), if any.
(d): No other person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares of
DNFC Common Stock issuable upon exercise of the DNFC Stock Option. To its
knowledge, any beneficiaries of Trust Accounts would likely have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any shares of DNFC Common held in any such Trust Accounts.
(e): Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
None.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
1. Merger Agreement dated December 1, 1998 between D&N Financial Corporation
and Republic Bancorp Inc.
2. Stock Option Agreement dated December 1, 1998 between D&N Financial
Corporation and Republic Bancorp Inc.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete
and correct.
Republic Bancorp Inc.
Dated: December 9, 1998 By /s/ Thomas F. Menacher
-----------------------------------------
Thomas F. Menacher
Senior Vice President, Treasurer and
Chief Financial Officer
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF REPUBLIC BANCORP INC.
The names, business addresses and present principal occupations of the
directors and executive officers of Republic Bancorp Inc. ("Republic") are
set forth below. If no business address is given, the director's or executive
officer's business address is 1070 East Main Street, Owosso, Michigan 48867.
The business address of each Republic director is also the business address
of such director's employer, if any. Unless otherwise indicated, all
directors and executive officers listed below are citizens of the United
States.
I. DIRECTORS
NAME PRESENT PRINCIPAL OCCUPATION AND ADDRESS
Jerry D. Campbell Chairman of the Board and Chief Executive Officer of
Republic.
Dana M. Cluckey President and Chief Operating Officer of Republic.
Bruce L. Cook Chairman of Wolverine Sign Works of Owosso,
Michigan, a family-owned company specializing in
outdoor advertising. His business address is: c/o
Wolverine Sign Works, P.O. Box 578, Owosso, MI 48867
Richard Cramer, Sr. President of Dee Cramer, Inc., sheet metal, heating
and air conditioning contractors. His business
address is: 1819 S. Dort Highway, Flint, MI 48503
George A. Eastman Orthodontic consultant.
Howard J. Hulsman Chairman of the Board of Ross Learning, Inc., a
private educational concern.
Gary Hurand President of Dawn Donut Systems, Inc. and a Trustee
of BRT Realty Trust, a publicly-held company located
in Great Neck, New York. His business address is:
4182 Pier North Boulevard, Suite D, Flint, MI 48504
Dennis J. Ibold President of Peterson & Ibold (attorneys at law) of
Chardon, Ohio. His business address is: Village
Station, 401 South Street, Chardon, OH 44924
Stephen M. Klein Chairman and Chief Executive Officer of Omni
Financial Services, Inc., a consumer finance
company. His business address is: c/o Omni Funding
Corporation, 4800 Ashford Dunwoody Road, Suite 150,
Atlanta, Georgia 30338
John J. Lennon Retired.
Sam H. McGoun President and Chief Executive Officer of Willis
Corroon Corporation of Michigan, Inc., an insurance
agency. His business address is: c/o Willis Corroon
of Michigan, Inc., P.O. Box 5104, Southfield, MI
48086
Kelly E. Miller President and chief Executive Officer of Miller
Exploration Company, a publicly-held oil and gas
exploration and production company headquartered in
Traverse City, Michigan. His business address is:
c/o Miller Exploration Company, 3104 Logan Valley,
Traverse City, MI 49684
Joe D. Pentecost President of Better Properties, Inc., a commercial
real estate development company headquartered in
Lansing, Michigan. His business address is: c/o
Better Properties, Inc., 1651 W. Lake Lansing Road,
Suite 200, East Lansing, MI 48823
Isaac J. Powell Associate professor of Urology, Wayne State
University, Detroit, Michigan. His business address
is: c/o Harper Professional Building, Department of
Urology, 4160 John R Street, Suite 1017, Detroit,
Michigan 48201
George B. Smith Chairman of the Board of Republic Bancorp Mortgage
Inc., a subsidiary of Republic.
Jeffrey K. Stross Professor of Internal Medicine, University Medical
Center, The University of Michigan, Ann Arbor,
Michigan 48109.
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II. EXECUTIVE OFFICERS
NAME PRESENT PRINCIPAL OCCUPATION AND ADDRESS
Jerry D. Campbell Chairman and Chief Executive Officer.
Dana M. Cluckey President and Chief Operating Officer.
Barry J. Eckhold Vice President and Chief Credit Officer.
Thomas F. Menacher Senior Vice President, Treasurer and Chief Financial
Officer.
George E. Parker III General Counsel and Corporate Secretary.
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INDEX OF EXHIBITS
EXHIBIT
1 Agreement and Plan of Merger dated December 1, 1998 by and between
Republic Bancorp Inc. and D&N Financial Corporation
2 Stock Option Agreement dated December 1, 1998 between D&N Financial
Corporation and Republic Bancorp Inc.
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EXHIBIT 1
EDGAR COPY
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated as of
December 1, 1998, by and between D&N Financial Corporation, a Delaware
corporation ("D&N"), and Republic Bancorp Inc., a Michigan corporation
("Republic"). Each of D&N and Republic is sometimes individually referred to
herein as a "party," and D&N and Republic are sometimes collectively referred
to herein as the "parties."
RECITALS
WHEREAS, D&N, a unitary savings and loan holding company, with
principal offices in Hancock, Michigan, owns, among other things, all of the
issued and outstanding capital stock of D&N Bank, a federally chartered
savings bank ("D&N Bank"). As of the date hereof, D&N has 25,000,000
authorized shares of common stock, par value $0.01 per share ("D&N Common
Stock"), of which 9,165,011 shares are outstanding, and 1,000,000 authorized
shares of preferred stock, par value $.01 per share, none of which is
outstanding.
WHEREAS, Republic, a bank holding company, with principal offices in
Owosso, Michigan, owns, among other things, 100% of the issued and
outstanding capital stock of Republic Bank ("Republic Bank"). As of the date
hereof, Republic has 30,000,000 authorized shares of common stock, par value
$5.00 per share ("Republic Common Stock"), of which 23,697,383 shares are
outstanding, 5,000,000 authorized shares of preferred stock, no par value per
share ("Republic Preferred Stock"), of which no shares are outstanding.
WHEREAS, D&N and Republic desire to combine their respective holding
companies through a tax-free, stock-for-stock merger so that the respective
stockholders of D&N and Republic will have an equity ownership in the
combined holding company.
WHEREAS, neither the Board of Directors of D&N nor the Board of
Directors of Republic seeks to sell its respective holding company at this
time but both Boards desire to merge their respective holding companies in a
transaction structured as a merger of equals.
WHEREAS, it is intended that to accomplish this result, D&N will be
merged with and into Republic, with Republic as the surviving corporation.
Such merger is referred to herein as the "Merger." Republic after the Merger
is sometimes referred to herein as the "Surviving Corporation."
WHEREAS, as an inducement to and condition of Republic's willingness
to enter into this Agreement, D&N will grant to Republic concurrently with
the execution and delivery of this Agreement an option pursuant to the D&N
Stock Option Agreement (the "D&N Stock Option Agreement"). The D&N Stock
Option Agreement is attached hereto as Exhibit A.
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WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
WHEREAS, the Boards of Directors of D&N and Republic (at meetings
duly called and held) have determined that this Agreement and the
transactions contemplated hereby are in the best interests of D&N and
Republic, respectively, and their respective stockholders and have approved
this Agreement and the D&N Stock Option Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger. Subject to the terms and conditions of this Agreement
and pursuant to applicable law, at the Effective Time (as hereinafter
defined), (i) D&N shall be merged with and into Republic pursuant to the
terms and conditions set forth herein, (ii) the separate corporate existence
of D&N shall cease, and (iii) Republic as the Surviving Corporation shall
continue to be governed by the laws of the State of Michigan. This Agreement
is intended to constitute the "plan of merger" contemplated by Section 701 of
the Michigan Business Corporation Act, as amended (the "MBCA"), and the
"agreement of merger" contemplated by Section 251 of the Delaware General
Corporation Law, as amended ("DGCL").
1.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article IV hereof has been satisfied or waived, D&N
and Republic will file, or cause to be filed, a certificate of merger and
articles of merger with the appropriate authorities of Delaware and Michigan,
respectively, for the Merger, which certificate of merger and articles of
merger shall in each case be in the form required by and executed in
accordance with the provisions of applicable law. The Merger shall become
effective at the time and date which is the later of the time at which (i)
the Delaware certificate of merger is filed with the appropriate authorities
of Delaware and (ii) the Michigan articles of merger are filed with the
appropriate authorities of Michigan ("Effective Time"), which shall be
immediately following the Closing (as defined in Section 1.11 hereof) and on
the same day as the Closing if practicable, or at such other date and time as
may be agreed to by the parties and specified in the certificate of merger
and articles of merger in accordance with applicable law.
1.3 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of D&N or Republic or the holders of shares of D&N or
Republic Common Stock:
(i) Each outstanding share of D&N Common Stock issued
and outstanding at the Effective Time subject to clause (a)(ii) of this
Section 1.3 and Section 1.6 hereof, shall cease to be outstanding, shall
cease to exist and shall be converted into and represent solely
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1.82 shares of Republic Common Stock (the "Conversion Number") and shall no
longer be a share of D&N Common Stock.
(ii) Any shares of D&N Common Stock which are owned or
held by either party hereto or any of their respective Subsidiaries (as
defined in Section 2.1 hereof) (other than in a fiduciary capacity) at the
Effective Time shall cease to exist, the certificates for such shares shall
as promptly as practicable be cancelled, such shares shall not be converted
into or represent any shares of Republic Common Stock, and no shares of
capital stock of Republic shall be issued or exchanged therefor. At the
Effective Time, all shares of D&N Common Stock that are owned by D&N as
treasury stock and all shares of D&N Common Stock that are owned, directly or
indirectly, by D&N or Republic or any of their respective wholly-owned
Subsidiaries (other than shares of D&N Common Stock held, directly or
indirectly, in trust accounts, managed accounts and the like or otherwise
held in a fiduciary capacity that are beneficially owned by third parties
(any such shares, and shares of Republic Common Stock which are similarly
held, whether held directly or indirectly by D&N or Republic, as the case may
be, being referred to herein as "Trust Account Shares") and other than any
shares of D&N Common Stock held by D&N or Republic or any of their respective
wholly-owned Subsidiaries in respect of a debt previously contracted (any
such shares of D&N Common Stock, and shares of Republic Common Stock which
are similarly held, whether held directly or indirectly by D&N or Republic or
any of their respective Subsidiaries, being referred to herein as "DPC
Shares") and as set forth in the D&N Disclosure Schedule) shall be cancelled
and shall cease to exist and no stock of Republic or other consideration
shall be delivered in exchange therefor.
(iii) Each share of Republic Common Stock issued and
outstanding immediately before the Effective Time shall remain an outstanding
share of Common Stock of Republic as the Surviving Corporation. All shares of
Republic Common Stock that are owned by D&N or any of its wholly-owned
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of Republic.
(iv) The holders of certificates representing shares of
D&N Common Stock shall cease to have any rights as stockholders of D&N,
except such rights, if any, as they may have pursuant to the DGCL.
1.4 Surviving Corporation in the Merger.
(a) The name of the Surviving Corporation in the Merger shall
be "Republic". At the Effective Time, the headquarters and principal
executive offices of Republic immediately prior to the Effective Time shall
be the headquarters and principal executive offices of the Surviving
Corporation. At the Effective Time, the headquarters and principal executive
offices of Republic Bank immediately prior to the Effective Time shall be the
headquarters and principal executive offices of Republic Bank. At the
Effective Time, the headquarters and principal executive offices of D&N Bank
immediately prior to the Effective Time shall be the headquarters and
principal executive offices of D&N Bank.
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(b) At the Effective Time, the Articles of Incorporation of
Republic, as amended by the Republic Charter Amendment (as defined in Section
1.5(a) hereof) and as then in effect, shall be the Articles of Incorporation
of Republic as the Surviving Corporation until amended as provided therein or
as otherwise permitted by the MBCA.
(c) At the Effective Time, the Bylaws of Republic as then in
effect shall be the Bylaws of Republic as the Surviving Corporation until
amended as provided therein or as otherwise permitted by the MBCA.
(d) The directors and certain executive officers of Republic
as the Surviving Corporation following the Merger shall be as provided in
Section 6.2 herein until such directors or officers are replaced or
additional directors or officers are elected or appointed in accordance with
the provisions of this Agreement and the Articles of Incorporation and Bylaws
of the Surviving Corporation.
(e) From and after the Effective Time the Merger shall have
the effects set forth in this Agreement and in the MBCA and the DGCL,
including without limitation the following:
(i) Republic as the Surviving Corporation shall possess
all assets and property of every description, and every interest in the
assets and property, wherever located, and the rights, privileges,
immunities, powers, franchises, and authority, of a public as well as of a
private nature, of each of D&N and Republic, and all obligations belonging or
due to each of D&N and Republic, all of which shall vest in Republic as the
Surviving Corporation without further act or deed. Title to any real estate
or any interest in the real estate vested in D&N or Republic shall not revert
or in any way be impaired by reason of the Merger.
(ii) Republic as the Surviving Corporation will be
liable for all the obligations of each of D&N and Republic. Any claim
existing, or action or proceeding pending, by or against D&N or Republic, may
be prosecuted to judgment, with right of appeal, as if the Merger had not
taken place, or Republic as the Surviving Corporation may be substituted in
its place.
(iii) All the rights of creditors of each of D&N and
Republic will be preserved unimpaired, and all liens upon the property of D&N
and Republic will be preserved unimpaired only on the property affected by
such liens immediately before the Effective Time.
1.5 Authorization for Issuance of Republic Common Stock; Exchange of
Certificates.
(a) Subject to the approval by Republic's stockholders of an
amendment to the Articles of Incorporation of Republic increasing the number
of authorized shares of Republic Common Stock to not less than 75,000,000
(the "Republic Charter Amendment"), prior to the Closing Republic shall
reserve for issuance a sufficient number of shares of its common stock for
the purpose of issuing its shares to D&N's stockholders in accordance with
this Article I.
(b) After the Effective Time, holders of certificates
theretofore representing outstanding shares of D&N Common Stock (other than
as provided in Section 1.3(a)(ii) hereof),
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upon surrender of such certificates to State Street Bank and Trust
Company/Boston EquiServe, or another exchange agent appointed jointly by D&N
and Republic on behalf of Republic as the Surviving Corporation (the
"Exchange Agent"), shall be entitled to receive certificates for the number
of whole shares of Republic Common Stock into which shares of D&N Common
Stock theretofore evidenced by the certificates so surrendered shall have
been converted, as provided in Section 1.3 hereof, and cash payments in lieu
of fractional shares, if any, as provided in Section 1.6 hereof. As soon as
practicable after the Effective Time, the Exchange Agent will send a notice
and transmittal form to each D&N stockholder of record at the Effective Time
whose D&N Common Stock shall have been converted into Republic Common Stock
advising such stockholder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent outstanding certificates
formerly representing D&N Common Stock in exchange for new certificates for
Republic Common Stock. Upon surrender, each certificate representing D&N
Common Stock shall be cancelled.
(c) Until surrendered as provided in this Section 1.5 hereof,
all outstanding certificates of a holder which, before the Effective Time,
represented D&N Common Stock (other than those representing shares cancelled
at the Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed
for all corporate purposes to represent the number of whole shares of
Republic Common Stock into which the shares of D&N Common Stock formerly
represented thereby were converted and the right to receive cash in lieu of a
fractional share interest. However, until such outstanding certificates
formerly representing D&N Common Stock are so surrendered, no dividend or
distribution payable to holders of record of Republic Common Stock shall be
paid to any holder of such outstanding certificates, but upon surrender of
such outstanding certificates by such holder there shall be paid to such
holder the amount of any dividends or distribution, without interest,
theretofore paid with respect to such whole shares of Republic Common Stock,
but not paid to such holder, and which dividends or distribution had a record
date occurring on or after the Effective Time and the amount of any cash,
without interest, payable to such holder in lieu of a fractional share
interest pursuant to Section 1.6 hereof. After the Effective Time, there
shall be no further registration of transfers on the records of D&N of
outstanding certificates formerly representing shares of D&N Common Stock
and, if a certificate formerly representing such shares is presented to
Republic or D&N, it shall be forwarded to the Exchange Agent for cancellation
and exchanged for a certificate representing shares of Republic Common Stock
and cash for any fractional share interest (if any), as herein provided.
Following six months after the Effective Time, the Exchange Agent shall
return to Republic any certificates for Republic Common Stock and cash
remaining in the possession of the Exchange Agent (together with any
dividends in respect thereof) and thereafter shareholders of D&N shall look
exclusively to Republic for shares of Republic Common Stock and cash to which
they are entitled hereunder. Notwithstanding the foregoing, none of D&N,
Republic, the Exchange Agent or any other Person shall be liable to any
former holder of shares of D&N Common Stock for any amount delivered in good
faith to a public official pursuant to applicable abandoned property, escheat
or similar laws.
(d) All shares of Republic Common Stock and cash in lieu of
any fractional share issued or paid upon the conversion of D&N Common Stock
in accordance with the above terms and conditions shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to such D&N
Common Stock.
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(e) If any new certificate for Republic Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange thereof is registered, it shall be a condition of the issuance
therefor that the certificate surrendered in exchange shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such transfer pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of a new certificate representing
shares of Republic Common Stock in any name other than that of the registered
holder of the certificate surrendered, or establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not payable.
(f) In the event any certificate representing D&N Common
Stock shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed certificate, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Republic Common Stock and cash for any fractional share interest, as may be
required pursuant hereto; provided, however, that Republic as the Surviving
Corporation or Exchange Agent may, in its discretion and as a condition
precedent to the issuance or payment thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such sum as it may
direct as indemnity against any claim that may be made against Republic as
the Surviving Corporation, D&N, the Exchange Agent or any other person with
respect to the certificate alleged to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision
hereof, no fractional shares of Republic Common Stock, and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued upon
the conversion of or in exchange for any shares of D&N Common Stock; no
dividend or distribution with respect to Republic Common Stock shall be
payable on or with respect to any fractional share interest; and no such
fractional share interest shall entitle the owner thereof to vote or to any
other rights of a stockholder of Republic as the Surviving Corporation. In
lieu of such fractional share interest, any holder of D&N Common Stock who
would otherwise be entitled to a fractional share of Republic Common Stock
will, upon surrender of his certificate or certificates representing D&N
Common Stock outstanding immediately before the Effective Time, be paid the
applicable cash value of such fractional share interest, which shall be equal
to the product of the fraction of the share to which such holder would
otherwise have been entitled and the closing price of Republic Common Stock
on the trading day immediately prior to the date of the Effective Time. For
the purposes of determining any such fractional share interest, all shares of
D&N Common Stock owned by a D&N stockholder shall be combined so as to
calculate the maximum number of whole shares of Republic Common Stock
issuable to such D&N stockholder.
1.7 Stockholders' Meetings.
(a) D&N shall, at the earliest practicable date, hold a
meeting of its stockholders (the "D&N Stockholders' Meeting") to submit this
Agreement for adoption by its stockholders. The affirmative vote of a
majority of the issued and outstanding shares of D&N Common Stock entitled to
vote shall be required for such adoption.
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(b) Republic shall, at the earliest practicable date, hold a
meeting of its stockholders (the "Republic Stockholders' Meeting") to (i)
submit this Agreement for stockholder approval and (ii) submit the Republic
Charter Amendment for stockholder approval. The affirmative vote of a
majority of the issued and outstanding shares of Republic Common Stock
entitled to vote shall be required for such approval of this Agreement and
for such approval of the Republic Charter Amendment.
1.8 D&N Stock Options.
(a) The Disclosure Schedule delivered by D&N to Republic
pursuant to Section 2.2 herein sets forth a list of each stock option
outstanding on the date of this Agreement (collectively, the "D&N Stock
Options") to purchase D&N Common Stock heretofore granted pursuant to the D&N
Amended and Restated Stock Option and Incentive Plan (as amended February 27,
1995) and the D&N Amended and Restated 1994 Management Stock Incentive Plan
(collectively, the "D&N Option Plans"). The Disclosure Schedule delivered by
D&N to Republic pursuant to Section 2.2 herein also sets forth with respect
to each D&N Stock Option the option exercise price, the number of shares
subject to the option, the dates of grant, vesting, exercisability and
expiration of the option and that the option is either an incentive or a
nonqualified stock option. Except as otherwise expressly provided in Section
3.14(b) hereof, without the written consent of Republic, no additional stock
options shall, after the date of this Agreement, be granted under the D&N
Option Plans.
(b) At the Effective Time, each D&N Stock Option which is
outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of D&N Common Stock and shall be
converted automatically into an option to purchase shares of Republic Common
Stock in an amount and at an exercise price determined as provided below (and
otherwise, in the case of options, subject to the terms of the D&N Option
Plans under which they were issued and the agreements evidencing grants
thereunder):
(i) The number of shares of Republic Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of D&N Common Stock subject to the original D&N
Stock Option and the Conversion Number, provided that any fractional
shares of Republic Common Stock resulting from such multiplication
shall be rounded down to the nearest whole share; and
(ii) The exercise price per share of Republic Common
Stock under the new option shall be equal to the exercise price per
share of D&N Common Stock under the original D&N Stock Option
divided by the Conversion Number, provided that such exercise price
shall be rounded down to the nearest whole cent.
(c) The adjustment provided herein with respect to any D&N
Stock Options which are "incentive stock options" (as defined in Section 422
of the Internal Revenue Code of 1986, as amended ("Internal Revenue Code"))
shall be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Internal Revenue Code. The vesting, duration and other
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terms of the new option shall be the same as the original D&N Stock Option
except that all references to D&N shall be deemed to be references to
Republic.
(d) At all times after the Effective Time, Republic as the
Surviving Corporation shall reserve for issuance such number of shares of
Republic Common Stock as necessary so as to permit the exercise of options
granted under the D&N Option Plans in the manner contemplated by this
Agreement and, subject to Section 1.8(e) hereof, the instruments pursuant to
which such options were granted. Republic shall make all filings required
under federal and state securities laws promptly after the Effective Time so
as to permit the exercise of such options and the sale of the shares received
by the optionee upon such exercise at and after the Effective Time and
Republic as the Surviving Corporation shall continue to make such filings
thereafter as may be necessary to permit the continued exercise of options
and sale of such shares.
(e) Notwithstanding anything to the contrary express or
implied in any of the D&N Option Plans or any of the D&N Stock Options, D&N
and Republic, as applicable, shall: (i) neither approve nor allow any holder
of any stock option granted under any of the D&N Option Plans (including,
without limitation, the D&N Stock Options) to elect or receive a cash payment
in lieu of the right to receive or exercise such stock option; and (ii) not
allow any holder of any stock option granted under any D&N Option Plan
(including, without limitation, the D&N Stock Options) to exercise his or her
right to receive cash pursuant to such D&N Option Plan, and shall institute a
procedure to effect the issuance of D&N or Republic Common Stock, as
applicable, in lieu thereof, with the right of the holder to sell such D&N or
Republic Common Stock, as applicable.
