<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 1997
----------------
BAY VIEW CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17901 94-3078031
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2121 South El Camino Real, San Mateo, California 94403
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 573-7300
--------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
------------
On May 8, 1997, Bay View Capital Corporation, a Delaware Corporation ("Bay
View Capital") issued a press release announcing the execution of an Agreement
and Plan of Merger, dated May 8, 1997, by and among, Bay View Capital, America
First Eureka Holdings, Inc. ("America"), America First Financial Fund 1987-A
Limited Partnership ("America First") and America First Capital Associates
Limited Partnership Five (the "Merger Agreement"). The Merger Agreement provides
for the merger of America with and into Bay View Capital to be followed
immediately by the merger of Eureka Bank, A Federal Savings Bank, a wholly owned
subsidiary of America, with and into Bay View Bank, a wholly owned subsidiary of
Bay View Capital, with Bay View Bank as the surviving corporation (the
"Merger").
Under the Merger Agreement, America First, as the sole stockholder of
America, will be entitled to receive in the aggregate (A) $90,000,000 in cash
and (B) Bay View Capital common stock (and the associated rights under the Bay
View Capital Stockholder Protection Rights Agreement) with a value of $210
million (subject to adjustment) upon consummation of the Merger.
Consummation of the Merger is subject to various conditions, including:
(i) approval of the Merger by the stockholders of Bay View Capital; (ii)
approval of the Merger by the limited partners and holders of beneficial unit
certificates of America First; (iii) approval of the Merger by the appropriate
regulatory authorities; and (iv) satisfaction of certain other conditions.
Immediately prior to the execution of the Merger Agreement, each of Bay
View Capital and America were issued option agreements (the "Stock Option
Agreements") providing the holder of the option with the right to purchase 19.9%
of the voting equity position of the respective issuer.
The Merger Agreement, the Stock Option Agreements, the press release issued
on May 8, 1997 announcing the Merger and certain additional information
regarding the acquisition are filed as Exhibits to this Report. The foregoing
discussion does not purport to be complete and is qualified in its entirety by
reference to such Exhibits.
Statements contained in Exhibits 99.1 and 99.2 that are not historical
facts may be forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.
Certain of such statements are identified as being based on consensus estimates
(by analysts not affiliated with the Registrant). Further, such statements are
subject to important factors that could cause actual results to differ
materially from those in Exhibits 99.1 and 99.2, including the following:
regional and national economic conditions; changes in levels of market interest
rates; credit risks of real estate, consumer and other lending activities;
regulatory factors (including regulatory approval of the acquisition); and the
2
<PAGE>
Registrant's ability to achieve synergies in the acquisition and to sustain or
improve the performance of the acquired company.
Item 7. Financial Statements and Exhibits
---------------------------------
(i) Exhibits
The Exhibits referred to in Item 5 of this Report and listed on the
accompanying Exhibit Index are filed as part of this Report and are incorporated
herein by reference.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
2 Agreement and Plan of Merger, dated as of May 8, 1997, by and between
Bay View Capital Corporation, America First Eureka Holdings, Inc.,
America First Financial Fund 1987-A Limited Partnership and America
First Capital Associates Limited Partnership Five
10.1 Stock Option Agreement, dated as of May 8, 1997, by and between Bay
View Capital Corporation and America First Financial Fund 1987-A
Limited Partnership
10.2 Stock Option Agreement, dated as of May 8, 1997, by and between Bay
View Capital Corporation and America First Eureka Holdings, Inc.
99.1 Press release
99.2 Presentation
</TABLE>
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAY VIEW CAPITAL CORPORATION
Date: May 8, 1997 By: /s/ ROBERT J. FLAX
-----------------------------
Robert J. Flax
Executive Vice President and
Corporate Secretary
4
<PAGE>
EXHIBIT 2
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
BAY VIEW CAPITAL CORPORATION,
AMERICA FIRST EUREKA HOLDINGS, INC.,
AMERICA FIRST FINANCIAL FUND 1987-A
LIMITED PARTNERSHIP
and
AMERICA FIRST CAPITAL ASSOCIATES LIMITED
PARTNERSHIP FIVE
--------------------------------------------------
Dated May 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
- ---------
THE MERGER
----------
<S> <C> <C>
1.01. The Merger.................................................. 2
----------
1.02. Closing..................................................... 2
-------
1.03. Effective Time.............................................. 2
--------------
1.04. Additional Actions.......................................... 3
------------------
1.05. Certificate of Incorporation and Bylaws of Surviving
----------------------------------------------------
Corporation................................................. 3
-----------
1.06. Board of Directors and Officers of the Surviving
------------------------------------------------
Corporation................................................. 3
-----------
1.07. Conversion of Securities.................................... 3
------------------------
1.08. Exchange of Certificates.................................... 4
------------------------
1.09. No Fractional Shares........................................ 5
--------------------
1.10. Anti-Dilution Adjustments................................... 5
-------------------------
1.11. Reservation of Right to Revise Transaction.................. 5
------------------------------------------
ARTICLE II
- ----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER, SELLING STOCKHOLDER
AND GENERAL PARTNER
2.01. Organization and Authority.................................. 6
--------------------------
2.02. Subsidiaries................................................ 6
------------
2.03. Capitalization.............................................. 7
--------------
2.04. Authorization............................................... 7
-------------
2.05. Seller Financial Statements................................. 8
---------------------------
2.06. Seller Reports.............................................. 9
--------------
2.07. Properties and Leases....................................... 9
---------------------
2.08. Taxes....................................................... 10
-----
2.09. Material Adverse Effect..................................... 10
-----------------------
2.10. Commitments and Contracts................................... 11
-------------------------
2.11. Litigation and Other Proceedings............................ 12
--------------------------------
2.12. Insurance................................................... 12
---------
2.13. Compliance with Laws........................................ 12
--------------------
2.14. Labor....................................................... 14
-----
2.15. Material Interests of Certain Persons....................... 14
-------------------------------------
2.16. Allowance for Loan and Lease Losses; Non-performing Assets.. 15
----------------------------------------------------------
2.17. Employee Benefit Plans...................................... 15
----------------------
2.18. Conduct of Seller to Date................................... 17
-------------------------
2.19. Proxy Statement, etc........................................ 18
--------------------
2.20. Registration Obligations.................................... 19
------------------------
2.21. State Takeover Statutes..................................... 19
-----------------------
2.22. Accounting, Tax and Regulatory Matters...................... 19
--------------------------------------
2.23. Brokers and Finders......................................... 19
-------------------
2.24. Interest Rate Risk Management Instruments................... 19
-----------------------------------------
2.25. Accuracy of Information..................................... 20
-----------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
2.26. Authorization............................................... 20
-------------
2.27. Beneficial Ownership of Seller Equity Securities............ 20
------------------------------------------------
2.28. Rights to Acquire Equity Securities......................... 20
-----------------------------------
2.29. Title to Seller Common Stock................................ 20
----------------------------
2.30. Authorization............................................... 21
-------------
ARTICLE III
- -----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
3.01. Organization and Authority.................................. 21
--------------------------
3.02. Subsidiaries................................................ 21
------------
3.03. Capitalization of Buyer..................................... 22
-----------------------
3.04. Authorization............................................... 22
-------------
3.05. Buyer Financial Statements.................................. 23
--------------------------
3.06. Buyer Reports............................................... 24
-------------
3.07. Properties and Leases....................................... 24
---------------------
3.08. Taxes....................................................... 24
-----
3.09. Material Adverse Effect..................................... 25
-----------------------
3.10. Commitments and Contracts................................... 25
-------------------------