1.9 Registration Statement; Prospectus/Joint Proxy Statement.
(a) For the purposes (i) of holding the Republic
Stockholders' Meeting, (ii) of registering with the Securities and Exchange
Commission ("SEC") and with applicable state securities authorities the
Republic Common Stock to be issued to holders of D&N Common Stock in
connection with the Merger and (iii) of holding the D&N Stockholders'
Meeting, the parties shall cooperate in the preparation of an appropriate
registration statement (such registration statement, together with all and
any amendments and supplements thereto, is referred to herein as the
"Registration Statement"), including the Prospectus/Joint Proxy Statement
satisfying all applicable requirements of applicable state laws, and of the
Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act
of 1934 (the "Exchange Act") and the rules and regulations thereunder (such
Prospectus/Joint Proxy Statement, together with any and all amendments or
supplements thereto, is referred to herein as the "Prospectus/Joint Proxy
Statement").
(b) D&N shall furnish such information concerning D&N and its
Subsidiaries as is necessary in order to cause the Prospectus/Joint Proxy
Statement, insofar as it relates to such entities, to comply with Section
1.9(a) hereof. D&N agrees promptly to advise Republic if at any time before
the Republic or D&N Stockholders' Meeting any information provided by D&N in
the Prospectus/Joint Proxy Statement (through incorporation by reference or
otherwise) becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy or omission. D&N
shall furnish Republic with such supplemental information as may
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be necessary in order to cause such Prospectus/Joint Proxy Statement, insofar
as it relates to D&N and its Subsidiaries, to comply with Section 1.9(a)
hereof.
(c) Republic shall furnish D&N with such information
concerning Republic and its Subsidiaries as is necessary in order to cause
the Prospectus/Joint Proxy Statement, insofar as it relates to such entities,
to comply with Section 1.9(a) hereof. Republic agrees promptly to advise D&N
if at any time before the D&N or Republic Stockholders' Meeting any
information provided by Republic in the Prospectus/Joint Proxy Statement
(through incorporation by reference or otherwise) becomes incorrect or
incomplete in any material respect and to provide D&N with the information
needed to correct such inaccuracy or omission. Republic shall furnish D&N
with such supplemental information as may be necessary in order to cause the
Prospectus/Joint Proxy Statement, insofar as it relates to Republic and its
Subsidiaries, to comply with Section 1.9(a).
(d) Republic shall promptly file the Registration Statement
with the SEC and applicable state securities agencies. D&N and Republic shall
use all reasonable efforts to cause the Registration Statement to become
effective under the Securities Act and applicable state securities laws at
the earliest practicable date. D&N authorizes Republic to utilize in the
Registration Statement the information concerning D&N and its Subsidiaries
incorporated by reference in, and provided to Republic for the purpose of
inclusion in, the Prospectus/Joint Proxy Statement. Republic shall advise D&N
promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Republic shall furnish D&N with copies
of all such documents. Before the Effective Time or the termination of this
Agreement, each party shall consult with the other with respect to any
material (other than the Prospectus/Joint Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the
Securities Act.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate,
and shall cause each of their respective affiliates and Subsidiaries to
cooperate, in the preparation and submission by them, as promptly as
reasonably practicable, of such applications, petitions, and other filings as
any of them may reasonably deem necessary or desirable to or with thrift and
bank regulatory authorities, Federal Trade Commission, Department of Justice,
SEC, Secretary of State of Delaware and Michigan, other regulatory or
governmental authorities, holders of the voting shares of common stock of D&N
and Republic, and any other persons for the purpose of obtaining any
approvals or consents necessary to consummate the transactions contemplated
hereby. Each party will have the right to review and comment on such
applications, petitions and filings in advance and shall furnish to the other
copies thereof promptly after submission thereof. Any such materials must be
acceptable to both D&N and Republic prior to submission to any regulatory or
governmental entity or authority or transmission to stockholders or other
third parties, except to the extent that D&N or Republic is legally required
to proceed prior to obtaining the acceptance of the other party hereto. Each
party agrees to consult with the other with respect to obtaining all
necessary consents and approvals, and each will keep the other apprised of
the status of matters relating to such approvals and consents and the
consummation of the transactions contemplated hereby. At the date hereof, no
party is aware of any reason that any regulatory approval required to be
obtained by it would not be obtained or would be obtained subject to
conditions that would have or result in a material adverse effect on Republic
as the Surviving Corporation.
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1.11 Closing. If (i) this Agreement has been duly approved by the
stockholders of D&N and Republic, (ii) the Republic Charter Amendment has
been duly approved by the stockholders of Republic, and (iii) all relevant
conditions of this Agreement have been satisfied or waived, a closing (the
"Closing") shall take place as promptly as practicable thereafter at the
principal office of Miller, Canfield, Paddock and Stone, P.L.C., Detroit,
Michigan, or at such other place as the parties agree, at which the parties
will exchange certificates, letters and other documents as required hereby
and will make the filings described in Section 1.2 hereof. Such Closing will
take place within 30 days after the satisfaction or waiver of all conditions
and/or obligations precedent to Closing contained in Article IV of this
Agreement, or at such other time as the parties agree. The parties shall use
their respective best efforts to cause the Closing to occur on or prior to
June 30, 1999.
1.12 Tax Consequences; Accounting Treatment. It is intended that (i)
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, (ii) this Agreement shall constitute a
"plan of reorganization" for the purposes of Section 368 of the Internal
Revenue Code, and (iii) the Merger shall qualify for "pooling of interests"
accounting treatment under Accounting Principles Board Opinion No. 16 and SEC
Accounting Series Releases 130 and 135, as amended.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
D&N represents and warrants to Republic, and Republic represents and
warrants to D&N, except as disclosed in the Disclosure Schedule delivered by
each party to the other pursuant to Section 2.23 hereof, as follows:
2.1 Organization, Good Standing, Authority, Insurance, Etc. It is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Section 2.1 of its Disclosure
Schedule lists each "subsidiary" (the term "subsidiary" when used with
respect to any party means any entity (including without limitation any
corporation, partnership, joint venture or other organization, whether
incorporated or unincorporated) which is consolidated with such party for
financial reporting purposes (individually a "Subsidiary" and collectively
the "Subsidiaries"). Each of its Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction under which
it is organized, as set forth in Section 2.1 of its Disclosure Schedule. It
and each of its Subsidiaries have all requisite power and authority and to
the extent required by applicable law are licensed to own, lease and operate
their respective properties and conduct their respective businesses as they
are now being conducted. It has delivered or made available to the other
party a true, complete and correct copy of the articles of incorporation,
certificate of incorporation or other organizing document and of the bylaws,
as in effect on the date of this Agreement, of it and each of its
Subsidiaries. It and each of its Subsidiaries are qualified to do business as
foreign corporations or entities and are in good standing in each
jurisdiction in which qualification is necessary under applicable law, except
to the extent that any failures to so qualify would not, in the aggregate,
have a material adverse effect on it. All eligible accounts of each of its
Subsidiaries that is a depositary institution are insured by the Federal
Deposit Insurance Corporation (the "FDIC") to the maximum extent permitted
under applicable law. In the case of the representations and warranties of
D&N, D&N is duly registered as a savings and loan holding
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company under the Home Owners' Loan Act of 1933, as amended, and the D&N
Common Stock is registered under the Exchange Act. In the case of the
representations and warranties of Republic, Republic is duly registered as a
bank holding company registered under the Bank Holding Company Act of 1956,
as amended, and the Republic Common Stock is registered under the Exchange
Act. Its minute books and those of each of its Subsidiaries contain complete
and accurate records of all meetings and other corporate actions taken by
their respective stockholders and Boards of Directors (including the
committees of such Boards).
2.2 Capitalization.
(a) Its authorized capital stock and the number of issued and
outstanding shares of its capital stock as of the date hereof are accurately
set forth in the recitals in this Agreement. All outstanding shares of its
common stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except (i) as set forth in Section 2.2 of its
Disclosure Schedule or (ii) with respect to the D&N Stock Option Agreement,
as of the date of this Agreement, there are no options, convertible
securities, warrants or other rights (preemptive or otherwise) to purchase or
acquire any of its capital stock from it and no oral or written agreement,
contract, arrangement, understanding, plan or instrument of any kind to which
it or any of its Subsidiaries is subject with respect to the issuance, voting
or sale of issued or unissued shares of its capital stock. A true and
complete copy of each plan and agreement pursuant to which such options,
convertible securities, warrants or other rights have been granted or issued,
as in effect on the date of this Agreement, is included in Section 2.2 of its
Disclosure Schedule. Only the holders of its common stock have the right to
vote at meetings of its stockholders on matters to be voted thereat
(including this Agreement).
(b) Subject to stockholder approval of the Republic Charter
Amendment, and with respect to the shares of Republic Common Stock to be
issued in the Merger, Republic represents and warrants that such shares when
so issued in accordance with this Agreement will be duly authorized, validly
issued, fully paid and nonassessable and not subject to any preemptive rights
or other liens.
2.3 Ownership of Subsidiaries. All outstanding shares or ownership
interests of its Subsidiaries are validly issued, fully paid, nonassessable
and owned beneficially and of record by it or one of its Subsidiaries free
and clear of any lien, claim, charge, restriction, rights of third parties,
or encumbrance (collectively, "Encumbrance"), except as set forth in Section
2.3 of its Disclosure Schedule. There are no options, convertible securities,
warrants or other rights (preemptive or otherwise) to purchase or acquire any
capital stock or ownership interests of any of its Subsidiaries and no
contracts to which it or any of its Subsidiaries is subject with respect to
the issuance, voting or sale of issued or unissued shares of the capital
stock or ownership interests of any of its Subsidiaries. Neither it nor any
of its Subsidiaries owns more than 2% of the capital stock or other equity
securities (including securities convertible or exchangeable into such
securities) of or more than 2% of the aggregate profit participations in any
entity other than a Subsidiary or as otherwise set forth in Section 2.3 of
its Disclosure Schedule.
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2.4 Financial Statements and Reports.
(a) No registration statement, offering circular, proxy
statement, schedule or report filed by it or any of its Subsidiaries under
various securities and financial institution laws and regulations
("Regulatory Reports"), on the date of its effectiveness in the case of such
registration statements, or on the date of filing in the case of such reports
or schedules, or on the date of mailing in the case of such proxy statements,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. For the past five years, it and its Subsidiaries have timely
filed all Regulatory Reports required to be filed by them under various
securities and financial institution laws and regulations except to the
extent that all failures to so file, in the aggregate, would not have a
material adverse effect on it; and all such documents, as finally amended,
complied in all material respects with applicable requirements of law and, as
of their respective date or the date as amended, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the
extent stated therein, all financial statements and schedules included in the
Regulatory Reports (or to be included in Regulatory Reports to be filed after
the date hereof) (i) were or will be (with respect to financial statements in
respect of periods ending after September 30, 1998), prepared in accordance
with its books and records and those of its consolidated Subsidiaries, and
(ii) present (and in the case of financial statements in respect of periods
ending after September 30, 1998, will present) fairly the consolidated
financial position and the consolidated results of operations or income,
changes in stockholders' equity and cash flows of it and its Subsidiaries as
of the dates and for the periods indicated in accordance with generally
accepted accounting principles applied on a basis consistent with prior
periods (except for the omission of notes to unaudited statements and in the
case of unaudited statements to recurring year-end adjustments normal in
nature and amounts). Its audited consolidated financial statements at
December 31, 1997 and for the year then ended and the consolidated financial
statements for all periods thereafter up to the Closing reflect or will
reflect, as the case may be, all liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and
regardless of when asserted) as of such date of it and its Subsidiaries
required to be reflected in such financial statements in accordance with
generally accepted accounting principles and contain or will contain (as the
case may be) adequate reserves for losses on loans and properties acquired in
settlement of loans, taxes and all other material accrued liabilities and for
all reasonably anticipated material losses, if any, as of such date in
accordance with generally accepted accounting principles. There exists no set
of circumstances that could reasonably be expected to result in any liability
or obligation material to it or its Subsidiaries, taken as a whole, except as
disclosed in such consolidated financial statements at December 31, 1997 or
for transactions effected or actions occurring or omitted to be taken after
December 31, 1997 (i) in the ordinary course of business, (ii) as permitted
by this Agreement or (iii) as disclosed in its Regulatory Reports filed after
December 31, 1997 and before the date of this Agreement. A true and complete
copy of such December 31, 1997 financial statements has been delivered by it
to the other party. The books and records of it and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
generally accepted accounting principles and any other applicable legal and
accounting requirements.
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(b) To the extent permitted under applicable law, it has
delivered or made available to the other party each Regulatory Report filed,
used or circulated by it with respect to periods since January 1, 1995
through the date of this Agreement and will promptly deliver to the other
party each such Regulatory Report filed, used or circulated after the date
hereof, each in the form (including exhibits and any amendments thereto)
filed with the applicable regulatory or governmental entity or authority (or,
if not so filed, in the form used or circulated).
2.5 Absence of Changes.
(a) Since September 30, 1998, there has been no material
adverse change affecting it. There is no occurrence, event or development of
any nature existing or, to its best knowledge, threatened which may
reasonably be expected to have a material adverse effect upon it.
(b) Except as set forth in Section 2.5 of its Disclosure
Schedule or in its Regulatory Reports filed after December 31, 1997 and
before the date of this Agreement, since December 31, 1997, each of it and
its Subsidiaries has owned and operated its respective assets, properties and
businesses in the ordinary course and consistent with past practice.
(c) In the case of D&N: since December 31, 1997 neither it nor
any of its Subsidiaries has (i) except for such actions as are in the
ordinary course of business consistent with past practice or except as
required by applicable law, (A) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of
December 31, 1997, or (B) granted any severance or termination pay or entered
into any contract to make or grant any severance or termination pay, or (ii)
suffered any strike, work stoppage, slowdown, or other labor disturbance
which, in its reasonable judgment, is likely, either individually or in the
aggregate, to have a material adverse effect on it.
2.6 Prospectus/Joint Proxy Statement. At the time the
Prospectus/Joint Proxy Statement is mailed to the stockholders of D&N and
Republic for the solicitation of proxies for the approvals referred to in
Section 1.7 hereof and at all times after such mailings up to and including
the times of such approvals, such Prospectus/Joint Proxy Statement (including
any supplements thereto), with respect to all information set forth therein
relating to it (including its Subsidiaries) and its stockholders, its common
stock, this Agreement, the Merger and the other transactions contemplated
hereby, will:
(a) Comply in all material respects with applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations under
such Acts; and
(b) Not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which it is made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment
banker, person or firm acting on behalf or under authority of it or any of
its Subsidiaries is or will be entitled to any broker's
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or finder's fee or any other commission or similar fee directly or indirectly
in connection with the Merger or any other transaction contemplated hereby,
except as set forth in Section 2.7 of its Disclosure Schedule transactions
contemplated by this Agreement, other than (i) in the case of Republic, Roney
Capital Markets, a division of First Chicago Capital Markets, Inc. ("Roney")
(a copy of which engagement agreement has been disclosed by Republic to D&N)
whose fees, commissions and expenses shall be paid by Republic, and (ii) in
the case of D&N, Hovde Financial, Inc. ("Hovde") (a copy of which engagement
agreement has been disclosed by D&N to Republic) whose fees, commissions and
expenses shall be paid by D&N.
2.8 Litigation and Other Proceedings. Except for matters which would
not have a material adverse effect on it, or except as set forth in Section
2.8 of its Disclosure Schedule, neither it nor any of its Subsidiaries is a
defendant in, nor is any of its property subject to, any pending or, to its
best knowledge, threatened claim, action, suit, investigation or proceeding
or subject to any judicial order, judgment or decree. There is no injunction,
order, judgment, decree, or regulatory restriction (other than (i) in the
case of Republic, those that apply to similarly situated bank holding
companies and/or banks, and (ii) in the case of D&N, those that apply to
similarly situated savings and loan holding companies and/or savings banks)
imposed upon it , any of its Subsidiaries or the assets of it or any of its
Subsidiaries which has had, or might reasonably be expected to have, a
material adverse effect on it.
2.9 Compliance with Law. Except as set forth in Section 2.9 of its
Disclosure Schedule:
(a) It and each of its Subsidiaries are in compliance in
all material respects with all laws, regulations, ordinances, rules,
judgments, orders or decrees applicable to their respective operations or
businesses, including without limitation the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home Owners'
Disclosure Act and all other applicable fair lending laws or other laws
relating to discrimination. Neither it nor any of its Subsidiaries has
received notice from any federal, state or local government or governmental
or regulatory agency or body of any material violation of, and does not know
of any material violations of, any of the above.
(b) It and each of its Subsidiaries have all permits,
licenses, certificates of authority, franchises, orders and approvals of, and
have made all filings, applications and registrations with, all federal,
state, local and foreign government or governmental or regulatory agency or
body that are required in order to permit them to carry on their respective
businesses as they are presently being conducted.
(c) It and each of its Subsidiaries have received since
January 1, 1995 no notification or communication from any government or
governmental or regulatory agency or body or the staff thereof (A) asserting
that it or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances that such government or governmental or
regulatory agency or body administers or enforces; (B) threatening to revoke
any license, franchise, permit or authorization; or (C) threatening or
contemplating any enforcement action by or supervisory or other written
agreement with a state or federal banking regulator, or any revocation or
limitation of, or action which would have the effect of revoking or limiting,
the FDIC deposit insurance of any
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Subsidiary (nor, to the knowledge of its executive officers, do any grounds
for any of the foregoing exist); and
(d) It and each of its Subsidiaries are not required to
give prior notice to any government or governmental or regulatory agency or
body of the proposed addition of an individual to their respective board of
directors or the employment of an individual as a senior executive officer.
(e) Each of its Subsidiaries which is a federally insured
bank or savings institution currently performs all personal trust, corporate
trust and other fiduciary activities ("Trust Activities") with requisite
authority under applicable law and in accordance in all material respects
with the agreed-upon terms of the agreements and instruments governing such
Trust Activities, sound fiduciary principles and applicable law and
regulation (specifically including, but not limited to, Section 9 of Title 12
of the Code of Federal Regulations) where the failure to so perform would
have a material adverse effect on it; there is no investigation or inquiry of
a material nature by any governmental entity or authority pending, or to its
knowledge, threatened, against or affecting it, or any "Significant
Subsidiary" (as defined in Rule 1-02(u) of Regulation S-X of the SEC) of it
relating to the compliance by it or any such Significant Subsidiary with
sound fiduciary principles and applicable regulations; and except where any
such failure would not have a material adverse effect on it, each employee of
its Subsidiaries had the authority to act in the capacity in which he or she
acted with respect to Trust Activities, in each case, in which such employee
held himself or herself out as a representative of a Subsidiary of it; and
each of its Subsidiaries has established policies and procedures for the
purpose of complying with applicable laws relating to Trust Activities, has
followed such policies and procedures in all material respects and has
performed appropriate internal audit reviews of, and has engaged independent
accountants to perform audits of, Trust Activities, which audits since
December 31, 1995 have disclosed no material violations of applicable laws or
such policies and procedures.
2.10 Corporate Actions.
(a) Its Board of Directors (at a meeting duly called and
held) has by the requisite vote (i) determined that the Merger is advisable
and in the best interests of it and its stockholders, (ii) duly approved the
Merger, this Agreement and the D&N Stock Option Agreement, and authorized its
officers to execute and deliver this Agreement, the D&N Stock Option
Agreement and to take all action necessary to consummate the Merger and the
other transactions contemplated hereby and thereby, (iii) in the case of
Republic, duly approved the Republic Charter Amendment and authorized its
officers to take all action necessary to obtain stockholder approval of the
Republic Charter Amendment and, following such stockholder approval, to
effect the Republic Charter Amendment and the other transactions contemplated
thereby, (iv) authorized and directed the submission for stockholders'
approval or adoption of this Agreement, and (v) in the case of Republic,
authorized and directed the submission for stockholders' approval or adoption
of the Republic Charter Amendment. Its Board of Directors has been provided
with an opinion of its financial advisor (Roney in the case of Republic, and
Hovde in the case of D&N), that, as of the date of such duly called and held
meeting of its Board of Directors, the Conversion Number is fair, from a
financial point of view, to its stockholders.
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(b) Its Board of Directors has taken all necessary action
to exempt this Agreement, and the D&N Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
D&N Stock Option Agreement and the transactions contemplated hereby and
thereby are exempt from, (i) any applicable state takeover laws, (ii) any
state laws limiting or restricting the voting rights of stockholders, (iii)
any state laws requiring a stockholder approval vote in excess of the vote
normally required in transactions of similar type not involving a "related
person," "interested stockholder" or person or entity of similar type and
(iv) any provision in its or any of its Subsidiaries' articles of
incorporation, certificate of incorporation, charter or bylaws, (A)
restricting or limiting stock ownership or the voting rights of stockholders
or (B) requiring a stockholder approval vote in excess of the vote normally
required in transactions of similar type not involving a "related person,"
interested stockholder" or person or entity of similar type.
2.11 Authority. Except as set forth in Section 2.11 of its
Disclosure Schedule, neither the execution and delivery of and performance of
its obligations under this Agreement and the D&N Stock Option Agreement by it
nor the consummation of the Merger will violate any of the provisions of, or
constitute a breach or default under or give any person the right to
terminate or accelerate payment or performance under, (i) its articles of
incorporation, certificate of incorporation or bylaws, or the articles of
incorporation, certificate of incorporation, charter or bylaws of any of its
Subsidiaries, (ii) any regulatory restraint on the acquisition of it or
control thereof, (iii) any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of its Subsidiaries is subject or (iv) any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation or
instrument ("Contract") to which it or any of its Subsidiaries is a party or
is subject or by which any of its or their properties or assets is bound and
which provides for payments by, on behalf of, or to it and/or any of its
Subsidiaries in excess of either $50,000 per annum or $100,000 over the term
of such Contract. The parties acknowledge that the consummation of the Merger
and the other transactions contemplated hereby is subject to stockholder
approval and to various governmental or regulatory approvals. It has all
requisite corporate power and authority to enter into this Agreement and the
D&N Stock Option Agreement, and to perform its obligations hereunder and
thereunder, subject, in the case of Republic, to the approval or adoption of
the Republic Charter Amendment by the stockholders of Republic and, in the
case of the Merger, to the approval or adoption of this Agreement by its
stockholders under applicable law. Other than (x) the receipt of Governmental
Approvals (as defined in Section 4.1(c) hereof), (y) the approval or adoption
of this Agreement by its stockholders, and (z) in the case of Republic, the
approval or adoption of the Republic Charter Amendment by its stockholders,
and except as set forth in Section 2.11 of its Disclosure Schedule with
respect to any Contract, no consents or approvals are required on its behalf
or on behalf of any of its Subsidiaries in connection with the consummation
of the transactions contemplated by this Agreement. This Agreement and the
D&N Stock Option Agreement have been duly executed and delivered on behalf of
it (and assuming due authorization, execution and delivery by every other
party to this Agreement and the D&N Stock Option Agreement), and each of them
constitutes a valid and binding obligation of it, enforceable against it in
accordance with its terms, except as enforceability may be limited by
applicable laws relating to bankruptcy, insolvency or creditors rights
generally and general principles of equity.