3.11. Litigation and Other Proceedings............................ 26
--------------------------------
3.12. Insurance................................................... 27
---------
3.13. Compliance with Laws........................................ 27
--------------------
3.14. Labor....................................................... 29
-----
3.15. Material Interests of Certain Persons....................... 29
-------------------------------------
3.16. Allowance for Loan Losses; Non-performing Assets............ 29
------------------------------------------------
3.17. Employee Benefit Plans...................................... 30
----------------------
3.18. Conduct of Buyer to Date.................................... 31
------------------------
3.19. Proxy Statement, etc........................................ 32
--------------------
3.20. State Takeover Statutes..................................... 32
-----------------------
3.21. Accounting, Tax and Regulatory Matters...................... 33
--------------------------------------
3.22. Brokers and Finders......................................... 33
-------------------
3.23. Interest Rate Risk Management Instruments................... 33
-----------------------------------------
3.24. Accuracy of Information..................................... 33
-----------------------
ARTICLE IV
- ----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective Time........... 34
-------------------------------------------------
4.02. Forbearances of Seller...................................... 34
----------------------
4.03 Forbearances of Selling Stockholder......................... 37
-----------------------------------
4.04. Forbearances of Buyer....................................... 37
---------------------
ARTICLE V
- ---------
ADDITIONAL AGREEMENTS
5.01. Access and Information...................................... 38
----------------------
5.02. Registration Statement Regulatory Matters................... 39
-----------------------------------------
5.03. Approval of Merger and Distribution......................... 40
-----------------------------------
5.04. Current Information......................................... 40
-------------------
5.05. Agreements of Affiliates.................................... 40
------------------------
5.06. Expenses.................................................... 41
--------
5.07. Miscellaneous Agreements and Consents....................... 41
-------------------------------------
5.08. Employee Benefits........................................... 42
-----------------
5.09. Equity Appreciation Plan and Long Term Incentive
------------------------------------------------
Compensation Plan........................................... 42
-----------------
5.10. Press Releases.............................................. 42
--------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
5.11. State Takeover Statutes..................................... 43
-----------------------
5.12. D&O Indemnification......................................... 43
-------------------
5.13. Best Efforts................................................ 43
------------
5.14. Insurance................................................... 43
---------
5.15. Conforming Entries.......................................... 43
------------------
5.16. Environmental Reports....................................... 45
---------------------
5.17. Seller Bank Securities...................................... 45
----------------------
5.18. Agreement with FDIC......................................... 45
-------------------
5.19. Directors of Buyer.......................................... 45
------------------
5.20. Indemnification of Buyer.................................... 45
------------------------
5.21. Selling Stockholder and General Partner Approval............ 46
------------------------------------------------
5.22. Distribution................................................ 46
------------
5.23. EAP and LTIP Distributions.................................. 46
--------------------------
ARTICLE VI
- ----------
CONDITIONS
----------
6.01. Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger...................................................... 46
------
6.02. Conditions to Obligations of Seller To Effect the Merger.... 47
--------------------------------------------------------
6.03. Conditions to Obligations of Buyer To Effect the Merger..... 48
-------------------------------------------------------
ARTICLE VII
- -----------
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination................................................. 48
-----------
7.02. Effect of Termination....................................... 49
---------------------
7.03. Amendment................................................... 50
---------
7.04. Severability................................................ 50
------------
7.05. Waiver...................................................... 50
------
ARTICLE VIII
- ------------
GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties and Agreements.. 50
----------------------------------------------------------
8.02. Notices..................................................... 51
-------
8.03. Miscellaneous............................................... 52
-------------
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into on May 8, 1997 by and among BAY VIEW CAPITAL CORPORATION, a Delaware
corporation ("Buyer"), AMERICA FIRST EUREKA HOLDINGS, INC., a Delaware
corporation ("Seller"), AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP,
the sole stockholder of Seller and a Delaware limited partnership ("Selling
Stockholder") and AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE, the
General Partner of Selling Stockholder and a Delaware limited partnership.
W I T N E S S E T H:
- - - - - - - - -
WHEREAS, Buyer is a registered unitary savings and loan holding company
under the Home Owners' Loan Act, as amended ("HOLA"); and
WHEREAS, Seller is a registered unitary savings and loan holding company
under HOLA; and
WHEREAS, the Boards of Directors of Buyer, and Seller have approved the
merger (the "Merger") of Seller with and into Buyer, pursuant to the terms and
subject to the conditions of this Agreement to be followed immediately by the
merger of EurekaBank, A Federal Savings Bank, a wholly owned subsidiary of
Seller and a federal savings bank ("Seller Bank") with and into Bay View Bank, a
wholly owned subsidiary of Buyer and a federal savings bank ("Buyer Bank"),
pursuant to the Subsidiary Agreement and Plan of Merger in the form attached
hereto as Exhibit A (the "Subsidiary Merger Agreement"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "IRC"), and this Agreement
shall constitute a plan of reorganization pursuant to Section 368 of the IRC;
and
WHEREAS, as a condition to, and promptly after the execution of this
Agreement, (i) Buyer and each director of Seller and certain other persons
designated by Seller will enter into Support Agreements (the "Buyer Support
Agreements") in the form attached hereto as Exhibit B and (ii) Seller and each
director of Buyer will enter into Support Agreements (the "Seller Support
Agreements") in the form attached hereto as Exhibit C; and
WHEREAS, as a condition to, and immediately prior to execution of this
Agreement, Buyer and Selling Stockholder will enter into an option agreement
(the "Buyer Option Agreement") in the form attached hereto as Exhibit D; and
WHEREAS, as a condition to, and immediately prior to execution of this
Agreement, Buyer and Seller will enter into an option
<PAGE>
agreement (the "Seller Option Agreement") in the form attached hereto as
Exhibit E; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
---------
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this
----------
Agreement, and pursuant to the provisions of the Delaware General Corporation
Law (the "DGCL"), at the Effective Time (as hereinafter defined), Seller shall
be merged with and into Buyer pursuant to the terms and conditions set forth
herein. Upon consummation of the Merger, the separate corporate existence of
Seller shall cease and Buyer shall continue as the surviving corporation
(sometimes referred to herein as the "Surviving Corporation") under the DGCL,
and all rights, properties and assets and every other interest of or belonging
to or due to the Seller will be deemed to be transferred to and vested in Buyer.
1.02. Closing. The closing (the "Closing") of the Merger shall take
-------
place at 10:00 a.m. local time, on the date that the Effective Time (as defined
in Section 1.03) occurs, or at such other time, and at such place, as Buyer and
Seller shall agree (the "Closing Date"). The Closing is anticipated to occur on
December 31, 1997. In no event will the Closing Date occur until after the
record date for the quarterly dividend of Seller with respect to the fourth
calendar quarter of 1997.
1.03. Effective Time. The Merger shall become effective on the date
--------------
and at the time (the "Effective Time") on which appropriate documents in respect
of the Merger are filed with the Secretary of State of the State of Delaware in
such form as required by and in accordance with, the relevant provisions of the
DGCL. Subject to the terms and conditions of this Agreement, the Effective Time
shall occur on any such date as Buyer shall notify Seller in writing (such
notice to be at least five business days in advance of the Effective Time) but
not earlier than the satisfaction of all conditions set forth in Section 6.01(a)
and 6.01(b). As soon as practicable following the Effective Time, Buyer and
Seller shall cause a certificate or plan of merger reflecting the terms of this
Agreement to be delivered for filing and recordation with other state or local
officials in the State of Delaware in accordance with the DGCL.
2
<PAGE>
1.04. Additional Actions. If, at any time after the Effective Time,
------------------
Buyer or Buyer Bank shall consider or be advised that any further deeds,
assignments or assurances or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in Buyer or Buyer Bank its
right, title or interest in, to or under any of the rights, properties or assets
of Seller or Seller Bank, as the case may be, or (b) otherwise carry out the
purposes of this Agreement, Seller shall be deemed to have granted to Buyer and
Buyer Bank, jointly and severally, an irrevocable power of attorney to execute
and deliver all such deeds, assignments or assurances and to do all acts
necessary or desirable to vest, perfect or confirm title and possession to such
rights, properties or assets in Buyer or Buyer Bank, as the case may be, and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of Buyer are authorized in the name of Seller and the General Partner
or otherwise to take any and all such action.
1.05. Certificate of Incorporation and Bylaws of Surviving
----------------------------------------------------
Corporation. The Certificate of Incorporation and Bylaws of Buyer in effect
- -----------
immediately prior to the Effective Time shall, without any change, be the
Certificate of Incorporation and Bylaws of the Surviving Corporation following
the Merger until otherwise amended or repealed in accordance with applicable
law.