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2.12 Employment Arrangements.
(a) Except as set forth in Section 2.12 of its Disclosure
Schedule: (i) all employees of it and its Subsidiaries are employees-at-will,
may be terminated at any time for any lawful reason or no reason and have no
entitlement to employment by virtue of any oral or written contract, employer
policy, or otherwise, except for any employees, individually or in the
aggregate, the termination of whom without cause would not impose any
material liability on it or its Subsidiaries or require any material payments
by it or any of its Subsidiaries; (ii) there are no agreements, plans or
other arrangements with respect to employment, severance or other benefits
with any current or former directors, officers or employees of it or any of
its Subsidiaries which may not be terminated without penalty or expense
(including any augmentation or acceleration of benefits) on 30 days' or less
notice to any such person; (iii) no payments and benefits (including any
augmentation or acceleration of benefits) to current or former directors,
officers or employees of it or any of its Subsidiaries resulting from the
transactions contemplated hereby or the termination of such person's service
or employment within two years after completion of the Merger will cause the
imposition of excise taxes under Section 4999 of the Internal Revenue Code or
the disallowance of a deduction to it, Republic as the Surviving Corporation,
or any of their respective Subsidiaries pursuant to Section 162, 280G, or any
other section of the Internal Revenue Code; and (iv) neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (A) constitute a stated "triggering event" under any
"Employee Plan" (as defined in Section 2.13(a) hereof) or "Benefit
Arrangement" (as defined in Section 2.13(a) hereof) of it or any of its
Subsidiaries that will result in any material payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director, officer, stockholder, or employee of
it or any of its Subsidiaries, or any dependent or affiliate of any of the
foregoing, from it or any of its Subsidiaries under any Employee Plan or
Benefit Arrangement of it or any of its Subsidiaries or otherwise, (B)
materially increase any benefits otherwise payable under any Employee Plan or
Benefit Arrangement of it or any of its Subsidiaries or (C) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
(b) Neither it nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor union contract. To the best of
its knowledge, (i) no grievance procedure, arbitration proceeding or other
labor controversy is pending against it or any of its Subsidiaries under any
collective bargaining agreement or otherwise that would result in a material
liability, (ii) it and each of its Subsidiaries has complied in all material
respects with all laws relating to the employment of labor, including,
without limitation, any provision thereof relating to wages, hours, equal
employment, safety, collective bargaining and the payment of social security
and similar taxes and neither it nor any of its Subsidiaries is liable for
any arrears of wages or any taxes or penalties for failure to comply with any
of the foregoing, except, in each case, any of the foregoing which,
individually or in the aggregate would not have a material adverse effect on
it, and (iii) there is no unfair labor practice or similar complaint against
it or any of its Subsidiaries pending before the National Labor Relations
Board or similar authority or strike, dispute, slowdown, work stoppage or
lockout pending or threatened against it or any of its Subsidiaries or any
complaint pending before the Equal Employment Opportunity Commission or any
comparable federal, state or local fair employment practices agency and none
has existed during the past three years that was not dismissed
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without liability on the part of it or any of its Subsidiaries.
2.13 Employee Benefits.
(a) None of it, or any of its Subsidiaries, or any trade or
business, whether or not incorporated, required to be treated as a "single
employer" (within the meaning of Section 4001 of the Employment Retirement
Income Security Act of 1974 ("ERISA")) with it under Section 414(b) or (c) of
the Internal Revenue Code (an "ERISA Affiliate"), maintains any funded
deferred compensation plans (including profit sharing, pension, retirement
savings or stock bonus plans), unfunded deferred compensation arrangements or
employee benefit plans as defined in Section 3(3) of ERISA, other than any
plans ("Employee Plans") set forth in Section 2.13 of its Disclosure Schedule
(true and correct copies of which it has delivered to the other party). None
of the Employee Plans of it or any of its Subsidiaries is, and none of it, or
any of its Subsidiaries, or any ERISA Affiliate has ever sponsored,
participated in, or contributed to, a "multi-employer plan" as defined in
Section 3(37) of ERISA, or a "multiple employer plan" as covered in Section
413(c) of the Internal Revenue Code or any plan which is subject to Title IV
of ERISA or Section 412 of the Internal Revenue Code. Neither it nor any of
its Subsidiaries has incurred or reasonably expects to incur any liability to
the Pension Benefit Guaranty Corporation except for required premium payments
which, to the extent due and payable, have been paid. The Employee Plans
intended to be qualified under Section 401(a) of the Internal Revenue Code
are so qualified, and it is not aware of any fact which would adversely
affect the qualified status of such plans. Except as set forth in Section
2.13 of its Disclosure Schedule, neither it nor any of its Subsidiaries (a)
provides health, medical, death or survivor benefits to any former employee
or beneficiary thereof or (b) maintains any form of current (exclusive of
base salary and base wages) or deferred compensation, bonus, stock option,
stock appreciation right, benefit, severance pay, retirement, employee stock
ownership, incentive, group or individual health insurance, welfare or
similar plan or arrangement for the benefit of any single or class of
directors, officers or employees, whether active or retired (collectively
"Benefit Arrangements"). There are no restrictions on the rights of it or any
of its Subsidiaries or any ERISA Affiliate to amend or terminate any of the
Employee Plans or Benefit Arrangements without incurring any liability
thereunder.
(b) Except as disclosed in Section 2.13 of its Disclosure
Schedule, all Employee Plans and Benefit Arrangements which are in effect
were in effect for substantially all of calendar year 1997 and there has been
no material amendment thereof (other than amendments required to comply with
applicable law) or increase in the cost thereof or benefits payable
thereunder on or after January 1, 1998.
(c) To its best knowledge, with respect to all Employee
Plans and Benefit Arrangements, it and each of its Subsidiaries are in
substantial compliance with the requirements prescribed by any and all
statutes, governmental or court orders or rules or regulations currently in
effect, including but not limited to ERISA and the Internal Revenue Code,
applicable to such Employee Plans or Benefit Arrangements. To its best
knowledge, no condition exists that could constitute grounds for the
termination of any Employee Plan under Section 4042 of ERISA; no "prohibited
transaction," as defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code, has occurred with respect to any Employee Plan, or any
other employee benefit plan
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maintained by it or any of its Subsidiaries which is covered by Title I of
ERISA, which could subject any person to liability under Title I of ERISA or
to the imposition of any tax under Section 4975 of the Internal Revenue Code;
to its best knowledge, no Employee Plan subject to Part III of Subtitle B of
Title I of ERISA or Section 412 of the Internal Revenue Code, or both, has
incurred any "accumulated funding deficiency," as defined in Section 412 of
the Internal Revenue Code, whether or not waived; neither it nor any of its
Subsidiaries has failed to make any contribution or pay any amount due and
owing as required by the terms of any Employee Plan or Benefit Arrangement.
To its best knowledge, neither it nor any of its Subsidiaries has incurred or
expects to incur, directly or indirectly, any liability under Title IV of
ERISA arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA
which could constitute a liability of Republic as the Surviving Corporation
or any of its Subsidiaries at or after the Effective Time.
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether before, on or after the date
of this Agreement) or to be furnished in writing by or on behalf of it to the
other party pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. To its best knowledge,
no information which is material to the Merger and necessary to make the
representations and warranties herein not misleading has been withheld from
the other party.
2.15 Property and Assets. Either it or one of its Subsidiaries is
the sole and absolute owner of all of the assets (real and personal, tangible
and intangible) reflected in the financial statements at December 31, 1997
referred to in Section 2.4 hereof or acquired subsequent thereto (other than
assets which are leased under leases capitalized in accordance with generally
accepted accounting principles and assets which have been disposed of since
the date of such financial statements). It and its Subsidiaries have good and
marketable title to all such assets free and clear of any and all
Encumbrances, except for (x) the Encumbrances, if any, listed in Section 2.15
of its Disclosure Schedule, (y) in each case for any assets the failure to
have such good and marketable title or the existence of such Encumbrances
which, individually or in the aggregate, would not have a material adverse
effect on it, and (z) in the case of any real property, (I) such items as are
shown in such financial statements or in the notes thereto, (II) liens for
current real estate taxes not yet delinquent, (III) customary easements,
restrictions of record and title exceptions that are not material to the
value or use of such property, (IV) property sold or transferred in the
ordinary course of business since the date of such financial statements, and
(V) as otherwise specifically indicated in its Regulatory Reports filed after
December 31, 1997 and before the date of this Agreement or in Section 2.15 of
its Disclosure Schedule. No one has any written or oral agreement, option,
understanding, or commitment, or any right or privilege capable of becoming
an agreement, for the purchase from it or any of its Subsidiaries of any of
the material assets owned or leased by any of them. It and its Subsidiaries
enjoy peaceful and undisturbed possession under all material leases for the
use of real property or personal property under which they are the lessee;
all of such leases are valid and binding and in full force and effect, and
neither it nor any of its Subsidiaries is in default in any material respect
under any such lease. No default will arise under any material real property,
material personal property lease or material intellectual property license by
reason of the consummation of the Merger without the lessor's or licensor's
consent except as set forth in Section 2.15 of its Disclosure Schedule. There
has been no material physical loss, damage or destruction, whether or
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not covered by insurance, affecting any of the real properties or material
personal property of it and its Subsidiaries since December 31, 1997. All
fixed assets material to its or any of its Subsidiaries' respective business
and currently used by it or any of its Subsidiaries are, in all material
respects, in good operating condition and repair.
2.16 Agreements and Instruments. Except as set forth in its
Regulatory Reports filed after December 31, 1997 and before the date of this
Agreement or in Section 2.16 of its Disclosure Schedule and, in the case of
Republic, except as otherwise contemplated by Section 3.14 hereof, neither it
nor any of its Subsidiaries is a party to (a) any material agreement,
arrangement or commitment not made in the ordinary course of business, (b)
any agreement, indenture or other instrument relating to the borrowing of
money by it or any of its Subsidiaries or the guarantee by it or of its
Subsidiaries of any such obligation (other than (I) Federal Home Loan Bank
advances with a maturity of one year or less from the date hereof and (II) in
the case of Republic, its 6.75% Senior Debentures due January 15, 2001, its
6.95% Senior Debentures due January 15, 2003, and its 7.17% Senior Debentures
due April 1, 2001), (c) any agreements to make loans or for the provision,
purchase or sale of goods, services or property between it or any of its
Subsidiaries and any director or officer of it or any of its Subsidiaries or
any affiliate or member of the immediate family of any of the foregoing, (d)
any agreements with or concerning any labor or employee organization to which
it or any of its Subsidiaries is a party, (e) any agreements between it or
any of its Subsidiaries and any 5% or more stockholder of it and (f) any
agreements, directives, orders or similar arrangements between or involving
it or any of its Subsidiaries and any state or regulatory authority.
2.17 Material Contract Defaults. Neither it or any of its
Subsidiaries nor the other party thereto is in default in any respect under
any contract, agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it or any Subsidiary of it is a party or by which
its respective assets, business or operations may be bound or affected or
under which it or its respective assets, business or operations receives
benefits, which default is reasonably expected to have either individually or
in the aggregate a material adverse effect on it, and there has not occurred
any event that, with the lapse of time or the giving of notice or both, would
constitute such a default.
2.18 Tax Matters.
(a) It and each of its Subsidiaries have duly and properly
filed all federal, state, local and other tax returns and reports required to
be filed by them and have made timely payments of all taxes shown thereon to
be due and payable, whether disputed or not; the current status of audits of
such returns or reports by the Internal Revenue Service and other applicable
tax authorities is as set forth in Section 2.18 of its Disclosure Schedule;
and, except as set forth in Section 2.18 of its Disclosure Schedule, there is
no agreement by it or any of its Subsidiaries for the extension of time for
the assessment or payment of any taxes payable. Except as set forth in
Section 2.18 of its Disclosure Schedule, neither the Internal Revenue Service
nor any other taxing authority is now asserting or, to its best knowledge,
threatening to assert any deficiency or claim for additional taxes (or
interest thereon or penalties in connection therewith), nor is it aware of
any basis for any such assertion or claim. It and each of its Subsidiaries
have complied in all material respects with applicable Internal Revenue
Service backup withholding requirements. It and each of its Subsidiaries have
complied with all applicable state law tax collection and reporting
requirements.
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(b) Adequate provision for any unpaid federal, state, local
or foreign taxes due or to become due from it or any of its Subsidiaries for
all periods through and including September 30, 1998 has been made and is
reflected in its September 30, 1998 financial statements referred to in
Section 2.4 hereof and has been or will be made with respect to periods
ending after September 30, 1998.
2.19 Environmental Matters.
(a) To its best knowledge, neither it nor any of its
Subsidiaries owns, leases, or otherwise controls any property affected by
toxic waste, radon gas or other hazardous conditions or constructed in part
with the use of asbestos which requires removal or encapsulation. Neither it
nor any of its Subsidiaries is aware of, nor has it or any of its
Subsidiaries received written notice from any governmental or regulatory body
of, any past, present or future conditions, activities, practices or
incidents which may interfere with or prevent compliance or continued
compliance with hazardous substance or other environmental laws or any
regulation, order, decree, judgment or injunction, issued, entered,
promulgated or approved thereunder or which may give rise to any common law
or legal liability or otherwise form the basis of any claim, action, suit,
proceeding, hearing, investigation or remediation activity based on or
related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release
or threatened release into the environment, of any pollutant, contaminant,
chemical or industrial, toxic or hazardous substance or waste. There is no
civil, criminal or administrative claim, action, suit, proceeding, hearing or
investigation pending or, to its knowledge, threatened against it or any of
its Subsidiaries relating in any way to such hazardous substance laws or any
regulation, order, decree, judgment or injunction issued, entered,
promulgated or approved thereunder. To its knowledge, there is no reasonable
basis for any such claim, action, suit, proceeding, hearing, investigation or
remediation activity that would impose any material liability or that could
reasonably be expected to have a material adverse effect on it.
(b) None of its "Loan Portfolio Properties, Trust
Properties and Other Properties" (as defined in this Section 2.19(b)) is in
violation of or has any liability absolute or contingent, under any
environmental laws or regulation, except any such violations or liabilities
which, individually or in the aggregate would not have a material adverse
effect on it. There are no actions, suits, demands, notices, claims,
investigations or proceedings pending or threatened relating to any of its
Loan Portfolio Properties, Trust Properties and Other Properties (including,
without limitation, any notices, demand letters or requests for information
from any federal or state environmental agency relating to any such liability
under or violation of environmental laws or regulation), which would impose a
liability upon it or its Subsidiaries pursuant to any environmental laws or
regulation, except such as would not, individually or in the aggregate, have
a material adverse effect on it. "Loan Portfolio Properties, Trust Properties
and Other Properties" means, with respect to each party, any real property,
interest in real property, improvements, appurtenances, rights and personal
property attendant thereto, which is owned, leased as a landlord or a tenant,
licensed as a licensor or licensee, managed or operated or upon which is held
a mortgage, deed of trust, deed to secure debt or other security interest by
it or any of its Subsidiaries whether directly, as an agent, as trustee or
other fiduciary or otherwise.
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2.20 Loan Portfolio; Portfolio Management.
(a) All evidences of indebtedness reflected as assets in
its financial statements at December 31, 1997 referred to in Section 2.4
hereof, or originated or acquired since such date, are (except with respect
to those assets which are no longer assets of it or any of its Subsidiaries)
binding obligations of the respective obligors named therein except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except as to the
availability of equitable remedies, including specific performance, which are
subject to the discretion of the court before which a proceeding is brought,
and the payment of no material amount thereof (either individually or in the
aggregate with other evidences of indebtedness) is subject to any defenses or
offsets which have been threatened or asserted against it or any Subsidiary.
All such indebtedness which is secured by an interest in real property is
secured by a valid and perfected mortgage lien having the priority specified
in the loan documents. All such indebtedness which is secured by an interest
in personal property is secured by a valid and perfected security interest
having the priority specified in the loan documents, except in each case in
which, individually or in the aggregate, the failure to have such a security
interest would not have a material adverse effect on it. All loans
originated, directly or indirectly, or purchased by it or any of its
Subsidiaries were at the time entered into and at all times owned by it or
its Subsidiaries in compliance in all material respects with all applicable
laws and regulations (including, without limitation, all consumer protection
laws and regulations). It and its Subsidiaries (as applicable) administer
their loan and investment portfolios (including, but not limited to,
adjustments to adjustable mortgage loans) in accordance with all applicable
laws and regulations and the terms of applicable instruments. The records of
it and any of its Subsidiaries (as applicable) regarding all loans
outstanding on its books are accurate in all material respects.
(b) Section 2.20 of its Disclosure Schedule sets forth a
list, accurate and complete in all material respects, of the aggregate
amounts of loans, extensions of credit and other assets of it and its
Subsidiaries that have been adversely designated, criticized or classified by
it as of September 30, 1998, separated by category of classification or
criticism (the "Asset Classification"); and no amounts of loans, extensions
of credit or other assets that have been adversely designated, classified or
criticized as of the date hereof by any representative of any governmental or
regulatory authority as "Special Mention," "Substandard," "Doubtful," "Loss"
or words of similar import are excluded from the amounts disclosed in the
Asset Classification, other than amounts of loans, extensions of credit or
other assets that were charged off by it or any of its Subsidiaries before
the date hereof.
2.21 Real Estate Loans; Investments.
(a) Except for properties acquired in settlement of loans,
there are no facts, circumstances or contingencies known to it which exist
and would require a material reduction under generally accepted accounting
principles in the present carrying value of any of the real estate
investments, joint ventures, construction loans, other investments or other
loans of it or any of its Subsidiaries (either individually or in the
aggregate with other loans and investments).
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(b) It and its Subsidiaries have good and marketable title
to all securities held by it (except securities sold under repurchase
agreements or held in any fiduciary or agency capacity), free and clear of
any Encumbrance, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to
secure obligations of it or any of its Subsidiaries. Such securities are
valued on its books in accordance with generally accepted accounting
principles. No investment material to it or any of its Subsidiaries is
subject to any restrictions, contractual, statutory or other, that would
materially impair the ability of it or any of its Subsidiaries to dispose
freely of any such investment at any time, except restriction on the public
distribution or transfer of any such investments under the Securities Act and
the regulations thereunder or state securities laws and pledges or security
interests given to secure public funds on deposit with any of its
Subsidiaries.
2.22 Derivatives Contracts. Neither it nor any of its Subsidiaries
is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar
financial contract or any other contract not included in its financial
statement as of September 30, 1998 which is a derivatives contract (including
various combinations thereof) (each, a "Derivatives Contract") or owns
securities that are identified in Thrift Bulletin No. 65 or otherwise
referred to as structured notes (each, a "Structured Note"), except for those
Derivatives Contracts and Structured Notes set forth in Section 2.22 of its
Disclosure Schedule, including a list, as applicable, of any of its or any of
its Subsidiaries' assets pledged as security for a Derivatives Contract.
2.23 Exceptions to Representations and Warranties.
(a) On or before the date hereof, D&N has delivered to
Republic and Republic has delivered to D&N its respective Disclosure Schedule
setting forth, among other things, exceptions to any and all of its
representations and warranties in Article II, provided that each exception
set forth in a Disclosure Schedule shall be deemed disclosed for purposes of
all representations and warranties if such exception is contained in a
section of the Disclosure Schedule corresponding to a Section in Article II
and provided further that (i) no such exception is required to be set forth
in a Disclosure Schedule if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the
standard established by Section 2.23(b) and (ii) the mere inclusion of an
exception in a Disclosure Schedule shall not be deemed an admission by a
party that such exception represents a material fact, event or circumstance
or would result in a material adverse effect or material adverse change.
(b) None of the representations or warranties of D&N or
Republic contained in Article II shall be deemed untrue or incorrect, and no
party shall be deemed to have breached its representations or warranties
contained herein, as a consequence of the existence of any fact, circumstance
or event if such fact, circumstance or event, individually or taken together
with all other facts, circumstances or events, would not, or in the case of
Section 2.8 is not reasonably likely to, have a material adverse effect or
material adverse change on such party.
As used in this Agreement, the term "material adverse
effect" or "material adverse change" means an effect or change which (i) is
materially adverse to the financial condition of a party and its respective
Subsidiaries taken as a whole, (ii) significantly and adversely affects the
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ability of D&N or Republic to consummate the transactions contemplated hereby
or to perform its material obligations hereunder or (iii) enables any person
to prevent the consummation of the transactions contemplated hereby, provided
however that any effect or change resulting from (A) actions or omissions of
D&N or Republic contemplated by this Agreement or taken with the prior
consent of the other party in contemplation of the transactions provided for
herein (including, without limitation, conforming accounting adjustments and,
in the case of Republic, the entering into and/or consummation of the
"Contemplated Permitted Transaction" (as defined in Section 3.14 hereof)), or
(B) circumstances affecting the financial institutions industry generally
(including changes in laws or regulations, accounting principles or general
levels of interest rates) which do not adversely affect a party and its
Subsidiaries, taken as a whole, in a manner significantly different than the
other party hereto, shall be deemed not to be or have a material adverse
effect or result in a material adverse change.
2.24 Intellectual Property.
(a) It and its Subsidiaries owns or has the right to use
pursuant to license, sublicense, agreement or permission all intellectual
property necessary for the operation of its business as presently conducted
and as presently proposed to be conducted. The term "intellectual property"
means all trademarks, service marks, logos, trade names and corporate names
and registrations and applications for registration thereof, copyrights and
registrations and applications for registration thereof, computer software,
data and documentation, trade secrets and confidential business information
(including financial, marketing and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists
and information), other proprietary rights, and copies and tangible
embodiments thereof (in whatever form or medium).
(b) To the best of its knowledge, neither it nor any of its
Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any intellectual property rights of third
parties and none of it, its Subsidiaries and their respective directors and
officers (and employees with responsibility for intellectual property
matters) has ever received any charge, complaint, claim or notice alleging
any such interference, infringement, misappropriation or violation. To its
knowledge, no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any intellectual
property rights of it or any of its Subsidiaries.