1.06. Board of Directors and Officers of the Surviving Corporation.
------------------------------------------------------------
At the Effective Time, the directors of Buyer immediately prior to the Effective
Time, and Stephen T. McLin and another person selected by Seller acceptable to
Buyer, shall be the directors of the Surviving Corporation. At the Effective
Time, the officers of Buyer immediately prior to the Effective Time shall be the
officers of the Surviving Corporation. Such directors and officers shall hold
office in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
1.07. Conversion of Securities. (a) At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Buyer, Seller or the holder
of any of the following securities:
(i) Each share of the common stock, par value $.01 per share, of
Buyer ("Buyer Common Stock") (and the associated Rights under the
Stockholder Protection Rights Agreement dated as of July 31, 1990, as
amended (the "Buyer Rights Agreement") between Buyer and Manufacturers
Hanover Trust Company of California, as Rights Agent) issued and
outstanding or held in treasury immediately prior to the Effective Time
shall remain issued and outstanding or held in treasury and shall be
unchanged after the Merger; and
(ii) Each share of common stock, par value $1.00 per share, of Seller
("Seller Common Stock") issued and outstanding immediately prior to the
Effective Time ("Exchange Shares")
3
<PAGE>
shall cease to be outstanding and shall be converted into and become the
right to receive:
(1) that number of shares of Buyer Common Stock (and the
associated Rights under the Buyer Rights Agreement) equal to (i) 70%
of Purchase Price, divided by (ii) the number of Exchange Shares,
divided by (iii) the Buyer Stock Price (such number of shares being
the "Per Share Stock Consideration"). The "Buyer Stock Price" means
(a) the average (rounded to four decimal points) of the average
closing sale price of one share of Buyer Common Stock on the Nasdaq
National Market ("Nasdaq") for the 20 consecutive full trading days
ending on the fifth business day immediately prior to the Closing Date
("Average Price"), (b) if the Average Price is in excess of $52.00 per
share, then $52.00, or (c) if the Average Price is less than $42.00
per share and Buyer has not made an Adjustment Election (as defined in
Section 7.01(f)), then $42.00. "Purchase Price" shall mean $300
million; and
(2) an amount of cash equal to (i) 30% of Purchase Price,
divided by (ii) the number of Exchange Shares (such amount of cash
being the "Per Share Cash Consideration").
1.08. Exchange of Certificates. (a) At the Closing, the Selling
------------------------
Stockholder shall deliver to Buyer certificates evidencing all of the Exchange
Shares ("Certificates"), duly endorsed in blank or accompanied by stock powers
duly executed in blank. Buyer shall issue Buyer Common Stock (and the
associated Rights) to the Selling Stockholder in exchange for Certificates in an
amount equal to the Per Share Stock Consideration multiplied by the number of
Exchange Shares evidenced by such Certificates.
(b) Buyer shall cooperate with the Selling Stockholder in distributing
the Buyer Common Stock issued pursuant to Section 1.08(a) to the holders of
Beneficial Unit Certificates of Selling Stockholder ("BUC Holders"), Limited
Partners of Selling Stockholder (the "Limited Partners") and the General Partner
in accordance with a plan of dissolution of the Selling Stockholder (the
"Distribution") which plan shall be approved by the Limited Partners and BUC
Holders pursuant to Section 5.03 of this Agreement. In consummating the
Distribution, Buyer and the Selling Stockholder agree to use their best efforts
to cause the Buyer Common Stock distributed in the Distribution to be registered
pursuant to the Securities Act of 1933, as amended (the "Securities Act").
(c) All shares of Seller Common Stock exchanged pursuant to this
Section 1.08 shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and
4
<PAGE>
each Certificate previously evidencing any such shares shall thereafter
represent the right to receive the consideration described in this Agreement.
The holders of Certificates shall cease to have any rights with respect to
shares of Seller Common Stock except as otherwise provided herein or by law.
1.09. No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of Buyer
Common Stock shall be issued in the Merger. The Selling Stockholder shall
receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the Closing Price on the last business day preceding the
Effective Time. With respect to a share of stock, "Closing Price" shall mean:
the closing sale price of one share of Buyer Common Stock on the Nasdaq. The
Selling Stockholder shall not be entitled to dividends, voting rights or any
other rights in respect of any fractional share.