(c) Each item of intellectual property that any third party
owns and that it and each of its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission: (i) the license, sublicense, agreement
or permission covering the item is legal, valid, binding, enforceable and in
full force and effect; (ii) the license, sublicense, agreement or permission
will continue to be legal, valid, binding and enforceable and in full force
and effect on identical terms on and after the Closing Date; (iii) no party
to the license, sublicense, agreement or permission is in breach or default,
and no event of default has occurred which with notice or lapse of time, or
both, would constitute a breach or default or permit termination,
modification or acceleration thereunder; (iv) no party to the license,
sublicense, agreement or permission has repudiated any provision thereof; and
(vi) neither it nor any of its Subsidiaries has granted any sublicense or
similar right with respect to the license, sublicense, agreement or
permission.
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2.25 No Investment Company. Neither it nor any of its Subsidiaries
is an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
2.26 Tax Treatment; Pooling of Interests. It knows of no reason why
the Merger will fail to qualify as a reorganization under Section 368(a) of
the Internal Revenue Code. It has no reason to believe that the Merger will
not qualify as a "pooling of interests" for accounting purposes. All share
repurchase programs previously authorized by its Board of Directors, except
to the extent that it is advised by the SEC that such purchases would not
adversely affect the ability of the parties to account for the Merger as a
"pooling of interests" for accounting purposes, have been revoked by
resolution duly adopted on or prior to the date hereof.
2.27 Year 2000 Compliance. It and each of its Significant
Subsidiaries has conducted an inventory of the hardware, software and
embedded microcontrollers in non-computer equipment (the "Computer Systems")
used by it and its Significant Subsidiaries in its or their business, in
order to determine which parts of the Computer Systems are not Year 2000
compliant (as defined in Section 2.27) and to estimate the cost of rendering
such Computer Systems Year 2000 compliant prior to January 1, 2000 or such
earlier date on which such Computer Systems may shut down (a "hard crash") or
produce incorrect calculations or otherwise malfunction without becoming
totally inoperable (a "soft crash"). Based on such inventory, the estimated
total cost of rendering the Computer Systems used by Republic and its
Significant Subsidiaries Year 2000 compliant is $1,500,000. Based on such
inventory, the estimated total cost of rendering the Computer Systems used by
D&N and its Significant Subsidiaries Year 2000 compliant is $500,000. As used
in this Agreement, the term "Year 2000 compliant" means that all of the
hardware, software, and embedded microcontrollers in non-computer equipment
comprising the Computer Systems will correctly differentiate between years,
in different centuries, that end in the same two digits, and will accurately
process date/time data (including, but not limited to, calculating,
comparing, and sequencing) from, into, and between the twentieth and
twenty-first centuries, including leap year calculations. The consummation of
the Merger and the other transactions contemplated by this Agreement will not
result in the loss by it or any of its Subsidiaries of any rights to use
computer and telecommunications software (including, without limitation,
source and object code and documentation and any other media (including,
without limitation, manuals, journals and reference books)) necessary to
carry on its business substantially as currently conducted and the loss of
which would have a material adverse effect on it. None of it or any of its
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). It has disclosed to the other party a complete and accurate copy of
its plan for addressing the issues set forth in the statements of the Federal
Financial Institutions Examination Council, dated May 5, 1997, entitled "Year
2000 Project Management Awareness," and December 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect it and its Subsidiaries.
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ARTICLE III
COVENANTS
3.1 Investigations; Access and Copies. Between the date of this
Agreement and the Effective Time, each party agrees to give to the other
party and its respective representatives and agents full access (to the
extent lawful) to all of the premises, books, records and employees of it and
its Subsidiaries at all reasonable times and to furnish and cause its
Subsidiaries to furnish to the other party and its respective agents or
representatives access to and true and complete copies of such financial and
operating data, all documents with respect to matters to which reference is
made in Article II of this Agreement or on any list, schedule or certificate
delivered or to be delivered in connection herewith and such other documents,
records, or information with respect to the businesses and properties of it
and its Subsidiaries as the other party or its respective agents or
representative shall from time to time reasonably request; provided however,
that any such inspection (a) shall be conducted in such manner as not to
interfere unreasonably with the operation of the business of the entity
inspected and (b) shall not affect any of the representations and warranties
hereunder. Each party will also give prompt written notice to the other party
of any event or development which, (x) had it existed or been known on the
date of this Agreement, would have been required to be disclosed under this
Agreement, (y) would cause any of its representations and warranties
contained herein to be inaccurate or otherwise materially misleading or (z)
materially relates to the satisfaction of the conditions set forth in Article
IV of this Agreement. Notwithstanding anything to the contrary herein,
neither party hereto nor any of its Subsidiaries shall be required to provide
access to or to disclose information where such access or disclosure would
jeopardize the attorney-client privilege of the entity in possession or
control of such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to
the date of this Agreement or, in the event of any litigation or threatened
litigation between the parties over the terms of this Agreement, where access
to information may be adverse to the interests of such party. To the extent
reasonably practicable, the parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
3.2 Conduct of Business. Between the date of this Agreement and the
Effective Time or the termination of this Agreement, each party agrees, on
behalf of itself and each of its respective Subsidiaries, except as otherwise
contemplated by Section 3.14 hereof, or except insofar as the President of
D&N or the Chief Executive Officer or the President of Republic shall
otherwise consent in writing (which consent shall not be unreasonably
withheld):
(a) That it and its Subsidiaries shall (i) except as
contemplated in this Agreement conduct their business only in the ordinary
course consistent with past practices, (ii) maintain their books and records
in accordance with past practices and (iii) use all reasonable efforts to
preserve intact their business organizations and assets, to maintain their
rights, franchises and existing relations with customers, suppliers,
employees and business associates and to take no action that would (A)
adversely affect the ability of any of them to obtain any Governmental
Approvals (as defined in Section 4.1(c) hereof) or which would reasonably be
expected to hinder or delay receipt of such Governmental Approvals or (B)
adversely affect its ability to perform its obligations under this Agreement
or the D&N Stock Option Agreement;
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(b) That except where the provisions herein are limited to
a specific party and/or its Subsidiaries, it and its Subsidiaries shall not:
(i) declare, set aside or pay any dividend or make any other distribution
with respect to its capital stock, except for dividends or distributions by a
wholly owned Subsidiary of such party to such party or in accordance with
past practice; (ii) reacquire or buy any of its outstanding shares; (iii)
issue or sell any shares of capital stock of it or any of its Subsidiaries,
except shares of its common stock issued pursuant to the D&N Stock Option
Agreement and shares issued pursuant to exercise of stock options previously
issued and identified in Section 2.2 of its Disclosure Schedule; (iv) effect
any stock split, stock dividend, reverse stock split or other
reclassification or recapitalization of its common stock; or (v) except with
respect to the D&N Stock Option Agreement, grant any options or issue any
warrants exercisable for or securities convertible or exchangeable into
capital stock of it or any of its Subsidiaries or grant any stock
appreciation or other rights with respect to shares of capital stock of it or
of any of its Subsidiaries.
(c) That except where the provisions herein are limited to
a specific party and/or its Subsidiaries, it and its Subsidiaries shall not:
(i) sell, dispose of or pledge any significant assets of it or of any of its
Subsidiaries other than in the ordinary course of business consistent with
past practices or to borrow funds consistent with the provisions hereinafter
contained; (ii) merge or consolidate it or any of its Subsidiaries into
another entity or acquire any other entity or except in accordance with its
written business plan in effect on the date hereof, acquire any significant
assets; (iii) sell or pledge or agree to sell or pledge or permit any lien to
exist on any stock of any of its Subsidiaries owned by it; (iv) change the
articles of incorporation or certificate of incorporation, charter, bylaws or
other governing instruments of it or any of its Subsidiaries, except as
contemplated by this Agreement; (v) engage in any lending activities other
than in the ordinary course of business consistent with past practices; (vi)
form any new subsidiary or cause or permit a material change in the
activities presently conducted by any Subsidiary or make additional
investments in subsidiaries in excess of $100,000; (vii) except to hedge
interest rate risk on certificates of deposits or mortgage servicing rights,
or to hedge interest rate risk and/or credit risk on commitments to extend
consumer credit secured by residential mortgage loans, engage in any off
balance sheet interest rate swap arrangement, (viii) engage in any activity
not contemplated by its written business plan in effect on the date hereof
(ix) purchase any equity securities other than Federal Home Loan Bank stock
or incur or assume any indebtedness except in the ordinary and usual course
of business; (x) authorize capital expenditures other than in the ordinary
and usual course of business; or (xi) implement or adopt any change in its
accounting principles, practices or methods other than as may be required by
generally accepted accounting principles. The limitations contained in this
Section 3.2(c) shall also be deemed to constitute limitations as to the
making of any commitment with respect to any of the matters set forth in this
Section 3.2(c).
(d) That except where the provisions herein are limited to
a specific party and/or its Subsidiaries it and its Subsidiaries shall not:
(i) grant any general increase in compensation or benefits to its employees
or officers or pay any bonuses to its employees or officers except in
accordance with policies in effect on the date hereof; (ii) enter into,
extend, renew, modify, amend or otherwise change any employment or severance
agreements with any of its directors, officers or employees except as
consistent with past practice for Republic; (iii) grant any increase in fees
or
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other increases in compensation or other benefits to any of its present or
former directors in such capacity; (iv) in the case of D&N, involuntarily
terminate any officer of it or any of its Subsidiaries without the prior
consultation with Republic; or (v) establish or sponsor any new Employee Plan
or Benefit Arrangement or effect any material change in its Employee Plans or
Benefit Arrangements (unless such change is contemplated by this Agreement or
is required by applicable law or, in the opinion of its counsel, is necessary
to maintain continued qualification of any tax-qualified plan that provides
for retirement benefits).
3.3 No Solicitation. Each party agrees, on behalf of itself and each
of its Subsidiaries, that it will not authorize or permit any officer,
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of it or any of its Subsidiaries, directly
or indirectly, to initiate contact with any person or entity in an effort to
solicit, initiate or encourage any "Takeover Proposal" (as defined in this
Section 3.3). Except as the fiduciary duties of its Board of Directors may
otherwise require (as determined in good faith after consultation with its
legal counsel), each party agrees that it will not authorize or permit any
officer, director, employee, investment banker, financial consultant,
attorney, accountant or other representative of it or any of its
Subsidiaries, directly or indirectly, (A) to cooperate with, or furnish or
cause to be furnished any non-public information concerning its business,
properties or assets to, any person or entity in connection with any Takeover
Proposal; (B) to negotiate any Takeover Proposal with any person or entity;
or (C) to enter into any agreement, letter of intent or agreement in
principle as to any Takeover Proposal. Each party agrees that it shall
promptly give written notice to the other upon becoming aware of any Takeover
Proposal, such notice to contain, at a minimum, the identity of the persons
submitting the Takeover Proposal, a copy of any written inquiry or other
communication, the terms of any Takeover Proposal, any information requested
or discussions sought to be initiated and the status of any requests,
negotiations or expressions of interest. As used in this Agreement, "Takeover
Proposal" shall mean any proposal, other than as contemplated by this
Agreement, for a merger or other business combination involving either party
or any of their respective financial institution Subsidiaries or for the
acquisition of a 10% or greater equity interest in either party or any of
their respective Subsidiaries, or for the acquisition of a substantial
portion of the assets of either party or any of their respective
Subsidiaries.
3.4 Stockholder Approvals. The parties shall call the meetings of
their respective stockholders to be held for the purpose of voting upon this
Agreement and related matters, as referred to in Section 1.7 hereof, as soon
as practicable. In connection with the D&N and Republic Stockholders'
Meetings, the respective Boards of Directors shall recommend approval of this
Agreement, and any other matters (including without limitation the Republic
Charter Amendment) requiring stockholder action relating to the transactions
contemplated herein (and such recommendation shall be contained in the
Prospectus/Joint Proxy Statement) unless as a result of an unsolicited
Takeover Proposal received by a party after the date hereof, the Board of
Directors of such party determines in good faith after consultation with its
legal counsel and investment banking firm that to do so would constitute a
breach of the fiduciary duties of such Board of Directors to the stockholders
of such party. Each of the parties shall use its best efforts to solicit from
its stockholders proxies in favor of approval and to take all other action
necessary or helpful to secure a vote of the holders of the outstanding
shares of its common stock in favor of this Agreement, except as the
fiduciary duties of its Board of Directors may otherwise require.
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3.5 Resale Letter Agreements; Accounting and Tax Treatment.
(a) After execution of this Agreement, (i) D&N shall use
its best efforts to cause to be delivered to Republic from each person who
may be deemed to be an "affiliate" of D&N within the meaning of Rule 145 of
the Securities Act, a written letter agreement as of a date prior to the date
of the D&N Stockholders' Meeting in the form as set forth in Exhibit 3.5,
regarding restrictions on resale of shares of Republic Common Stock, to
ensure compliance with applicable restrictions imposed under the federal
securities laws and prior to the Effective Time D&N shall use its best
efforts to secure such written letter agreement from persons who become an
affiliate of it subsequent to the date hereof, and (ii) neither party shall
take any action which would prevent the Merger and the other transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Internal Revenue Code, or which would disqualify the
Merger as a "pooling of interests" for accounting purposes, provided that
nothing hereunder shall limit the ability of either party to exercise its
rights under the D&N Stock Option Agreement.
(b) Because the Merger is intended to qualify for pooling
of interests accounting treatment, the shares of Republic Common Stock
received by D&N affiliates in the Merger shall not be transferrable until
such time as financial results covering at least 30 days of post-Merger
operations have been published, and the certificates representing such shares
will bear an appropriate restrictive legend. Republic shall use its best
efforts to publish as promptly as reasonably practical but in no event later
than forty-five (45) days after the end of the first month after the
Effective Time in which there are at least thirty (30) days of post-merger
combined operations (which month may be the month in which the Effective Time
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
3.6 Publicity. Between the date of this Agreement and the Effective
Time, neither party nor any of its Subsidiaries shall, without the prior
approval of the other party (which approval shall not be unreasonably
withheld), issue or make, or permit any of its directors, employees, officers
or agents to issue or make, any press release, disclosure or statement to the
press or any third party with respect to the Merger or the other transactions
contemplated hereby, except as required by applicable law or the rules of the
National Association of Securities Dealers, Inc. and the Nasdaq National
Market. The parties shall cooperate when issuing or making any press release,
disclosure or statement with respect to the Merger or the other transactions
contemplated hereby.
3.7 Cooperation Generally. Between the date of this Agreement and
the Effective Time, the parties and their respective Subsidiaries shall in
conformance with the provisions of this Agreement use their best efforts, and
take all actions necessary or appropriate, to consummate the Merger and the
other transactions contemplated hereby at the earliest practicable date.
3.8 Additional Financial Statements and Reports. As soon as
reasonably practicable after they become publicly available, each party shall
furnish to the other its statements of financial condition, statements of
operations or statements of income, statements of cash flows and statements
of changes in stockholders' equity at all dates and for all periods before
the Closing. Such financial statements will be prepared in conformity with
generally accepted accounting principles applied on
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a consistent basis and fairly present the financial condition, results of
operations and cash flows of the respective parties (subject, in the case of
unaudited financial statements, to (a) normal year-end audit adjustments, (b)
any other adjustments described therein and (c) the absence of notes which,
if presented, would not differ materially from those included with its most
recent audited consolidated financial statements), and all of such financial
statements will be prepared in conformity with the requirements of Form 10-Q
or Form 10-K under the Exchange Act. As soon as reasonably practicable after
they are filed, each party shall, to the extent permitted under applicable
law, furnish to the other its Regulatory Reports.
3.9 Stock Exchange Listings. Republic agrees to use all reasonable
efforts to cause to be listed on the Nasdaq National Market, subject to
official notice of issuance, the shares of Republic Common Stock to be issued
in the Merger.
3.10 Employee Benefits and Agreements.
(a) Following the Effective Time, Republic as the Surviving
Corporation shall honor in accordance with their terms all Benefit
Arrangements and all provisions for vested benefits or other vested amounts
earned or accrued through such time period under the Employee Plans.
(b) The Employee Plans shall not be terminated by reason of
the Merger but shall continue thereafter as plans of Republic as the
Surviving Corporation until such time as the Employee Plans are integrated,
subject to the terms and conditions specified in such plans and to such
changes therein as may be necessary to reflect the consummation of the
Merger. Republic as the Surviving Corporation shall take such steps as are
necessary as soon as practicable following the Effective Time to integrate
the Employee Plans, with (i) full credit for prior service with D&N or
Republic or any of the D&N or Republic Subsidiaries for purposes of vesting
and eligibility for participation (but not benefit accruals under any
Employee Plan), and co-payments and deductibles and (ii) waiver of all
waiting periods and pre-existing condition exclusions or penalties.
(c) Employment Agreements and Related Matters.
(i) Immediately prior to the Effective Time,
Republic and D&N Bank shall offer to employ Mr. George J. Butvilas
pursuant to the form of Employment Agreement attached hereto as
Exhibit 3.10(c)(i) (the "New Employment Agreement"). Simultaneously
with the execution and delivery of the New Employment Agreement, (x)
D&N shall cause Mr. Butvilas to execute and deliver an
acknowledgment and release in the form attached hereto as Exhibit
3.10(c)(ii) (the "Acknowledgment"), and (y) as set forth in the
Acknowledgment and upon his timely execution and delivery of the
Acknowledgement, shall pay to Mr. Butvilas the sum provided for in
the Acknowledgement. Upon and in consideration of the execution of
the Employment Agreement by Republic and the payment of the sum
provided for in the Acknowledgement, the Employment Agreement dated
as of July 31, 1997, among D&N, D&N Bank and Mr. Butvilas, shall be
deemed to be fully satisfied and terminated for all purposes.
Republic represents and warrants to D&N that the form and substance
of the New Employment Agreement is acceptable to it. D&N represents
and warrants to Republic that the form and substance of the New
Employment Agreement
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is acceptable to D&N Bank. D&N shall provide Republic with the
amount of the sum to be paid to Mr. Butvilas pursuant to the
Acknowledgement, and the supporting calculations therefor, not later
than that date that is fifteen (15) days prior to the Closing Date.
(ii) D&N shall, in accordance with the terms of
the D&N Bank Overflow Plan (the "D&N SERP"), make the contribution
required for 1998 under the D&N SERP. At or prior to the Effective
Time, D&N shall pay all amounts contained in the D&N SERP (including
all earnings or accumulations thereon, if any, through the date of
payment) to George J. Butvilas. D&N covenants, represents and
warrants to Republic that Mr. Butvilas is the only person eligible
to receive benefits under the D&N SERP. D&N shall provide Republic
with the amount of the sum to be contributed by D&N to the D&N SERP
pursuant to this Section 3.10(c)(ii), and the supporting
calculations therefor, not later than that date that is fifteen (15)
days prior to the Closing Date.
3.11 Conforming Accounting And Reserve Policies; Restructuring
Expenses.
(a) Notwithstanding that D&N believes that it has
established all reserves and taken all provisions for possible loan losses
required by generally accepted accounting principles and applicable laws,
rules and regulations, D&N recognizes that Republic has adopted different
loan, accrual and reserve policies (including loan classifications and levels
of reserves for possible loan losses), subject to applicable laws,
regulations, and the requirements of governmental and regulatory agencies or
bodies and generally accepted accounting principles. From and after the date
of this Agreement to the Effective Time, D&N and Republic shall consult and
cooperate with each other with respect to conforming, based upon such
consultation, D&N's loan, accrual and reserve policies to those policies of
Republic.
(b) In addition, from and after the date of this Agreement
to the Effective Time, D&N and Republic shall consult and cooperate with each
other with respect to determining, based upon such consultation, appropriate
accruals, reserves and charges to establish and take in respect of excess
facilities and equipment capacity, restructuring costs, severance costs,
litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments taking into account the Surviving
Corporation's business plan following the Merger.
(c) D&N and Republic shall consult and cooperate with each
other with respect to determining, based upon such consultation, the amount
and the timing for recognizing for financial accounting purposes the expenses
of the Merger and the restructuring charges related to or to be incurred in
connection with the Merger.
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(d) At the request of Republic, and in an amount and on a
basis satisfactory to D&N, D&N shall promptly establish and take such
reserves and accruals as Republic shall request to conform, on a mutually
satisfactory basis, D&N's loan, accrual and reserve policies to Republic's
policies, shall establish and take such accruals, reserves and charges in
order to implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off or
write-down of various assets and other appropriate accounting adjustments,
and to recognize for financial accounting purposes such expenses of the
Merger and restructuring charges related to or to be incurred in connection
with the Merger; provided, however, that it is the objective of Republic and
D&N that such reserves, accruals and charges be taken on or before the
Effective Time, but in no event later than immediately prior to the Closing;
and provided, further, that D&N shall not be obligated to take any such
action pursuant to this Section 3.11 unless and until (i) Republic specifies
its request in a writing delivered to D&N, (ii) all conditions to the
obligations of D&N and Republic to consummate the Merger set forth in
Sections 4.1 through 4.3 hereof have been waived or satisfied by the
appropriate party, and (iii) such reserves, accruals and charges conform with
generally accepted accounting principles, applicable laws, regulations, and
the requirements of governmental entities.
3.12 Forbearances. During the period from the date of this Agreement
to the Effective Time, except as set forth in its Disclosure Schedule and,
except as expressly contemplated or permitted by this Agreement neither party
shall, without the prior written consent of the other party: (a) take any
action that would prevent or impede the Merger from qualifying (i) for
"pooling of interests" accounting treatment or (ii) as a reorganization
within the meaning of Section 368 of the Internal Revenue Code; provided,
however, that nothing contained herein shall limit the ability of Republic to
exercise its rights under the D&N Option Agreement; or (b) agree to, or make
any commitment to, take any of the actions prohibited by this Section 3.12.
3.13 Legal Conditions to Merger. Each party shall, and shall cause
its Subsidiaries to, use their best efforts (a) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries
with respect to the Merger and, subject to the conditions set forth in
Article IV hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
governmental entity or authority and any other third party which is required
to be obtained by it or any of its Subsidiaries in connection with the Merger
and the other transactions contemplated by this Agreement.