1.10. Anti-Dilution Adjustments. If prior to the Effective Time
--------------------------
Buyer shall declare a stock dividend or make distributions upon or subdivide,
split up, reclassify or combine or make other similar change to Buyer Common
Stock, exchange Buyer Common Stock for a different number or kind of shares or
securities or declare a dividend or make a distribution on Buyer Common Stock or
on any security convertible into Buyer Common Stock, or is involved in any
transaction resulting in any of the foregoing (including any exchange of Buyer
Common Stock for a different number or kind of shares or securities)
appropriate adjustment or adjustments will be made to the Buyer Stock Price,
Average Price and the per share prices set forth in Section 1.07.
1.11. Reservation of Right to Revise Transaction. Buyer may at any
------------------------------------------
time change the method of effecting the acquisition of Seller by Buyer (in a
manner reasonably acceptable to Seller counsel) and Seller shall cooperate in
such efforts (including without limitation the provisions of this Article I)
(any such additional transactions together with the Merger being referred to
herein as the "Transactions")), if and to the extent Buyer has been advised in
writing by Buyer's independent accountants that the method of effecting the
acquisition contemplated hereby will not result in the best utilization of net
operating loss carry-forwards of Seller and the Seller Subsidiaries, provided,
---------
however, that no such change shall (A) alter or change the amount or kind of
- -------
consideration to be issued to Selling Stockholder as provided for in this
Agreement (the "Merger Consideration"), (B) adversely affect the tax treatment
to Selling Stockholder as a result of receiving the Merger Consideration or (C)
materially delay receipt of any approval referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this Agreement. Buyer may
exercise this right of revision by giving written notice thereof in the manner
provided in Section 8.02 of this Agreement.
5
<PAGE>
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER,
SELLING STOCKHOLDER AND GENERAL PARTNER
Seller represents and warrants to and covenant with Buyer as follows:
2.01. Organization and Authority. Seller is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except as set forth on Schedule 2.01
and except where the failure to be so qualified would not have a material
adverse effect on the financial condition or results of operations ("Material
Adverse Effect") of Seller and its Subsidiaries, taken as a whole, and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Seller is registered as a unitary
savings and loan holding company with the Office of Thrift Supervision (the
"OTS") under HOLA. True and complete copies of the Certificate of Incorporation
and Bylaws of Seller and of the charter and bylaws of the Seller Subsidiaries
(as that term is defined in Section 2.02), each as in effect on the date of this
Agreement, have been provided to Buyer. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.
2.02. Subsidiaries. Schedule 2.02 sets forth, among other things, a
------------
complete and correct list of all of Seller's Subsidiaries (each a "Seller
Subsidiary" and collectively the "Seller Subsidiaries"), all outstanding Equity
Securities of each of which, except as set forth on Schedule 2.02, are owned
directly or indirectly by Seller. "Equity Securities" of an issuer means
capital stock or other equity securities of such issuer, options, limited
partnership units, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible
into, shares of any capital stock or other Equity Securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer is
or may become bound to issue additional shares of its capital stock or other
Equity Securities of such issuer, or options, warrants, scrip or rights to
purchase, acquire, subscribe to, calls on or commitments for any shares of its
capital stock or other Equity Securities. Except as set forth on Schedule 2.02,
all of the outstanding shares of capital stock of the Seller Subsidiaries are
validly issued, fully paid and nonassessable, and those shares owned by Seller
are owned free and clear of any lien, claim, charge, option, encumbrance,
agreement, mortgage, pledge, security
6
<PAGE>
interest or restriction (a "Lien") with respect thereto. Each of the Seller
Subsidiaries is a corporation or savings bank duly incorporated or organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority to own or
lease its properties and assets and to carry on its business as it is now being
conducted. Each of the Seller Subsidiaries is duly qualified to do business in
each jurisdiction where its ownership or leasing of property or the conduct of
its business requires it so to be qualified, except where the failure to so
qualify would not have a Material Adverse Effect on Seller and its Subsidiaries,
taken as a whole. Except as set forth on Schedule 2.02, Seller does not own
beneficially, directly or indirectly, any shares of any class of Equity
Securities or similar interests of any corporation, bank, business trust,
association or similar organization. Seller Bank is chartered by the OTS. The
deposits of Seller Bank are insured by the Savings Association Insurance Fund
("SAIF") or the Bank Insurance Fund ("BIF"). Except as set forth on
Schedule 2.02, neither Seller nor any Seller Subsidiary holds any interest in a
partnership, limited liability company, joint venture or any other kind of
business enterprise.