3.14 Permitted Transactions.
(a) Notwithstanding anything to the contrary express or
implied herein, Republic may: (i) sell, dispose of, or "spin-off," or agree
to sell, dispose of, or "spin-off," in a public distribution or otherwise,
all or part of its equity interest in Market Street Mortgage Corporation, a
subsidiary of Republic Bank ("Republic Mortgage Corporation"); (ii) convert
into, or exchange for, indebtedness of, or another equity interest in,
Republic Mortgage Corporation, all or part of its equity interest in Republic
Mortgage Corporation; (iii) redeem, for cash and/or property, all or part of
its equity interest in Republic Mortgage Corporation; (iv) declare and pay a
stock dividend or a stock
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split not exceeding 10% of the shares of Republic Common Stock outstanding as
of the date such stock dividend is declared; (v) merge Republic Savings Bank,
a subsidiary of Republic ("Republic Savings Bank"), with and into Republic
Bank; (vi) transfer certain assets and employees of Republic Bank and
Republic Savings Bank to Republic Bancorp Mortgage Inc., a subsidiary of
Republic Bank; (vii) amend the articles of incorporation or bylaws of
Republic Mortgage, Republic Bank and/or Republic Savings Bank to the extent
necessary to effect the transactions contemplated by clauses (i)-(iii), and
(v)-(vi) of this Section 3.14(a); (viii) make awards of restricted shares of
Republic Common Stock, and grant rights or options to acquire shares of
Republic Common Stock ("Republic Options"), to directors, officers and
employees of it and its Subsidiaries in accordance with its Benefit
Arrangements, as in effect on the date hereof, and consistent with past
practices (including, without limitation, awards of stock and options
pursuant to Republic's Voluntary Management Stock Accumulation Plan); (ix)
issue additional shares of Republic Common Stock pursuant to the exercise of
Republic Options outstanding as of the date hereof or issued pursuant to
clause (viii) of this sentence; and (x) merge or consolidate it or a
wholly-owned Subsidiary of it (which Subsidiary may be an existing entity or
a newly-formed entity) with another entity so long as (w) in the event it is
merged or consolidated with such other entity, it is the surviving entity in
such merger or consolidation, (x) in the event such Subsidiary is merged or
consolidated with such other entity, the surviving entity in such merger or
consolidation is a wholly-owned subsidiary of it, (y) the consideration
issued in such merger or consolidation consists solely of shares of Republic
Common Stock and cash in lieu of any fractional shares, and (z) not more than
3,200,000 shares of Republic Common Stock are issued in such merger or
consolidation (the "Contemplated Permitted Transaction").
(b) Notwithstanding anything to the contrary express or
implied herein, D&N may grant options to acquire shares of D&N Common Stock
to directors, officers and employees of it and its Subsidiaries in accordance
with the D&N Option Plans, as in effect on the date hereof, consistent with
past practices and as disclosed in Section 2.2 of the Disclosure Schedule
delivered by D&N to Republic.
(c) D&N shall not, and shall not permit any of the D&N
Subsidiaries to, declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with respect to,
or purchase or redeem, any shares of the capital stock of any of them other
than (i) D&N's regular quarterly cash dividends in the amount (subject to the
last two sentences of this paragraph) of $0.05 per share of D&N Common Stock
(to the extent legally permitted), (ii) dividends paid (to the extent legally
permitted) by any D&N Subsidiary to another D&N Subsidiary or D&N with
respect to such D&N Subsidiary's capital stock, and (iii) regular cash
dividends (consistent with past practice) on the shares of 9.0% preferred
stock of D&N Capital Corporation issued and outstanding as of the date
hereof.
(d) Republic shall not, and shall not permit any of the
Republic Subsidiaries to, declare, set aside, pay or make any dividend or
other distribution or payment (whether in cash, stock or property) with
respect to, or purchase or redeem, any shares of the capital stock of any of
them other than (i) Republic's regular quarterly cash dividends in the amount
(subject to the last two sentences of this paragraph) of $0.08 per share of
Republic Common Stock (to the extent legally permitted), and (ii) dividends
paid (to the extent legally permitted) by any Republic Subsidiary to
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another Republic Subsidiary or Republic with respect to such Republic
Subsidiary's capital stock.
(e) From the date of this Agreement to the earlier of the
Effective Time or the termination of this Agreement, neither party to this
Agreement, without the prior written consent of the other party to this
Agreement, make any changes in its practice of setting dividend record or
dividend payment dates. Each of Republic and D&N shall coordinate with the
other regarding the declaration and payment of dividends in respect of the
Republic Common Stock and the D&N Common Stock and the record dates and
payment dates relating thereto, it being the intention of Republic and D&N
that any holder of Republic Common Stock or D&N Common Stock shall not
receive two dividends for any single calendar quarter with respect to its
shares of D&N Common Stock and/or shares of Republic Common Stock, including
shares of Republic Common Stock that a holder received in exchange for shares
of D&N Common Stock pursuant to the Merger.
ARTICLE IV
CONDITIONS OF THE MERGER;
TERMINATION OF AGREEMENT
4.1 General Conditions. The obligations of each party to effect the
Merger shall be subject to the satisfaction (or written waiver by such party,
to the extent such condition is waivable) of the following conditions before
the Effective Time:
(a) Stockholder Approval. The holders of the outstanding
shares of D&N and Republic Common Stock shall have approved or adopted this
Agreement as specified in Section 1.7 hereof or as otherwise required by
applicable law. The holders of the outstanding shares of Republic Common
Stock shall have approved or adopted the Republic Charter Amendment as
specified in Section 1.7 hereof or as otherwise required by applicable law.
(b) No Proceedings. No order shall have been entered and
remain in force restraining or prohibiting the Merger in any legal,
administrative, arbitration, investigatory or other proceedings by any
governmental or judicial or other authority. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any governmental or regulatory authority which prohibits,
materially restricts or makes illegal consummation of the Merger.
(c) Governmental Approvals. To the extent required by
applicable law or regulation, all approvals of or filings with any
governmental or regulatory authority (collectively, "Governmental Approvals")
shall have been obtained or made, and any waiting periods shall have expired
in connection with the consummation of the Merger; provided, however, that
none of the preceding shall be deemed obtained or made if it shall be
conditioned or restricted in a manner that would have or result in a material
adverse effect on Republic as the Surviving Corporation as the parties hereto
shall reasonably and in good faith agree. All other statutory or regulatory
requirements for the valid consummation of the Merger shall have been
satisfied.
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(d) Registration Statement. The Registration Statement
shall have been declared effective and shall not be subject to a stop order
of the SEC (and no proceedings for that purpose shall have been initiated or
threatened by the SEC) and, if the offer and sale of the Surviving
Corporation Common Stock in the Merger pursuant to this Agreement is subject
to the securities laws of any state, shall not be subject to a stop order of
any state securities authority.
(e) Federal Tax Opinion. Each party shall have received an
opinion of its tax counsel, dated as of the Effective Time, to the effect
that for federal income tax purposes:
(i) The Merger will qualify as a "reorganization"
under Section 368(a) of the Internal Revenue Code.
(ii) No gain or loss will be recognized by D&N or
Republic by reason of the Merger.
(iii) No gain or loss will be recognized by any
stockholder of D&N upon the exchange of D&N Common Stock
solely for Republic Common Stock in the Merger.
(iv) The basis of the Republic Common Stock
received by each stockholder of D&N who exchanges D&N
Common Stock for Republic Common Stock in the Merger will
be the same as the basis of the D&N Common Stock
surrendered in exchange therefor (subject to any
adjustments required as the result of receipt of cash in
lieu of a fractional share of Surviving Corporation Common
Stock).
(v) The holding period of the Republic Common
Stock received by a stockholder of D&N in the Merger will
include the holding period of the D&N Common Stock
surrendered in exchange therefore, provided that such
shares of D&N Common Stock were held as a capital asset by
such stockholders at the Effective Time.
(vi) Cash received by a D&N shareholder in lieu of
a fractional share interest of Republic Common Stock as
part of the Merger will be treated as having been received
as a distribution in full payment in exchange for the
fractional share interest of Republic Common Stock which
such stockholder would otherwise be entitled to receive and
will qualify as capital gain or loss (assuming the D&N
stock was a capital asset in such stockholder's hands at
the Effective Time).
(f) Third Party Consents. All consents or approvals of all
persons (other than the Governmental Approvals referenced in Section 4.1(c)
hereof) required for the execution, delivery and performance of this
Agreement and the consummation of the Merger shall have been obtained and
shall be in full force and effect, unless the failure to obtain any such
consent or approval is not reasonably likely to have, individually or in the
aggregate, a material adverse effect on Republic as the Surviving Corporation
as the parties hereto shall reasonably and in good faith agree.
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(g) Listing. The shares of Republic Common Stock to be
issued in the Merger shall have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance.
(h) Pooling of Interests. Each party shall have received a
letter, effective as of the Effective Time, from its independent accountants
addressed to it to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
4.2 Conditions to Obligations of D&N. The obligations of D&N to
effect the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction or written waiver by D&N of the following
additional conditions before the Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and the Closing, Republic shall not have been effected by any event
or change which has had or caused a material adverse effect or material
adverse change on it.
(b) Representations and Warranties to be True; Fulfillment
of Covenants and Conditions. (i) The representations and warranties of
Republic shall be true and correct (subject to Section 2.23 hereof) as of the
date hereof and at the Effective Time with the same effect as though made at
the Effective Time (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date)
except where the failure to be true and correct would not have, or would not
reasonably be expected to have, a material adverse effect, on Republic; (ii)
Republic and its Subsidiaries shall have performed all obligations and
complied with each covenant, in all material respects, and satisfied all
conditions under this Agreement on its part to be satisfied at or before the
Effective Time; and (iii) Republic shall have delivered to D&N a certificate,
dated the Effective Time and signed by its chief executive officer and chief
financial officer, certifying as to the satisfaction of clauses (i) and (ii)
hereof.
(c) No Litigation. Neither Republic nor any Republic
Subsidiary shall be subject to any pending litigation which, if determined
adversely to Republic or any Republic Subsidiary, would have a material
adverse effect on Republic.
(d) Audited Financials. Republic shall have delivered to
D&N audited consolidated financial statements at and for the year ended
December 31, 1998, including an unqualified opinion of Republic's independent
auditors related thereto.
(e) Employment Matters. The instruments described in
Section 3.10(c) hereof to be executed and delivered by, among others,
Republic shall have been executed and delivered by Republic as provided in
Section 3.10(c) hereof.
(f) Other Certificates. Republic shall have delivered to
D&N such other certificates and instruments as D&N and its counsel may
reasonably request. The form and substance of all certificates, instruments
and other documentation delivered to D&N under this Agreement shall be
reasonably satisfactory to D&N and its counsel.
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4.3 Conditions to Obligations of Republic. The obligations of
Republic to effect the Merger and the other transactions contemplated hereby
shall be subject to the satisfaction or written waiver by Republic of the
following additional conditions before the Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and Closing, D&N shall not have been effected by any event or
change which has had or caused a material adverse effect or material adverse
change on D&N.
(b) Representations and Warranties to be True; Fulfillment
of Covenants and Conditions. (i) The representations and warranties of D&N
shall be true and correct (subject to Section 2.23 hereof) as of the date
hereof and at the Effective Time with the same effect as though made at the
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date) except where the
failure to be true and correct would not have, or would not reasonably be
expected to have, a material adverse effect on D&N; (ii) D&N and its
Subsidiaries shall have performed all obligations and complied with each
covenant, in all material respects, and satisfied all conditions under this
Agreement on its part to be satisfied at or before the Effective Time; and
(iii) D&N shall have delivered to Republic a certificate, dated the Effective
Time and signed by its chief executive officer and chief financial officer,
certifying as to the satisfaction of clauses (i) and (ii) hereof.
(c) No Litigation. Neither D&N nor any D&N Subsidiary shall
be subject to any pending litigation which, if determined adversely to D&N or
any D&N Subsidiary, would have a material adverse effect on D&N.
(d) Affiliate Letters. Republic shall have received from
D&N the letter agreements from all affiliates of D&N as contemplated in
Section 3.5 hereof.
(e) Audited Financials. D&N shall have delivered to
Republic audited consolidated financial statements at and for the year ended
December 31, 1998, including an unqualified opinion of D&N's independent
auditors related thereto.
(f) Employment Matters. The instruments described in
Section 3.10(c) hereof to be executed and delivered by, among others, persons
or entities other than Republic shall have been executed and delivered by
such other persons and entities as provided in Section 3.10(c) hereof.
(g) Other Certificates. D&N shall have delivered to
Republic such other certificates and instruments as Republic and its counsel
may reasonably request. The form and substance of all certificates,
instruments and other documentation delivered to Republic under this
Agreement shall be reasonably satisfactory to Republic and its counsel.
4.4 Termination of Agreement and Abandonment of Merger. This
Agreement may be terminated at any time before the Effective Time, whether
before or after approval thereof by the stockholders of D&N or Republic, as
provided below:
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(a) Mutual Consent. By mutual consent of the parties,
evidenced by their written agreement.
(b) Closing Delay. At the election of either party,
evidenced by written notice, if (i) the Closing shall not have occurred on or
before November 30, 1999, or such later date as shall have been agreed to in
writing by the parties, provided however that the right to terminate under
this Section 4.4(b) shall not be available to any party whose failure to
perform an obligation hereunder has been the cause of, or has resulted in,
the failure of the Closing to occur on or before such date; (ii) any approval
or authorization of any governmental or regulatory authority, the lack of
which would result in the failure to satisfy the closing condition set forth
in Section 4.1(c) hereof, shall have been denied by such governmental or
regulatory authority, or such governmental or regulatory authority shall have
requested the withdrawal of any application therefor or indicated an
intention to deny, or impose a condition of a type referred to in the proviso
to Section 4.1(c) hereof with respect to, such approval or authorization, or
(iii) the approval of the stockholders of D&N or Republic referred to in
Section 4.1(a) hereof shall not have been obtained, provided that the
electing party is not then in breach of its obligations under Section 3.4
hereof.
(c) Conditions to D&N Performance Not Met. By D&N upon
delivery of written notice of termination to Republic if any event occurs
which renders impossible of satisfaction in any material respect one or more
of the conditions to the obligations of D&N to effect the Merger set forth in
Sections 4.1 and 4.2 hereof and noncompliance is not waived in writing by
D&N.
(d) Conditions to Republic Performance Not Met. By Republic
upon delivery of written notice of termination to D&N if any event occurs
which renders impossible of satisfaction in any material respect one or more
of the conditions to the obligations of Republic to effect the Merger set
forth in Sections 4.1 and 4.3 hereof and noncompliance is not waived in
writing by Republic.
(e) Breach. By either D&N or Republic if there has been a
material breach of the other party's representations and warranties (as
contemplated in this Agreement), covenants or agreements set forth in this
Agreement of which written notice has been given to such breaching party and
which has not been fully cured or cannot be fully cured within the earlier of
(i) 30 days of receipt of such notice or (ii) five days prior to the Closing
and which breach would, in the reasonable opinion of the non-breaching party,
individually or in the aggregate, have, or be reasonably likely to have, a
material adverse effect on the breaching party.
(f) D&N Election. By D&N if (i) the Board of Directors of
Republic shall not have publicly recommended in the Prospectus/Joint Proxy
Statement that its stockholders approve and adopt this Agreement or shall
have withdrawn, modified or changed in a manner adverse to D&N its approval
or recommendation of this Agreement, (ii) the Board of Directors of Republic
shall have authorized Republic to enter into any agreement, letter of intent
or agreement in principle with the intent to pursue or effect a Takeover
Proposal or (iii) the Board of Directors of D&N shall have failed to
recommend to its stockholders the adoption of this Agreement or shall have
withdrawn, modified or changed such recommendation pursuant to the exercise
of its fiduciary obligations under Section 3.4 hereof.
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(g) Republic Election. By Republic if (i) the Board of
Directors of D&N shall not have publicly recommended in the Prospectus/Joint
Proxy Statement that its stockholders approve and adopt this Agreement or
shall have withdrawn, modified or changed in a manner adverse to Republic its
approval or recommendation of this Agreement, (ii) the Board of Directors of
D&N shall have authorized D&N to enter into any agreement, letter of intent
or agreement in principle with the intent to pursue or effect a Takeover
Proposal or (iii) the Board of Directors of Republic shall have failed to
recommend to its stockholders the adoption of this Agreement or shall have
withdrawn, modified or changed such recommendation pursuant to the exercise
of its fiduciary obligations under Section 3.4 hereof.
ARTICLE V
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
5.1 Termination; Lack of Survival of Representations and Warranties.
(a) In the event of the termination and abandonment of this
Agreement pursuant to Section 4.4 hereof, this Agreement shall become void
and have no effect, except (i) the provisions of Sections 2.7 (No Broker's or
Finder's Fees), 3.6 (Publicity), 5.2 (Payment of Expenses), 7.2
(Confidentiality) and 7.12 (No Employment Solicitation) hereof shall survive
any such termination and abandonment, and (ii) a termination pursuant to
Section 4.4(e) hereof shall not relieve the breaching party from liability
for any uncured intentional and willful breach of a representation, warranty,
covenant or agreement giving rise to such termination. Moreover, the
aggrieved party without terminating this Agreement shall be entitled to
specifically enforce the terms hereof against the breaching party in order to
cause the Merger to be consummated. Each party acknowledges that there is not
an adequate remedy at law to compensate the other party relating to the
non-consummation of the Merger. To this end, each party, to the extent
permitted by law, irrevocably waives any defense it might have based on the
adequacy of a remedy at law which might be asserted as a bar to specific
performance, injunctive relief or other equitable relief.
(b) The representations, warranties and agreements set
forth in this Agreement shall not survive the Effective Time and shall be
terminated and extinguished at the Effective Time, and from and after the
Effective Time no party shall have any liability to the other on account of
any breach or failure of any of those representations, warranties and
agreements, provided however that the foregoing clause (i) shall not apply to
agreements of the parties which by their terms are intended to be performed
after the Effective Time by the Surviving Corporation or otherwise and (ii)
shall not relieve any party or person for liability for fraud, deception or
intentional misrepresentation.
(c) At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b)
waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto and (c) waive compliance with
any of the agreements or conditions contained herein; provided, however, that
after any approval of the transactions contemplated by this Agreement by the
stockholders of D&N, there may not be, without further approval of such
stockholders, any
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extension or waiver of this Agreement or any portion hereof which reduces the
amount or changes the form of the consideration to be delivered to the
holders of D&N Common Stock hereunder other than as contemplated by this
Agreement. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
5.2 Payment of Expenses. Each party shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereby; provided, however, that the costs and expenses of
printing and mailing the Proxy Statement/Prospectus, and all filing and other
fees paid to the SEC in connection with the Merger, shall be borne equally by
Republic and D&N.
ARTICLE VI
CERTAIN POST-MERGER AND OTHER AGREEMENTS
6.1 Indemnification.
(a) For a period of six years from and after the Effective
Time, Republic as the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or who has been at any time before the date
hereof or who becomes before the Effective Time, an officer or director of
either D&N or Republic or any of their respective Subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including reasonable attorney's fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior written
consent of Republic as the Surviving Corporation, which consent shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, or administrative (each
a "Claim"), in which an Indemnified Party is, or is threatened to be made, a
party based in whole or in part on or arising in whole or in part out of the
fact that such Indemnified Party is or was a director or officer of either
D&N or Republic or any of their respective Subsidiaries if such Claim
pertains to any matter or fact arising, existing at or occurring before the
Effective Time (including, without limitation, the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is
asserted or claimed before, or at or after, the Effective Time (the
"Indemnified Liabilities"), to the fullest extent permitted under applicable
state or federal law in effect as of the date hereof or as amended applicable
to a time before the Effective Time and under D&N's or Republic's governing
corporation documents (as the case may be), and Republic as the Surviving
Corporation shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent
permitted by applicable state or federal law in effect as of the date hereof
or as amended applicable to a time before the Effective Time upon receipt of
any undertaking required by applicable law. Any Indemnified Party wishing to
claim indemnification under this Section 6.1(a), upon learning of any Claim,
shall notify Republic as the Surviving Corporation (but the failure so to
notify Republic as the Surviving Corporation shall not relieve it from any
liability which it may have under this Section 6.1(a) except to the extent
such failure materially prejudices Republic as the Surviving Corporation) and
shall deliver to Republic as the Surviving Corporation the undertaking, if
any, required by
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applicable law. Republic as the Surviving Corporation shall insure, to the
extent permitted under applicable law, that all limitations of liability
existing in favor of the Indemnified Parties as provided in D&N's or
Republic's governing corporation documents (as the case may be), as in effect
as of the date hereof, or allowed under applicable state or federal law as in
effect as of the date hereof or as amended applicable to a time before the
Effective Time, with respect to claims or liabilities arising from facts or
events existing or occurring before the Effective Time (including, without
limitation, the transactions contemplated hereby), shall survive the Merger.
The Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation with Republic as the Surviving Corporation; provided,
however, that (A) Republic as the Surviving Corporation shall have the right
to assume the defense thereof and upon such assumption Republic as the
Surviving Corporation shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred
by any Indemnified Party in connection with the defense thereof, except that
if Republic as the Surviving Corporation elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified
Parties that there are issues which raise conflicts of interest between
Republic as the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Republic as the Surviving Corporation, and Republic as the
Surviving Corporation shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (B) Republic as the Surviving
Corporation shall be obligated pursuant to this paragraph to pay for only one
firm of counsel for all Indemnified Parties, unless an Indemnified Party
shall have reasonably concluded, based on the advice of counsel, that in
order to be adequately represented, separate counsel is necessary for such
Indemnified Party, in which case, Republic as the Surviving Corporation shall
be obligated to pay for such separate counsel, (C) Republic as the Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and (D)
Republic as the Surviving Corporation shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(b) For a period of three years from and after the
Effective Time, Republic as the Surviving Corporation shall cause to be
maintained in effect the current policies of directors' and officers'
liability insurance maintained by D&N and the D&N Subsidiaries (provided that
they may substitute therefor policies from financially capable insurers of at
least the same coverage and amounts and containing terms and conditions that
are carried by Republic and its Subsidiaries in the ordinary course of
business) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall Republic
and its Subsidiaries be required to expend more than 150% of the current
amount expended by D&N or any of the D&N Subsidiaries (the "Insurance
Amount") to maintain or procure insurance coverage pursuant hereto; and
provided, further, that if Republic is unable to maintain or obtain the
insurance called for by this Section 6.1(b), Republic shall use its best
efforts to obtain as much comparable insurance as available for the Insurance
Amount. Following consummation of the Merger, the directors and officers of
Republic as the Surviving Corporation shall be covered by the directors' and
officers' liability insurance maintained by the Surviving Corporation.
(c) In the event Republic or any of its successors or
assigns (i) consolidates with
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or merges into any other person or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person or entity, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Republic
assume the obligations set forth in this Section 6.1.
(d) The obligations of Republic as the Surviving
Corporation provided under this Section 6.1 are intended to be enforceable
against the Surviving Corporation directly by the Indemnified Parties and
shall be binding on all respective successors and permitted assigns of
Republic as the Surviving Corporation.
6.2 Directors and Officers of the Surviving Corporation.
(a) Directors of the Surviving Corporation. The following
provisions shall, to the greatest extent practicable, apply with respect to
the Board of Directors of Republic, as the Surviving Corporation, the Board
of Directors of D&N Bank, and the Board of Directors of Republic Bank:
(i) At the Effective Time, but subject to the
three sentences that follow, the Board of Directors of Republic as
the Surviving Corporation shall consist of not less than 25 and not
more than 28 directors who shall consist of (A) all ten persons
serving as directors of D&N immediately prior to the Effective Time
(each, a "D&N-Related Director"), (B) all 16 persons serving as
directors of Republic immediately prior to the Effective Time (each,
a "Republic-Related Director"), and (C) at least one director
appointed by the Republic-Related Directors in connection with the
Contemplated Permitted Transaction (the "Permitted Additional
Republic Director"). D&N shall use its best efforts to ensure that
it has ten directors immediately prior to the Effective Time
consisting of those persons named by it in regulatory applications
for approval of the Merger and in the Prospectus/Joint Proxy
Statement. Republic shall use its best efforts to ensure that it has
16 directors immediately prior to the Effective Time consisting of
those persons named by it in regulatory applications for approval of
the Merger and in the Prospectus/Joint Proxy Statement. The
membership of each D&N-Related Director, each Republic-Related
Director and each Permitted Additional Republic Director, on the
Board of Directors of Republic, as the Surviving Corporation, shall
be subject to such director's satisfaction of the Republic Policy
regarding Director Responsibilities and Criteria for Re-election of
Directors (Policy No. 201, as revised October 27, 1998) (the
"Republic Directors Policy"); provided, however, (i) that the
provision of the Republic Directors Policy prohibiting any director
from standing for election at an annual meeting of stockholders of
Republic occurring after such director's 70th birthday shall not
apply to Mr. Joseph C. Bromley, Mr. Kenneth D. Seaton, Mr. Bruce L.
Cook, or Mr. George B. Smith with respect to any election of
directors of Republic, as the Surviving Corporation, occurring prior
to the 2000 Annual Meeting of Stockholders of Republic, as the
Surviving Corporation (the "2000 Annual Meeting"), and (ii) that
from and after the 2000 Annual Meeting each of Messrs. Bromley,
Seaton, Cook and Smith shall be a Director Emeritus of Republic, as
the Surviving Corporation, for life.
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(ii) At the Effective Time, but subject to the
three sentences that follow, the Board of Directors of D&N Bank
shall consist of ten directors who shall consist of (A) all ten
persons serving as directors of D&N Bank immediately prior to the
Effective Time and (B) three persons selected by Republic and
approved by D&N (which consent shall not be unreasonably withheld)
(each, a "Republic-Related D&N Bank Director"). D&N shall use its
best efforts to ensure that D&N Bank has ten directors immediately
prior to the Effective Time consisting of those persons named by it
in regulatory applications for approval of the Merger and in the
Prospectus/Joint Proxy Statement. Republic shall use its best
efforts to ensure that the Republic-Related D&N Bank Directors
consist of those persons named by it in regulatory applications for
approval of the Merger and in the Prospectus/Joint Proxy Statement.
At and after the Effective Time, the membership of each director on
the Board of Directors of D&N Bank shall be subject to such
director's satisfaction of the Republic Directors Policy; provided,
however, (x) that the provision of the Republic Directors Policy
prohibiting any director from standing for election at an annual
meeting of stockholders of a subsidiary of Republic occurring after
such director's 70th birthday shall not apply to Mr. Joseph C.
Bromley or Mr. Kenneth D. Seaton with respect to any election of
directors of D&N Bank occurring prior to the 2000 Meeting, and (y)
that the provision of such Directors Tenure Policy prohibiting any
director from standing for election at an annual meeting of
stockholders of a subsidiary of Republic occurring after such
director's 70th birthday shall not apply to Mr. Seaton with respect
to any election of directors of D&N Bank, occurring prior to the
date of Mr. Seaton's 75th birthday.
(iii) At the Effective Time, but subject to the
three sentences that follow, the Board of Directors of Republic Bank
shall consist of not less than 23 nor more than 25 directors who
shall consist of (A) three persons selected by D&N and approved by
Republic (which approval shall not be unreasonably withheld) (each,
a "D&N-Related Director"), (B) 20 of the persons serving as
directors of Republic serving in such capacity immediately prior to
the Effective Time, and (C) up to two directors appointed by the
Republic in connection with the Contemplated Permitted Transaction.
D&N shall use its best efforts to ensure that the D&N-Related
Republic Bank Directors consist of those persons named by it in
regulatory applications for approval of the Merger and in the
Prospectus/Joint Proxy Statement. Republic shall use its best
efforts to ensure that Republic Bank has 13 directors immediately
prior to the Effective Time consisting of those persons named by it
in regulatory applications for approval of the Merger and in the
Prospectus/Joint Proxy Statement. At and after the Effective Time,
the membership of each director on the Board of Directors of
Republic Bank shall be subject to such director's satisfaction of
the Republic Directors Policy (subject to the exceptions set forth
in this Section 6.2(a)).
(iv) The Board of Directors of Republic as the
Surviving Corporation shall have an Executive Committee and such
other committees as such Board shall establish in accordance with
Section 527 of the MBCA and the Articles of Incorporation and Bylaws
of Republic, as the Surviving Corporation. At the Effective Time,
but subject to the following sentence, the Executive Committee shall
consist of ten directors who shall consist of Messrs. Jerry D.
Campbell, Dana M. Cluckey, Bruce L. Cook, Howard J. Hulsman, Kelly
E. Miller, Joe D. Pentecost, George B. Smith, George J. Butvilas, B.
Thomas M. Smith, Jr. and
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Stanley A. Jacobson. At the Effective Time, but subject to the
following sentence, every other committee of such Board shall
include at least one D&N-Related Director.
(v) The provision of the Republic Directors Policy
prohibiting any director from standing for election at an annual
meeting of stockholders of a subsidiary of Republic occurring after
such director's 70th birthday shall not apply to Mr. George B. Smith
with respect to any election of directors of Republic Bancorp
Mortgage Inc. occurring prior to the 2000 Annual Meeting, and (ii)
that from and after the 2000 Annual Meeting Mr. Smith shall be a
Director Emeritus of Republic Bancorp Mortgage Inc. for life, and
may serve as Chairman of the Board of Republic Bancorp Mortgage Inc.
(b) Chairman and Certain Officers of the Surviving
Corporation. During the three year period following the Effective Time:
(i) At the Effective Time, Mr. Jerry D. Campbell
shall be the Chairman of the Board and Chief Executive Officer of
Republic, as the Surviving Corporation; Mr. George J. Butvilas shall
be the Vice-Chairman of the Board of Republic, as the Surviving
Corporation; and Mr. Dana M. Cluckey shall be the President and
Chief Operating Officer of Republic, as the Surviving Corporation.
Except as otherwise provided in the preceding sentence, at the
Effective Time, those individuals who are the officers of Republic
immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, serving in the same officer capacities,
respectively, together with such other individuals who may be
subsequently appointed as officers of the Surviving Corporation by
the Board of Directors of the Surviving Corporation.
(ii) At the Effective Time, those individuals who
are the officers of D&N Bank immediately prior to the Effective Time
shall be the officers of D&N Bank serving in the same officer
capacities, respectively, together with such other individuals who
may be subsequently appointed as officers of D&N Bank by the Board
of Directors of D&N Bank.
(iii) At the Effective Time, those individuals who
are the officers of Republic Bank immediately prior to the Effective
Time shall be the officers of Republic Bank serving in the same
officer capacities, respectively, together with such other
individuals who may be subsequently appointed as officers of
Republic Bank by the Board of Directors of Republic Bank.
(c) Survival of Section 6.2. The provisions of Section
6.2(a) shall survive the Effective Time and remain in effect until the second
anniversary of the Effective Time, terminating thereafter. The provisos of
Sections 6.2(a)(i), (ii) and (v) shall survive the Effective Time and remain
in effect for the respective periods specified therein, terminating
thereafter.
6.3 Additional Agreements.
(a) In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
D&N and a Subsidiary of Republic) or to vest Republic, as the Surviving
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Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably
requested by, and at the sole expense of, Republic as the Surviving
Corporation.
(b) Each of Republic and D&N shall give the other the
reasonable opportunity to participate in the defense of any shareholder
litigation against Republic as the Surviving Corporation or D&N, as
applicable, and its directors relating to the transactions contemplated by
this Agreement.
(c) Republic shall use all commercially reasonable efforts
to cause to be delivered to D&N and D&N's independent accountants a letter
from Republic's independent accountants addressed to D&N and Republic, dated
as of the Closing Date, stating that accounting for the Merger as a pooling
of interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is closed
and consummated in accordance with this Agreement. D&N shall use all
commercially reasonable efforts to cause to be delivered to Republic and
Republic's independent accountants a letter from D&N's independent
accountants addressed to Republic and D&N, dated as of the Closing Date,
stating that accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated in
accordance with this Agreement.
(d) D&N and Republic intend to establish a "transition
team" (that may include employee representatives of each entity) to evaluate
and make recommendations to the Board of Directors of the Surviving
Corporation regarding the future operations of the Surviving Corporation
(including issues of integration, consolidation and staffing). It is
anticipated that, as part of such process, notice of vacant position
opportunities in the Surviving Corporation and its Subsidiaries will be
provided to employees of the Surviving Corporation and its Subsidiaries in
accordance with Republic's Position Opportunity Posting Program.
6.4 Advice of Changes. Republic and D&N shall promptly advise the
other party of any change or event having a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or constitute
a material breach of any of its representations, warranties or covenants
contained herein.
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ARTICLE VII
GENERAL
7.1 Amendments. Subject to applicable law, this Agreement may be
amended, whether before or after any stockholder approval hereof, by an
agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that after the approval of this Agreement by the stockholders of
either party hereto, no such amendment may change the amount or form of the
consideration to be delivered hereunder pursuant to Section 1.3 herein
without their approval. This Agreement may not be amended except by a written
instrument executed on behalf of each of the parties.
7.2 Confidentiality. All information disclosed by any party to any
other party, whether prior or subsequent to the date of this Agreement
including, without limitation, any information obtained pursuant to Section
3.1 hereof, shall be kept confidential by such other party and shall not be
used by such other party otherwise than as herein contemplated, all in
accordance with the terms of the confidentiality agreements between the
parties dated October 6, 1998 and November 9, 1998, respectively (the
"Confidentiality Agreements"). In the event of the termination of this
Agreement, each party shall use all reasonable efforts to return upon request
to the other party all documents (and reproductions thereof) received from
such other party (and, in the case of reproductions, all such reproductions)
that include information subject to the confidentiality requirement set forth
above.
7.3 Governing Law. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Michigan without taking into account any provision regarding
choice of law, except to the extent certain matters may be governed by
federal law by reason of preemption.
7.4 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed given if mailed
by registered or certified mail (postage prepaid and return receipt
requested) addressed as follows:
If to D&N, to: D&N Financial Corporation
400 Quincy Street
Hancock, MI 49930
Attention: George J. Butvilas
Fax: (906) 487-6245
with a copy to: Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Suite 700
Washington, D.C. 20005
Attention: James S. Fleischer, P.C.
Fax: (202) 682-0354
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If to Republic, to: Republic Bancorp Inc.
1070 East Main Street
Owosso, MI 48867
Attention: Jerry D. Campbell
Fax: (517) 723-8762
with a copy to: Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward Avenue, Suite 100
Bloomfield Hills, MI 48304
Attention: Brad B. Arbuckle, Esq.
Fax: (248) 258-3036
or such other address as shall be furnished in writing by either party to the
other, and any such notice or communication shall be deemed to have been
given two business days after the date of such mailing (except that the
notice of change of address shall not be deemed to have been given until
received by the addressee). Notices may also be sent by telegram, telex,
facsimile transmission or hand delivery and in such event shall be deemed to
have been given as of the date received by the addressee.
7.5 No Assignment. This Agreement may not be assigned by any party
hereto, by operation of law or otherwise, except as contemplated hereby.
7.6 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to each other party.
7.8 Construction and Interpretation. It is expressly acknowledged
and agreed that all parties have been represented by counsel and have
participated in the negotiation and drafting of this Agreement, and that
there shall be no presumption against any party on the ground that such party
was responsible for preparing this Agreement or any part of it. Each of the
exhibits and schedules referred to in, and/or attached to, this Agreement is
an integral part of this Agreement and is incorporated in this Agreement by
this reference. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". No provision of this Agreement shall be construed to
require D&N or Republic or any of their respective Subsidiaries or affiliates
to take any action which would violate any applicable law, rule or
regulation. Except as the context otherwise requires, all references herein
to any state or federal regulatory agency shall also be deemed to refer to
any predecessor or successor agency, and all references to state and federal
statutes or regulations shall also be deemed to refer to any successor
statute or regulation.
7.9 Entire Agreement. This Agreement, together with the schedules,
lists, exhibits and certificates referred to herein or required to be
delivered hereunder, and any amendment hereafter
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executed and delivered in accordance with Section 7.1 hereof, constitutes the
entire agreement of the parties and supersedes any prior written or oral
agreement or understanding among any parties pertaining to the Merger, except
that the Confidentiality Agreements shall remain in full force and effect as
contemplated in Section 7.2 hereof and except with respect to the D&N Stock
Option Agreement.
7.10 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law then such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
7.11 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person (other than the parties hereto and their respective
successors and assigns permitted hereby) to any claim, cause of action,
remedy or right of any kind, except for Sections 1.8, 6.1 and 6.2 (which are
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
7.12 No Employment Solicitation. If this Agreement is terminated,
the parties hereto agree that, for a period of two years subsequent to such
termination (i) none of the parties shall, without first obtaining the prior
written consent of the other, directly or indirectly, actively solicit the
employment of any current director, officer or employee of the other party or
any Subsidiary of such other party and (ii) none of the parties will actively
solicit business relationships with clients of the other party or any
Subsidiary of such other party solely as a result of review of the
information contemplated in Section 7.2 hereof; provided, however, that
neither clause (i) nor clause (ii) shall prohibit (x) employment
advertisements placed in publications of general circulation or in trade
journals, (y) contacts initiated by such director, officer or employee, or
(z) the hiring of any such director, officer, or employee as a result of (x)
or (y).
7.13 Attorney Fees. If litigation is brought concerning this
Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall upon final judgment
and expiration of all appeals immediately pay upon demand all reasonable
attorneys' fees and expenses of the prevailing party.
7.14 Other Transactions. Immediately after the execution of this
Agreement, D&N and Republic shall execute and deliver the D&N Stock Option
Agreement.
7.15 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the courts of the
jurisdiction in which Republic's principal place of business is located
(i.e., the State of Michigan, County of Shiawassee or the United States
District Court for the Eastern District of Michigan), and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue
laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
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7.16 Further Assurances. At the request of any party to this
Agreement, the other parties shall execute, acknowledge and deliver such
other documents and/or instruments as may be reasonably required by the
requesting party to carry out the purposes of this Agreement. In the event
any party to this Agreement shall be involved in litigation, threatened
litigation or government inquiries with respect to a matter covered by this
Agreement, every other party to this Agreement shall also make available to
such party, at reasonable times and subject to the reasonable requirements of
its own businesses, such of its personnel as may have information relevant to
such matters, provided that such party shall reimburse the providing party
for its reasonable costs for employee time incurred in connection therewith
if more than one business day is required. Following the Closing, the parties
will cooperate with each other in connection with tax audits and in the
defense of any legal proceedings.
7.17 Remedies Cumulative. Unless expressly made the exclusive remedy
by the terms of this Agreement, all remedies provided for in this Agreement
are cumulative and shall be in addition to any and all other rights and
remedies provided by law and by any other agreements between the parties.
7.18 Liquidated Damages; Termination Fee. Notwithstanding anything
to the contrary contained in this Agreement, in the event that any of the
following events or circumstances shall occur, Republic shall, within ten
(10) days after notice of the occurrence thereof by D&N, pay to D&N the sum
equal to the "Termination Fee Amount" (as defined in this Section 7.18),
which the parties agree and stipulate as reasonable and full liquidated
damages and reasonable compensation for the involvement of D&N in the
transactions contemplated in this Agreement, is not a penalty or forfeiture,
and will not affect the provisions of this Section 7.18: (i) at any time
prior to termination of this Agreement an "Acquisition Event" (as defined in
this Section 7.18) shall occur; or (ii) D&N shall terminate this Agreement
pursuant to Section 4.4(b)(i) (provided that the failure of Republic to
perform its obligations hereunder is the cause of, or has resulted in, the
failure of the Closing to occur on or before November 30, 1999), Section
4.4(e) or Section 4.4(f), or if Republic fails to call and hold the meeting
of its stockholders as required by Section 4.4(f) of this Agreement. For
purposes of this Section 7.18: "Acquisition Event" shall mean that Republic
shall have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose, or entered into an agreement
with any person other than any of the parties to this Agreement) to effect a
Takeover Proposal or shall fail to publicly oppose a tender offer or exchange
offer by another person based on a Takeover Proposal; and "Termination Fee
Amount" shall mean a sum, in Dollars, equal to the lesser of $9,000,000 or an
amount equal to three percent (3%) of the sum derived by multiplying (x) the
Conversion Number by (y) the sum derived by multiplying the number of shares
of D&N Common Stock outstanding as of the date of termination by the closing
price for D&N Common Stock on the trading day that the execution of this
Agreement is first publicly announced. Upon the making and receipt of such
payment under this Section 7.18, Republic shall have no further obligation of
any kind under this Agreement and D&N shall not have any further obligation
of any kind under this Agreement, except in each case under Sections 7.2,
7.12 and 7.13 of this Agreement, and no party shall have any liability for
any breach or alleged breach by such party of any provision of this
Agreement.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the date first
set forth above.
D&N FINANCIAL CORPORATION REPUBLIC BANCORP INC.
By: /s/ George J. Butvilas By: /s/ Jerry D. Campbell
-------------------------- --------------------------------
Name: George J. Butvilas Name: Jerry D. Campbell
Title: President and Chief Title: Chairman of the Board and
Executive Officer Chief Executive Officer
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EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 1, 1998, between
Republic Bancorp Inc., a Michigan corporation ("Grantee"), and D&N Financial
Corporation, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, and Issuer have entered into an Agreement and Plan
of Merger on even date herewith (the "Merger Agreement"); and
WHEREAS, as an inducement to the willingness of Grantee to enter
into the Merger Agreement, Issuer has agreed to grant Grantee the Option (as
hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of
the Option and the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 1,823,837 fully paid and nonassessable shares of the common
stock, par value $.01 per share, of Issuer ("Common Stock") at a price per
share of $21.625; provided, however, that in the event Issuer issues or
agrees to issue any shares of Common Stock (other than shares of Common Stock
issued pursuant to stock options granted pursuant to any employee benefit
plan prior to the date hereof) at a price less than such price per share (as
adjusted pursuant to subsection (b) of Section 5), such price shall be equal
to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided, further, that in no event shall the number of shares for
which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth without giving effect to any shares subject to
or issued pursuant to the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of
any provision of the Merger Agreement.
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2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event
(as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within six months following such Subsequent
Triggering Event (or such later period as provided in Section 10). Each of
the following shall be an Exercise Termination Event: (i) the Effective Time;
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to Section 4.4(e)
of the Merger Agreement (but only if the breach giving rise to the
termination was willful) (a "Listed Termination"); (iii) the passage of 15
months (or such longer period as provided in Section 10) after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination or (iv) the date on which the
shareholders of the Grantee shall have voted and failed to approve the Merger
(unless (A) Issuer shall then be in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior to such date,
the stockholders of Issuer shall have also voted and failed to approve and
adopt the Merger Agreement). The term "Holder" shall mean the holder or
holders of the Option. Notwithstanding anything to the contrary contained
herein, (i) the Option may not be exercised at any time when Grantee shall be
in material breach of the Merger Agreement such that Issuer shall be entitled
to terminate the Merger Agreement pursuant to Section 4.4(e) thereof as a
result of a material breach and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement (x) by Issuer
pursuant to Section 4.4(e) thereof as a result of the material breach by
Grantee, or (y) by Issuer or Grantee pursuant to Section 4.4(b)(ii).
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) (an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes
of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors of Issuer (the
"Issuer Board") shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction other than the
Merger. For purposes of this Agreement, (a) "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any
similar transaction, involving Issuer or any Issuer Subsidiary
(other than mergers, consolidations or similar transactions
involving solely Issuer and/or one or more wholly-owned (except for
directors' qualifying shares and a de minimis number of other
shares) Subsidiaries of the Issuer, provided, any such transaction
is not entered into in violation of the terms of the Merger
Agreement), (x) a purchase, lease or other acquisition of all or any
substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (y) a purchase or other
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acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the
voting power of Issuer or any Issuer Subsidiary; and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under
the Exchange Act;
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes
of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iii) The shareholders of Issuer shall have voted and
failed to adopt the Merger Agreement at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or
such meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination of the
Merger Agreement if, prior to such meeting (or if such meeting shall
not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made, or
publicly disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in any
manner adverse in any respect to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated by the
Merger Agreement, (y) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall have
authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage
in an Acquisition Transaction with any person other than Grantee or
a Grantee Subsidiary, or (z) Issuer shall have provided information
to or engaged in negotiations with a third party relating to a
possible Acquisition Transaction.
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a proposal to Issuer or its shareholders to engage
in an Acquisition Transaction and such proposal shall have been
publicly announced;
(vi) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the SEC a registration statement or
tender offer materials with respect to a potential exchange or
tender offer that would constitute an Acquisition Transaction (or
filed a preliminary proxy statement with the SEC with respect to a
potential vote by its shareholders to approve the issuance of shares
to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and following such breach
Grantee would be entitled to terminate the Merger Agreement (whether
immediately or after the giving of notice or passage of time or
both); or
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(viii) Any person other than Grantee or any Grantee
Subsidiary other than in connection with a transaction to which
Grantee has given its prior written consent shall have filed an
application or notice with the Office of Thrift Supervision (the
"OTS") or other federal or state thrift or bank regulatory or
antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except
that the percentage referred to in clause (z) of the second sentence
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option (or any portion thereof), it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided, that if prior notification to or approval of the
OTS or any other regulatory or antitrust agency is required in connection
with such purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify Issuer of such filing, and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive offices, provided that the failure or refusal of the
Issuer to designate such a bank account or accept surrender of this Agreement
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or
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certificates representing the number of shares of Common Stock purchased by
the Holder and, if the Option should be exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer
of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities Act")
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of
a letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference in
the opinion of Counsel to the Holder; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are
both satisfied. In addition, such certificates shall bear any other legend as
may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed, subject to the receipt of any necessary
regulatory approvals, to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state
and local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15
U.S.C. Section 18a
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<PAGE>
and regulations promulgated thereunder and (y) in the event, under the
Savings and Loan Holding Company Act or any state or other federal thrift or
banking law, prior approval of or notice to the OTS or to any state or other
federal regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices
and providing such information to the OTS or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein
to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Agreements and related Options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part
of Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision
shall be made so that, in the event that any additional shares of Common
Stock are to be issued or otherwise become outstanding as a result of any
such change (other than pursuant to an exercise of the Option), the number of
shares of Common Stock that remain subject to the Option shall be increased
so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on
account of any of the foregoing changes in the Common Stock), it equals 19.9%
of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
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6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 12 months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a registration statement under the Securities Act covering
any shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of any shares of Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested
by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The Issuer shall bear
the costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering by Issuer of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the offer and sale of
the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of all Holders
shall constitute at least 25% of the total number of shares to be sold by the
Holders and Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then Issuer shall file a registration statement for
the balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration and the 12-month period
referred to in the first sentence of this section shall be increased to 24
months. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed hereunder.
If requested by any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same,
postage prepaid, to the address of record of the persons entitled to receive
such copies. Notwithstanding anything to the contrary contained herein, in no
event shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
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<PAGE>
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to the amount by which (A)
the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto)
shall repurchase such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" shall mean the highest of (i) the price per
share of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of all or any substantial part of
Issuer's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or
Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to
the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a
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consequence of administrative policy, from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole
or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate,
that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice
of repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, and/or (B) to the Owner,
a certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 50% or more of
the then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(b)(i) hereof, except that the percentage
referred to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person, other than Grantee or a Grantee Subsidiary, or engage in a plan
of exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with
such merger or plan of exchange, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding shares of Common
Stock shall after such merger or plan of exchange represent less than 50% of
the outstanding shares and share equivalents of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or a substantial part of
its or the Issuer Subsidiary's assets or deposits to any person, other than
Grantee or a Grantee Subsidiary, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be
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<PAGE>
converted into, or exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation (as
hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing
or surviving person of a consolidation or merger with Issuer (if
other than Issuer), (ii) the acquiring person in a plan of exchange
in which Issuer is acquired, (iii) the Issuer in a merger or plan of
exchange in which Issuer is the continuing or surviving or acquiring
person, and (iv) the transferee of all or a substantial part of
Issuer's assets or deposits (or the assets or deposits of the Issuer
Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price,
as defined in Section 7.
(iv) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share
of common stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section
9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section
8(a) and the denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
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<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase
Price") equal to the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the request of the
owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal
to the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective rights to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this Agreement)
and/or certificates for Substitute Shares accompanied by a written notice or
notices stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
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(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Option Repurchase Price and/or the Substitute Share Repurchase
Price, respectively, which it is no longer prohibited from delivering, within
five business days after the date on which the Substitute Option Issuer is no
longer so prohibited; provided, however, that if the Substitute Option Issuer
is at any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute Option Issuer
shall use its reasonable best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exercisable at the time
of delivery of the notice of repurchase by a fraction, the numerator of which
is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, and/or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled
to occur at any time before the expiration of a period ending on the
thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights (for so long as the Holder, Owner, Substitute
Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
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(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Issuer Board prior to the date hereof and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrance and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that
in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations hereunder;
provided, however, that until the date 15 days following the date on which
the OTS has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Grantee's behalf or (iv) any other
manner approved by the OTS.
13. Each of Grantee and Issuer will use its reasonable best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, but Grantee shall not be obligated to apply
to state banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems appropriate to
do so.
14. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$13,813,390 and, if it otherwise would exceed such amount, the Grantee, at
its sole election, shall either (a) reduce the number of shares of Common
Stock subject to this Option, (b) deliver to Issuer for cancellation Option
Shares previously purchased by Grantee, (c) pay cash to Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $13,813,390 after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit
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(as defined below) of more than $13,813,390; provided that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option
(or any portion thereof) to any unaffiliated party, and (v) any amount
equivalent to the foregoing with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
15. (a) Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), relinquish the Option (together with any
Option Shares issued to and then owned by Grantee) to Issuer in exchange for
a cash fee equal to the Surrender Price; provided, however, that Grantee may
not exercise its rights pursuant to this Section 15 if Issuer has repurchased
the Option (or any portion thereof) or any Option Shares pursuant to Section
7. The "Surrender Price" shall be equal to $13,813,390 (i) plus, if
applicable, Grantee's purchase price with respect to any Option Shares and
(ii) minus, if applicable, the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or
any other securities into which such Option Shares were converted or
exchanged) to any unaffiliated party, over (B) Grantee's purchase price of
such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 15 by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds on
or before the second business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to time,
to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five
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business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
surrender pursuant to paragraph (b) of this Section 15 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within five days of the submission or
receipt of any documents relating to any such regulatory and legal approvals,
provide Grantee with copies of the same, and (c) keep Grantee advised of both
the status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party reasonably
related to the same and (ii) Grantee may revoke such notice of surrender by
delivery of a notice of revocation to Issuer and, upon delivery of such
notice of revocation, the Exercise Termination Event shall be extended to a
date six months from the date on which the Exercise Termination Event would
have occurred if not for the provisions of this Section 15(c) (during which
period Grantee may exercise any of its rights hereunder, including any and
all rights pursuant to this Section 15).
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. In connection
therewith both parties waive the posting of any bond or similar requirement.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section l(a) hereof (as adjusted pursuant to
Section l(b) or Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person,
by fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in
the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
20. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
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21. Except as otherwise expressly provided herein, each of the
parties hereto shall 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 consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as
of the date first above written.
REPUBLIC BANCORP INC.
By ________________________________
D&N FINANCIAL CORPORATION
By ________________________________
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EXHIBIT 3.5
AFFILIATE: ______________________
(Print Name)
AFFILIATE REPRESENTATION LETTER
Republic Bancorp Inc.
Dear Sirs:
I have been advised that as of the date hereof I may be deemed an
"affiliate" of D&N Financial Corporation, a Delaware corporation ("D&N"), as
that term is defined for purposes of Rule 145 of the Rules and Regulations of
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of
the Agreement and Plan of Merger, dated December 1, 1998 (the "Agreement"),
by and between Republic Bancorp Inc., a Michigan corporation ("Republic"),
and D&N providing for the merger of D&N with and into Republic (the
"Merger"), shares of D&N common stock ("D&N Capital Stock") owned by me on
the effective date of the Merger will be converted into shares of Republic
common stock (collectively "Republic Capital Stock").
With respect to the shares of Republic Capital Stock to be received
by me as a result of the Merger, either directly or indirectly, I represent,
warrant, understand and agree as follows:
1. I will not sell, transfer or otherwise reduce my interest in the
Republic Capital Stock or reduce my risk relating thereto until after such
time as Republic has published financial results covering at least 30 days of
combined operations after the effective date of the Merger.
2. I know of no plan (written or oral) pursuant to which the holders
of D&N Capital Stock intend to sell or otherwise dispose of a number of the
shares of Republic Capital Stock to be received in the Merger which would, in
the aggregate, constitute more than 50 percent of the value of the D&N
Capital Stock outstanding immediately prior to the Merger.
3. I have been advised that the issuance of the Republic Capital
Stock to me pursuant to the Agreement has been registered with the Securities
and Exchange Commission ("SEC") under the Act on a registration statement on
Form S-4. I have also been advised that, at the time the Merger was submitted
to the shareholders of D&N for approval, I may have been deemed an
"affiliate" of D&N. Any sale or disposition by me of any of the Republic
Capital Stock may, under current law, only be made in accordance with the
provisions of paragraph (d) of Rule 145 under the Act, pursuant to an
effective registration statement under the Act or pursuant to an exemption
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provided by the Act. I understand that the requirements of Rule 145(d) will
differ depending upon how long I hold the Republic Capital Stock and whether
I am an affiliate of Republic at the time of sale. I understand that, in
general, the provisions of Rule 145(d) will permit resale within one year of
the Merger only in brokers' transactions where the aggregate number of shares
sold at any time, together with all sales of restricted shares of Republic
Common Stock sold for my account during the preceding three-month period,
does not exceed the greater of (i) 1 percent of the shares of Republic Common
Stock outstanding or (ii) the average weekly volume of trading in shares of
Republic Common Stock on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
during the four-week period preceding any such sale.
4. I have carefully read this letter and discussed its requirements
and other applicable limitations upon the sale, transfer or other disposition
of the Republic Capital Stock to be acquired by me in the Merger, to the
extent I felt necessary, with my counsel.
5. I have carefully read the Agreement and discussed its
requirements and its impact upon my ability to sell, transfer or otherwise
dispose of the Republic Capital Stock to be acquired by me in the Merger, to
the extent I felt necessary, with my counsel.
6. I have been informed by Republic that the distribution by me of
the Republic Capital Stock has not been registered under the Act and that the
Republic Capital Stock must be held by me for the time required by Rule
145(d), unless (i) the distribution for sale of the Republic Capital Stock
has been registered under the Act, (ii) a sale of the Republic Capital Stock
is made in conformity with the limitations of Rule 145(d), or (iii) in the
opinion of counsel, which opinion is acceptable to Republic, some other
exemption from registration is available with respect to any such sale,
transfer or other disposition of the Republic Capital Stock.
7. I understand that Republic is under no obligation to register the
sale, transfer or other disposition of the Republic Capital Stock by me or on
my behalf or to take any other action necessary in order to make compliance
with an exemption from registration available.
8. I understand that stock transfer instructions will be given to
Republic's transfer agent with respect to Republic Capital Stock and that
there will be placed on the certificates for such shares, or any substitution
therefor, the following legend:
"The shares represented by this certificate (1) were issued
pursuant to a business combination which is being accounted
for as a pooling of interests and may not be sold, nor may
the owner thereof reduce his risk relative thereto in any
other way, until such time as Republic Bancorp Inc. has
published the financial results covering at least 30 days
of combined operations after _____________, 1999, the
Effective Date of the merger through which the business
combination was effected, and (2) may be sold only in
accordance with the provisions of paragraph (d) of Rule 145
under the Securities Act of 1933, as amended (the `Act'),
or pursuant to an effective registration
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statement under the Act or an exemption under the Act. The
restrictions of this paragraph shall automatically become
null and void and of no effect on and after ___________,
2000."
Very truly yours,
Dated: ____________ _________________________________
(Signed)
_________________________________
(Printed)
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EXHIBIT 3.10 (c)(i)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as
of the _________ day of ___________, 199___, by and between REPUBLIC BANCORP
INC. (the "Holding Company"), D&N BANK (the "Bank") and GEORGE J.
BUTVILAS (the "Employee").
W I T N E S S E T H :
WHEREAS, it is proposed that the Employee serve as Vice-Chairman of
the Holding Company; and
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer of the Bank;
WHEREAS, the boards of directors of the Holding Company and the Bank
believe it is in the best interests of the Holding Company and the Bank to
enter into this Agreement with the Employee in order to assure continuity of
management and to reinforce and encourage the continued attention and
dedication of the Employee to the Employee's assigned duties; and
WHEREAS, the Employee was employed pursuant to an Employment
Agreement among D & N Financial Corporation (Holding Company's
predecessor-in-interest), the Bank and the Employee, dated July 31, 1997 (the
"Prior Employment Agreement"), which the Employee is willing to terminate in
connection with the execution of this Agreement by the parties; and
WHEREAS, the Board of Directors of each of the Holding Company and
the Bank has approved and authorized the execution of this Agreement with the
Employee to take effect as stated in Section 2 hereof.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein, it is AGREED as
follows:
1. Definitions.
(a) [INTENTIONALLY OMITTED.]
(b) The term "Commencement Date" means the date first above
written
(c) "Consolidation Date" means the date on which Bank
merges, consolidates or otherwise combines with Republic Bank or any other
direct or indirect subsidiary of Holding Company, or all or substantially all
of the assets of Bank are sold to Republic Bank or any other direct or
indirect subsidiary of Holding Company.
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(d) The term "Date of Termination" means the date on which
employment shall cease as specified in a notice of termination pursuant to
Section 7(e) of this Agreement.
(e) The term "Involuntary Termination" means termination of
the employment of Employee without the Employee's express written consent, or
shall include a material diminution of or interference with the Employee's
duties, responsibilities and benefits as Vice-Chairman of the Holding
Company, and, prior to the Consolidation Date, as President and Chief
Executive Officer of the Bank, including (without limitation) any of the
following actions unless consented to in writing by the Employee: (1) at any
time during the 12 calendar months following the date first above written, a
change in the principal workplace of the Employee to a location that is
outside of a 50 mile radius from his current work location in Hancock,
Michigan as of the date hereof; (2) a material change to the Employee's
duties or title with the Holding Company such that his position will thereby
have less responsibility or scope than his position as of the date of this
Agreement, including but not limited to a requirement that the Employee
report to anyone other than the Chairman of the Board or the Board of
Directors of the Holding Company; (3) a material reduction in the number or
seniority of personnel reporting to the Employee or a material reduction in
the frequency with which, or in the nature of the matters with respect to
which, such personnel are to report to the Employee, other than as part of a
Bank- or Holding Company-wide reduction in staff; and (4) a material adverse
change in the Employee's salary, perquisites, benefits or contingent
benefits, other than as part of an overall program applied uniformly and with
equitable effect to all members of the senior management of the Bank or the
Holding Company. The term "Involuntary Termination" does not include
Termination for Cause or termination of employment due to retirement, death,
disability or suspension or temporary or permanent prohibition from
participation in the conduct of the Bank's affairs under Section 8 of the
Federal Deposit Insurance Act ("FDIA").
(f) The terms "Termination for Cause" and "Terminated for
Cause" mean termination of the employment of the Employee because of the
Employee's personal dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of this Agreement. No act or failure to act
by the Employee shall be considered willful unless the Employee acted or
failed to act with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interests of the Holding
Company and the Bank, as applicable. Any act, or failure to act, based upon
prior approval given by the Board of Directors of the Holding Company or of
the Bank, or based upon the advice of counsel for the Holding Company or the
Bank, shall be conclusively presumed to be done, or omitted to be done, by
the Employee in good faith and in the best interests of the Holding Company
and the Bank. The Employee shall not be deemed to have been Terminated for
Cause unless and until there shall have been delivered to the Employee a copy
of a resolution, duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors of the Holding
Company or of the Bank at a regular or special meeting of such Board called
and held for such purpose, (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's counsel, to be
heard before such Board), stating that in the good faith opinion of such
Board the Employee has engaged in conduct described in this paragraph and
specifying the particulars thereof in detail.
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2. Term; Termination of Prior Employment Agreement. The term of this
Agreement shall be a period of three years commencing on the Commencement
Date, subject to earlier termination as provided herein. This Agreement shall
be of no force or effect unless, immediately prior to this Agreement's being
executed by the parties hereto, the Prior Employment Agreement shall have
been terminated.
3. Employment. The Employee (i) shall be Vice Chairman of the Board
of the Holding Company and (ii) until the Consolidation Date, shall be
employed as President and Chief Executive Officer of the Bank. As such, the
Employee shall render administrative and management services as are
customarily performed by persons situated in similar executive capacities,
and shall have such other powers and duties (i) of Vice-Chairman of the
Holding Company as the Board of Directors of the Holding Company may
prescribe from time to time and (ii) prior to the Consolidation Date, of an
executive officer of the Bank as the Board of Directors of the Bank may
prescribe from time to time. The Employee shall serve as a director and
officer of any subsidiaries or affiliates of the Holding Company (in addition
to the Bank) if elected by the appropriate stockholders and boards of
directors of such subsidiaries. During the term of this Agreement, and
thereafter so long as the Employee is an employee of the Bank, the Employee
(x) shall be a director of Republic Bank, a wholly-owned subsidiary of the
Holding Company, (y) shall be a member of the Executive Committee of the
Holding Company and (z) shall be a member of the Office of Chairman of the
Holding Company. So long as Employee is employed by the Bank and Republic
Bancorp Mortgage, Inc. ("RBMI") is a wholly-owned subsidiary, directly or
indirectly, of the Holding Company, the Holding Company shall cause the
Employee to be elected to the Board of Directors of RBMI. The Employee shall
perform his duties in accordance with such reasonable standards as are
established from time to time by the Board of Directors of the Holding
Company or the Bank, as applicable. During the term of this Agreement, the
Employee shall devote his full time and attention to the business and affairs
of the Holding Company and its subsidiaries and use his best efforts, skills
and abilities to promote the interests of the Holding Company and its
subsidiaries.
4. Compensation.
(a) Salary.
[AT THE TIME THIS INSTRUMENT IS EXECUTED THE EMPLOYEE SHALL SELECT
EITHER ALTERNATIVE 1 OR ALTERNATIVE 2 AND THE ALTERNATIVE THAT IS NOT
SELECTED SHALL BE DELETED AND OF NO FORCE OR EFFECT.]
[ALTERNATIVE 1: The Bank agrees to pay the Employee during the term
of this Agreement a base salary at the annual rate of Four Hundred Thousand
and 00/100 Dollars ($400,000.00). The amount of the Employee's base salary
shall not be decreased from the prior rate.]
[ALTERNATIVE 2: The Bank agrees to pay the Employee during the term
of this Agreement a base salary at the minimum annual rate of Two Hundred
Thousand and 00/100 Dollars ($200,000.00) and annual cash bonus compensation
(up to Six Hundred Thousand and 00/100 Dollars ($600,000.00) per annum) in
accordance with Holding Company's Management Incentive Bonus Plan. The amount
of the Employee's base salary shall be reviewed by the Boards of Directors
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of the Holding Company and the Bank annually and may be increased from time
to time at the discretion of the Boards of Directors of the Holding Company
and the Bank, acting jointly, but not decreased from the prior rate.]
(b) Incentive Plans. The Employee shall be entitled to
participate in all incentive plans of Holding Company now in effect or
hereafter adopted by the Board of Directors of Holding Company for executive
officers (excluding, however, the Holding Company's Management Incentive
Bonus Plan (unless Section 4(a) provides otherwise)), with target awards,
performance criteria and other plan provisions as determined by the Board of
Directors of the Holding Company in its sole discretion.
(c) Expenses. The Employee shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Employee in
performing services under this Agreement in accordance with the policies and
procedures applicable to executive officers, provided that the Employee
accounts for such expenses as required under such policies and procedures.
5. Benefits.
(a) Participation in Executive Benefit Plans. The Employee
shall be entitled to participate in all plans adopted for the benefit of
executive officers, including but not limited to the Holding Company's Tax
Deferred Savings Plan and Voluntary Management Stock Accumulation Plan, group
life insurance, medical coverage and professional development (excluding,
however, the Holding Company's Management Incentive Bonus Plan (unless
Section 4(a) provides otherwise)).
(b) Fringe Benefits. The Employee shall be eligible to
participate in, and receive benefits under, any fringe benefit plans which
are or may become applicable to executive officers of the Bank, including but
not limited to a $400 per month automobile allowance and payment of
reasonable expenses for attendance at annual and periodic trade association
meetings.
(c) Minimum Benefits. In no event shall the Employee's
benefits under this Section 5 be less than those provided for in the Holding
Company's Employee Handbook.
6. Vacations: Leave. The Employee shall be entitled to annual paid
vacation in accordance with the policies established in the Holding Company's
Employee Handbook except as such policies may be modified by the Board of
Directors of the Holding Company. The timing of-vacations shall be scheduled
in a reasonable manner by the Employee. The Employee shall also be entitled
to voluntary leaves of absence, with or without pay, from time to time at
such times and upon such conditions as the Board of Directors of the Holding
Company may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination of Employment. The Board of
Directors of Holding Company or Bank may terminate the Employee's employment
at any time, but, except in the case of Termination for Cause, termination of
employment shall not prejudice the Employee's right to
4
<PAGE>
compensation or other benefits under this Agreement. In the event of
Involuntary Termination occurs during the term of this Agreement, the Bank
shall (1) pay to the Employee during the remaining term of this Agreement the
Employee's base salary at the rate in effect immediately prior to the Date of
Termination, in such manner and at such times as such base salary would have
been payable to the Employee under Section 4 if the Employee had continued to
be employed by the Bank, and (2) provide to the Employee during the remaining
term of this Agreement all benefits, including but not limited to medical
coverage maintained for the benefit of executive officers from time to time
during the remaining term of the Agreement, but excluding participation in
the Holding Company's Tax-Deferred Savings Plan and Trust (except as to
vested rights thereunder) and in stock option or restricted stock plans
(except to the extent provided in stock option agreements or restricted stock
agreements between the Holding Company and the Employee executed prior to the
Date of Termination), expense reimbursement, professional development and
expenses for attendance at trade association meetings. Medical coverage
provided under this Section 7(a) shall be on the same terms and conditions as
apply to executive officers generally, including but not limited to dependent
coverage, contributions (if any) by the Employee to the cost of premiums, and
deductible amounts. With the Employee's consent, in lieu of providing a
benefit or benefits under this Section 7(a), the Bank may pay to the Employee
the reasonable value of such benefits.
(b) Termination for Cause. In the event of Termination for
Cause, the Bank shall pay the Employee the Employee's base salary through the
Date of Termination, and the Holding Company and the Bank shall have no
further obligation to the Employee under this Agreement.
(c) Voluntary Termination of Employment. The Employee's
employment may be voluntarily terminated by the Employee at any time pursuant
to a notice of termination as provided for in Section 7(e) below. In the
event of such voluntary termination, the Bank shall (1) pay to the Employee
during the remaining term of this Agreement the Employee's base salary at the
rate in effect immediately prior to the Date of Termination, in such manner
and at such times as such base salary would have been payable to the Employee
under Section 4 if the Employee had continued to be employed by the Bank, and
(2) provide to the Employee during the remaining term of this Agreement all
benefits, including but not limited to medical coverage maintained for the
benefit of executive officers from time to time during the remaining term of
the Agreement, but excluding participation in the Holding Company's
Tax-Deferred Savings Plan and Trust (except as to vested rights thereunder)
and in stock option or restricted stock plans (except to the extent provided
in stock option agreements or restricted stock agreements between the Holding
Company and the Employee executed prior to the Date of Termination), expense
reimbursement, professional development and expenses for attendance at trade
association meetings, and the Holding Company and the Bank shall have no
further obligation to the Employee under this Agreement.
In the event that the Employee's employment is voluntarily
terminated by the Employee, then, and in consideration of the payments
provided for in the immediately preceding paragraph, from the applicable Date
of Termination and until that date that is three years from and after the
date first above written the Employee shall not, directly or indirectly, on
his own behalf or on behalf of any other person or entity, engage within the
State of Michigan, as an employee, officer, director, consultant, independent
contractor, partner or sole proprietor of, or have any financial interest in,
any business activity that competes with any business conducted by the
Holding
5
<PAGE>
Company or any of its subsidiaries prior to such Date of Termination.
Notwithstanding anything to the contrary express or implied in the preceding
sentence, the Employee shall not be prohibited from investing in the
securities of any entity so long as such investment does not exceed 5% of the
outstanding securities of any class of securities of such entity. The
covenants set forth in this Section 7(c) shall survive the termination of
this Agreement.
(d) [INTENTIONALLY OMITTED.]
(e) Notice of Termination. In the event that the Holding
Company (which, for purposes of this Section 7(e), includes the Bank) desires
to terminate the employment of the Employee during the term of this
Agreement, the Holding Company shall deliver to the Employee a written notice
of termination, stating whether such termination constitutes Termination for
Cause or Involuntary Termination, setting forth in reasonable detail the
facts and circumstances that are the basis for the termination, and
specifying the date upon which employment shall terminate, which date shall
be at least 30 days after the date upon which the notice is delivered except
in the case of Termination for Cause. In the event that the Employee
determines in good faith that he has experienced an Involuntary Termination
of his employment, he shall send a written notice to the Holding Company
stating the circumstances that constitute such Involuntary Termination and
the date upon which his employment shall have terminated due to such
Involuntary Termination. In the event that the Employee desires to terminate
his employment voluntarily, he shall deliver a written notice to the Holding
Company, stating the date upon which his employment shall terminate, which
date shall be at least 90 days after the date upon which the notice is
delivered, unless the parties agree to a date sooner.
(f) Death; Disability. In the event of the death of the
Employee while employed under this Agreement and prior to any termination of
employment, the Employee's estate, or such person as the Employee may have
previously designated in writing, shall be entitled to receive from the
Holding Company and the Bank the salary of the Employee through the last day
of the calendar month in which the Employee died. If the Employee becomes
disabled as defined in the then applicable disability plan, if any, or if the
Employee is otherwise unable to serve as Vice-Chairman of the Holding Company
or, prior to the Consolidation Date, as President and Chief Executive Officer
of the Bank, the Employee shall be entitled to receive disability income
benefits of the type, if any, then provided for executive officers of the
Bank.
(g) Temporary Suspension or Prohibition. If the Employee is
suspended and/or temporarily prohibited from participating in the conduct of
the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the
FDIA, 12 U.S.C. ss. 1818(e)(3) and (g)(1), the Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Employee all or part of the compensation
withheld while its obligations under this Agreement were suspended and (ii)
reinstate in whole or in part any of its obligations which were suspended.
(h) Permanent Suspension or Prohibition. If the Employee is
removed and/or permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued
6
<PAGE>
under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. ss. 1818(e)(4) and
(g)(1), all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the contracting
parties shall not be affected.
(i) Default of the Bank. If the Bank is in default (as
defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement
shall terminate as of the date of default, but this provision shall not
affect any vested rights of the contracting parties.
(j) Termination by Regulators. All obligations under this
Agreement shall be terminated, except to the extent determined that
continuation of this Agreement is necessary for the continued operation of
the Bank: (1) by the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the FDIA; or (2)
by the Director or his or her designee, at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by any such action.
(k) Bank, or its successor, shall provide to the Employee
medical coverage maintained for the benefit of executive officers, or its
successor, at no cost to the Employee, until the Employee reaches age 65. The
covenants set forth in this Section 7(k) shall survive the termination or
expiration of this Agreement for any reason.
8. Certain Reduction of Payments and Benefits. Any payments made to
the Employee pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C. 1828(k) and any regulations
promulgated thereunder.
9. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer, by retirement benefits after the Date of Termination or otherwise.
10. Confidential Information. The Employee acknowledges that as a
result of his employment, he may develop, obtain, or learn about Confidential
Information (as defined below) which is the property of the Holding Company
and its affiliates. The Employee hereby covenants and agrees to use his best
efforts and the utmost diligence to guard and protect Confidential
Information, and that he shall not, without the consent of the Holding
Company, during the term of this Agreement or any time thereafter, use for
himself or others, or disclose or permit to be disclosed to any third Party
by any method whatsoever, any Confidential Information.
The term "Confidential Information" shall include, but not be
limited to, trade secrets and any and all records, notes, memoranda, data,
ideas, processes, methods, devices, programs, computer software, writings,
research, personnel information, customer information, financial information,
plans, or any information of whatever nature, in the possession or control of
the Holding Company
7
<PAGE>
or any of its affiliates which has not been published or disclosed to the
general public or which gives to the Holding Company or any of its affiliates
an opportunity to obtain an advantage over competitors who do not know of or
use it.
The Employee agrees that if his employment is terminated for any
reason, he shall return to the Holding Company all originals and copies of
all records, papers, programs, computer software and documents and all matter
of whatever nature which bears Confidential Information that are in his
possession or control.
The covenants set forth in this Section 10 are made by the Employee
in consideration of his continuing employment, and the compensation paid to
him during his employment hereunder. Violation of the conditions of this
Section 10 shall result in forfeiture of any remaining compensation due under
this Agreement. The provisions of this Section 10 shall survive termination
of this Agreement for any reason.
11. [INTENTIONALLY OMITTED.]
12. No Assignments.
(a) This Agreement is personal to each of the parties
hereto, and no party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the
other parties; provided, however, that at any time after that date that is 12
months after the date first above written Bank may be merged with and into
Republic Bank without such consent, and that the Holding Company and the Bank
shall require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Holding Company and the Bank, by an
assumption agreement in form and substance reasonably satisfactory to the
Employee, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Holding Company and the Bank would be
required to perform it if no such succession or assignment had taken place.
Failure of the Holding Company and the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment
(other than in connection with a merger of the Bank with and into Republic
Bank) shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Holding Company and the Bank. For purposes of
implementing the provisions of this Section 12(a), the date on which any such
succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal
and legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Employee's
devisee, legatee or other designee or if there is no such designee. to the
Employee's estate.
13. Notice. For the purposes of this Agreement, notices and all
other communications
8
<PAGE>
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, to the Holding Company and the Bank at
the Holding Company's principal office, to the attention of the Board of
Directors with a copy to the Secretary of the Holding Company, or, if to the
Employee, to such home or other address as the Employee has most recently
provided in writing to the Holding Company.
14. Amendments. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties, except as herein
otherwise provided.
15. Headings. The headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with,
the interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Governing Law. This Agreement shall be governed by the laws of
the United States to the extent applicable and otherwise by the laws of the
State of Michigan without reference to its provisions concerning conflicts of
laws.
18. Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof shall be settled by arbitration in
Oakland County, Michigan in accordance with the laws of the State of Michigan
by one arbitrator agreed upon by the Employee and the Holding Company (which,
for purposes of this Section 18, includes the Bank). If either the Holding
Company or the Employee determines to seek arbitration in connection with
this Agreement, such party shall provide a written notice to the other. If
the Employee and the Holding Company are unable to agree on the appointment
of an arbitrator within 30 days after receipt by one party of the other
party's written notice of a determination to seek arbitration, they shall
request that the American Arbitration Association provide a list of three
arbitrators who are National Academy of Arbitrator members. Within 10 days
after receiving the list, the Employee shall designate one name to be
stricken from the list and notify the Holding Company thereof, and the
Holding Company shall designate one name to be stricken from the list and
notify the Employee thereof within 10 days after receiving such notice from
the Employee. The parties shall request the arbitrator whose name is not so
stricken to arbitrate the dispute. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
REPUBLIC BANCORP INC.
_______________________________
By: Jerry D. Campbell
Its: Chairman of the Board
D&N BANK
_______________________________
By: J. C. Bromley
Its: Chairman of the
Compensation Committee
EMPLOYEE
_______________________________
George J. Butvilas
10
<PAGE>
EXHIBIT 3.10(c)(ii)
ACKNOWLEDGEMENT AND RELEASE
FOR GOOD AND VALUABLE CONSIDERATION (including, without limitation,
the payment provided for in paragraph 2 hereof), the receipt and sufficiency
of which is hereby acknowledged, the undersigned covenants to, agrees with
and acknowledges to, Republic Bancorp Inc., a Michigan corporation
("Republic"), D&N Financial Corporation, a Delaware corporation ("D&N"), and
D&N Bank, a federal savings bank ("D&N Bank") as follows:
1. In connection with the transactions contemplated by that certain
Agreement and Plan of Merger dated as of December 1, 1998 between Republic
and D&N (the "Merger Agreement"), Republic and D&N Bank have offered to
provide me with employment at and following the Effective Time pursuant to an
Employment Agreement in the form attached as Exhibit 3.10(c)(i) to the Merger
Agreement (the "New Employment Agreement").
2. I have knowingly and voluntarily chosen to terminate the
Employment Agreement dated as of July 31, 1997, among myself, D&N and D&N
Bank (the "Old Employment Agreement"). In full settlement of any and all
rights I may have pursuant to the Old Employment Agreement, I have been paid
the sum equal to the lesser of $2,000,000 and the amount payable under
Section 7(d) of the Existing Employment Agreement by D&N.
3. For myself and my heirs, executors, administrators, successors
and assigns, I hereby irrevocably and unconditionally release and forever
discharge Republic, D&N, D&N Bank, their respective Subsidiaries, and each
and every director, officer, employee and shareholder of each of such
entities (jointly and severally, a "Releasee"), of and from all actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgment, executions, claims, and
demands whatsoever, in law, admiralty or equity, which against any Releasee I
(or my heirs, executors, administrator, successors or assigns) ever had, now
have or hereafter can, shall or may have by reason of any action, proceeding,
matter, cause or thing whatsoever arising out of or relating to the Old
Employment Agreement.
4. I hereby acknowledge that all payments due to me and all
obligations owed to me under the D&N SERP have been paid or satisfied in
full.
5. All capitalized terms not otherwise defined herein shall be
defined herein as in the Merger Agreement.
IN WITNESS WHEREOF, I have executed this Instrument this ______ day
of ____________, 199__.
______________________________
Name: George J. Butvilas
EXHIBIT 2
EDGAR COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 1, 1998, between
Republic Bancorp Inc., a Michigan corporation ("Grantee"), and D&N Financial
Corporation, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, and Issuer have entered into an Agreement and
Plan of Merger on even date herewith (the "Merger Agreement"); and
WHEREAS, as an inducement to the willingness of Grantee to enter
into the Merger Agreement, Issuer has agreed to grant Grantee the Option (as
hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant
of the Option and the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to an aggregate of 1,823,837 fully paid and nonassessable shares of the
common stock, par value $.01 per share, of Issuer ("Common Stock") at a price
per share of $21.625; provided, however, that in the event Issuer issues or
agrees to issue any shares of Common Stock (other than shares of Common Stock
issued pursuant to stock options granted pursuant to any employee benefit
plan prior to the date hereof) at a price less than such price per share (as
adjusted pursuant to subsection (b) of Section 5), such price shall be equal
to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided, further, that in no event shall the number of shares for
which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth without giving effect to any shares subject to
or issued pursuant to the Option.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of
any provision of the Merger Agreement.
<PAGE>
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of
an Exercise Termination Event (as hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within six months following such Subsequent
Triggering Event (or such later period as provided in Section 10). Each of
the following shall be an Exercise Termination Event: (i) the Effective Time;
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to Section 4.4(e)
of the Merger Agreement (but only if the breach giving rise to the
termination was willful) (a "Listed Termination"); (iii) the passage of 15
months (or such longer period as provided in Section 10) after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination or (iv) the date on which the
shareholders of the Grantee shall have voted and failed to approve the Merger
(unless (A) Issuer shall then be in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior to such date,
the stockholders of Issuer shall have also voted and failed to approve and
adopt the Merger Agreement). The term "Holder" shall mean the holder or
holders of the Option. Notwithstanding anything to the contrary contained
herein, (i) the Option may not be exercised at any time when Grantee shall be
in material breach of the Merger Agreement such that Issuer shall be entitled
to terminate the Merger Agreement pursuant to Section 4.4(e) thereof as a
result of a material breach and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement (x) by Issuer
pursuant to Section 4.4(e) thereof as a result of the material breach by
Grantee, or (y) by Issuer or Grantee pursuant to Section 4.4(b)(ii).
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) (an "Issuer Subsidiary"), without
having received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition Transaction
(as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer (the "Issuer Board") shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction other than the Merger. For purposes of this Agreement,
(a) "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Issuer or any
Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more
wholly-owned (except for directors' qualifying shares and a de
minimis number of other shares) Subsidiaries of the Issuer,
provided, any such transaction is not entered into in violation of
the terms of the Merger Agreement), (x) a purchase, lease or other
acquisition of all or any substantial part of the assets or
deposits of Issuer or any Issuer Subsidiary, or (y) a purchase or
other
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<PAGE>
acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of
the voting power of Issuer or any Issuer Subsidiary; and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under
the Exchange Act;
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iii) The shareholders of Issuer shall have voted and
failed to adopt the Merger Agreement at a meeting which has been
held for that purpose or any adjournment or postponement thereof,
or such meeting shall not have been held in violation of the
Merger Agreement or shall have been cancelled prior to termination
of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been cancelled,
prior to such termination), it shall have been publicly announced
that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a
proposal to engage in an Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or
modified (or publicly announced its intention to withdraw or
modify) in any manner adverse in any respect to Grantee its
recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, (y) Issuer or
any Issuer Subsidiary, without having received Grantee's prior
written consent, shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with
any person other than Grantee or a Grantee Subsidiary, or (z)
Issuer shall have provided information to or engaged in
negotiations with a third party relating to a possible Acquisition
Transaction.
(v) Any person other than Grantee or any Grantee
Subsidiary shall have made a proposal to Issuer or its
shareholders to engage in an Acquisition Transaction and such
proposal shall have been publicly announced;
(vi) Any person other than Grantee or any Grantee
Subsidiary shall have filed with the SEC a registration statement
or tender offer materials with respect to a potential exchange or
tender offer that would constitute an Acquisition Transaction (or
filed a preliminary proxy statement with the SEC with respect to a
potential vote by its shareholders to approve the issuance of
shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant
or obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, and following such breach
Grantee would be entitled to terminate the Merger Agreement
(whether immediately or after the giving of notice or passage of
time or both); or
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<PAGE>
(viii) Any person other than Grantee or any Grantee
Subsidiary other than in connection with a transaction to which
Grantee has given its prior written consent shall have filed an
application or notice with the Office of Thrift Supervision (the
"OTS") or other federal or state thrift or bank regulatory or
antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2,
except that the percentage referred to in clause (z) of the second
sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option (or any portion thereof), it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 60
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided, that if prior notification to or approval of the
OTS or any other regulatory or antitrust agency is required in connection
with such purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify Issuer of such filing, and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive offices, provided that the failure or refusal of the
Issuer to designate such a bank account or accept surrender of this Agreement
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
Option
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<PAGE>
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an agreement
between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended.
A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities Act")
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of
a letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference in
the opinion of Counsel to the Holder; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are
both satisfied. In addition, such certificates shall bear any other legend as
may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed, subject to the receipt of any necessary
regulatory approvals, to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state
and local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15
U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event, under the Savings and Loan Holding
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<PAGE>
Company Act or any state or other federal thrift or banking law, prior
approval of or notice to the OTS or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the OTS or such state or other federal regulatory authority as
they may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto;
and (iv) promptly to take all action provided herein to protect the rights of
the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment
from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision
shall be made so that, in the event that any additional shares of Common
Stock are to be issued or otherwise become outstanding as a result of any
such change (other than pursuant to an exercise of the Option), the number of
shares of Common Stock that remain subject to the Option shall be increased
so that, after such issuance and together with shares of Common Stock
previously issued pursuant to the exercise of the Option (as adjusted on
account of any of the foregoing changes in the Common Stock), it equals 19.9%
of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
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<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request
of Grantee delivered within 12 months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a registration statement under the Securities Act covering
any shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition
of any shares of Common Stock issued upon total or partial exercise of this
Option ("Option Shares") in accordance with any plan of disposition requested
by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement promptly to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The Issuer shall bear
the costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering by Issuer of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the offer and sale of
the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of all Holders
shall constitute at least 25% of the total number of shares to be sold by the
Holders and Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then Issuer shall file a registration statement for
the balance as promptly as practicable thereafter as to which no reduction
pursuant to this Section 6 shall be permitted or occur and the Holder shall
thereafter be entitled to one additional registration and the 12-month period
referred to in the first sentence of this section shall be increased to 24
months. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed hereunder.
If requested by any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same,
postage prepaid, to the address of record of the persons entitled to receive
such copies. Notwithstanding anything to the contrary contained herein, in no
event shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as
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<PAGE>
provided in Section 10), Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal
to the amount by which (A) the market/offer price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer
(or any successor thereto) shall repurchase such number of the Option Shares
from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number
of Option Shares so designated. The term "market/offer price" shall mean the
highest of (i) the price per share of Common Stock at which a tender or
exchange offer therefor has been made, (ii) the price per share of Common
Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or any substantial part of Issuer's assets or
deposits, the sum of the net price paid in such sale for such assets or
deposits and the current market value of the remaining net assets of Issuer
as determined by a nationally recognized investment banking firm selected by
the Holder or the Owner, as the case may be, and reasonably acceptable to
Issuer, divided by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be,
and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to
the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section
7 is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in
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full (and Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the Option and/or
the Option Shares whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the number of
shares of Common Stock for which the surrendered Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, and/or (B) to the Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing. If an Exercise Termination Event shall
have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option
until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 50% or more of
the then outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction
described in Section 2(b)(i) hereof, except that the percentage
referred to in clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person, other than Grantee or a Grantee Subsidiary, or engage in a plan
of exchange with any person, other than Grantee or a Grantee Subsidiary and
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with
such merger or plan of exchange, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding shares of Common
Stock shall after such merger or plan of exchange represent less than 50% of
the outstanding shares and share equivalents of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or a substantial part of
its or the Issuer Subsidiary's assets or deposits to any person, other than
Grantee or a Grantee Subsidiary, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder,
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<PAGE>
of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any
person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the
continuing or surviving person of a consolidation or merger with
Issuer (if other than Issuer), (ii) the acquiring person in a plan
of exchange in which Issuer is acquired, (iii) the Issuer in a
merger or plan of exchange in which Issuer is the continuing or
surviving or acquiring person, and (iv) the transferee of all or a
substantial part of Issuer's assets or deposits (or the assets or
deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section
9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section
8(a) and the denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares
of Substitute Common Stock outstanding prior to
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<PAGE>
exercise of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.9% of the shares of Substitute Common
Stock outstanding prior to exercise but for this clause (e), the issuer of
the Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over (ii)
the value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase
Price") equal to the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the request of the
owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal
to the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the agreement for
such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and/or certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the Substitute
Shares in accordance with the provisions of this Section 9. As promptly as
practicable, and in any event within five business days after the surrender
of the Substitute Option and/or certificates representing Substitute Shares
and the receipt of such notice or notices relating thereto, the Substitute
Option Issuer shall deliver or cause to be delivered to the Substitute Option
Holder the Substitute Option Repurchase Price and/or to the Substitute Share
Owner the Substitute Share Repurchase Price therefor or the portion thereof
which the Substitute Option Issuer is not then prohibited under applicable
law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option
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and/or the Substitute Shares in part or in full, the Substitute Option Issuer
shall immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered, from
time to time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Option Repurchase Price
and/or the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date
on which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery
of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and
the Substitute Option Issuer shall use its reasonable best efforts to receive
all required regulatory and legal approvals as promptly as practicable in
order to accomplish such repurchase), the Substitute Option Holder and/or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of
prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute
Share Owner, as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute Option
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute Option
evidencing the right of the Substitute Option Holder to purchase that number
of shares of the Substitute Common Stock obtained by multiplying the number
of shares of the Substitute Common Stock for which the surrendered Substitute
Option was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, and/or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the
notice by the Substitute Option Issuer described in the first sentence of
this subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods
for exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights (for so long as the Holder, Owner, Substitute
Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and
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<PAGE>
validly authorized by the Issuer Board prior to the date hereof and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrance and security interests and not subject to any
preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that
in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations hereunder;
provided, however, that until the date 15 days following the date on which
the OTS has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Grantee's behalf or (iv) any other
manner approved by the OTS.
13. Each of Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, but Grantee shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
14. (a) Notwithstanding any other provision of this Agreement, in
no event shall the Grantee's Total Profit (as hereinafter defined) exceed
$13,813,390 and, if it otherwise would exceed such amount, the Grantee, at
its sole election, shall either (a) reduce the number of shares of Common
Stock subject to this Option, (b) deliver to Issuer for cancellation Option
Shares previously purchased by Grantee, (c) pay cash to Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $13,813,390 after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below) of more
than $13,813,390; provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
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(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee
pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less
(y) Grantee's purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option
(or any portion thereof) to any unaffiliated party, and (v) any amount
equivalent to the foregoing with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that this Option were exercised on such date for such
number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
15. (a) Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), relinquish the Option (together with any
Option Shares issued to and then owned by Grantee) to Issuer in exchange for
a cash fee equal to the Surrender Price; provided, however, that Grantee may
not exercise its rights pursuant to this Section 15 if Issuer has repurchased
the Option (or any portion thereof) or any Option Shares pursuant to Section
7. The "Surrender Price" shall be equal to $13,813,390 (i) plus, if
applicable, Grantee's purchase price with respect to any Option Shares and
(ii) minus, if applicable, the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or
any other securities into which such Option Shares were converted or
exchanged) to any unaffiliated party, over (B) Grantee's purchase price of
such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and
any Option Shares pursuant to this Section 15 by surrendering to Issuer, at
its principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds on
or before the second business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to time,
to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any
time after delivery of a notice of surrender pursuant to paragraph (b) of
this Section 15 is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from
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<PAGE>
paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to make
such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (c) keep Grantee advised of both the
status of any such request for regulatory and legal approvals, as well as any
discussions with any relevant regulatory or other third party reasonably
related to the same and (ii) Grantee may revoke such notice of surrender by
delivery of a notice of revocation to Issuer and, upon delivery of such
notice of revocation, the Exercise Termination Event shall be extended to a
date six months from the date on which the Exercise Termination Event would
have occurred if not for the provisions of this Section 15(c) (during which
period Grantee may exercise any of its rights hereunder, including any and
all rights pursuant to this Section 15).
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. In connection
therewith both parties waive the posting of any bond or similar requirement.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section l(a) hereof (as adjusted pursuant to
Section l(b) or Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by fax, telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to the
conflict of law principles thereof (except to the extent that mandatory
provisions of Federal law are applicable).
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall 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 consultants, investment
bankers, accountants and counsel.
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<PAGE>
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
REPUBLIC BANCORP INC.
By /s/ Jerry D. Campbell
________________________________
Name: Jerry D. Campbell
Title: Chairman of the Board and
Chief Executive Officer
D&N FINANCIAL CORPORATION
By /s/ George J. Butvilas
________________________________
Name: George J. Butvilas
Title: President and Chief
Executive Officer
BHLIB:305168.4\100064-00078