2.03. Capitalization. The authorized capital stock of Seller consists
--------------
of 100 shares of Seller Common Stock of which 100 are issued and outstanding,
all of which shares are beneficially owned by Selling Stockholder. There are no
other Equity Securities of Seller outstanding. All of the issued and outstanding
shares of Seller Common Stock are validly issued, fully paid, and nonassessable,
and have not been issued in violation of any preemptive right. The authorized
capital stock of Seller Bank consists of (i) 10,000,000 shares of common stock,
par value $1.00 per share ("Seller Bank Common Stock"), of which 5,000,000
shares are issued and outstanding and (ii) 1,000,000 shares of preferred stock,
par value $100.00 per share("Seller Bank Preferred Stock"), issuable in series,
of which 200,000 shares are issued and outstanding. There are no other Equity
Securities of Seller Bank outstanding. All of the issued and outstanding shares
of Seller Bank Common Stock and Seller Bank Preferred Stock are validly issued,
fully paid and nonassessable, and have not been issued in violation of any
preemptive right.
2.04. Authorization. (a) Seller has the corporate power and authority
-------------
to enter into this Agreement and, subject to the approval of this Agreement by
the Selling Stockholder, to carry out its obligations hereunder. The only vote
required for Selling Stockholder to approve this Agreement is the affirmative
vote of a Majority in Interest of the Limited Partners as provided in Section
10.03 of the Limited Partnership Agreement of the Selling Stockholder (the
"Limited Partnership Agreement") at a meeting called for such purpose. The
execution, delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all
7
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requisite corporate action on the part of Seller. Subject to approval by the
Selling Stockholder and the execution and delivery hereof by the parties hereto,
this Agreement is a valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.
(b) Except as set forth on Schedule 2.04B, neither the execution nor
delivery nor performance by Seller of this Agreement, nor the consummation by
Seller and Seller Bank of the transactions contemplated hereby, nor compliance
by Seller with any of the provisions hereof, or compliance by Seller Bank with
any of the provisions of the Subsidiary Merger Agreement will (i) violate,
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any Lien upon any of the material properties or
assets of Seller or any Seller Subsidiary under any of the terms, conditions or
provisions of (x) its articles or certificate of incorporation, charter or
bylaws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Seller or
any Seller Subsidiary is a party or by which it may be bound, or to which Seller
or any Seller Subsidiary or any of the material properties or assets of Seller
or any Seller Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (c) of this Section 2.04, to
the best of knowledge of Seller violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or any
Seller Subsidiary or any of their respective material properties or assets.
(c) Other than in connection or in compliance with the provisions of the
DGCL, the Securities Act, the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), the securities or
blue sky laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required by the FDIC or under HOLA or
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), or any
required approvals or filings pursuant to any state statutes or regulations
applicable to Seller, Buyer or their respective Subsidiaries with respect to the
transactions contemplated by this Agreement, no notice to, filing with,
exemption or review by or authorization, consent or approval of, any public body
or authority is necessary for the consummation by Seller and Seller Bank of the
transactions contemplated by this Agreement.
2.05. Seller Financial Statements. The consolidated balance sheets
---------------------------
of Seller and its Subsidiary as of December 31, 1996, 1995 and 1994 and related
consolidated statements of income,
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cash flows and partners' capital for each of the three years in the three-year
period ended December 31, 1996, together with the notes thereto, audited by KPMG
Peat Marwick LLP and included in an annual report on Form 10-K of Selling
Stockholder (including amendments thereto) as filed with the Securities and
Exchange Commission (the "SEC") (the "Seller Financial Statements"), except as
set forth on Schedule 2.05, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP"), present
fairly the consolidated financial position of Selling Stockholder, Seller and
its Subsidiary at the dates and the consolidated results of operations, cash
flows and partners' capital of Selling Stockholder, Seller and its Subsidiary
for the periods stated therein and are derived from the books and records of
Selling Stockholder, Seller and its Subsidiary, which are complete and accurate
in all material respects and have been maintained in all material respects in
accordance with applicable laws and regulations. Except as set forth on
Schedule 2.05, neither Seller nor its Subsidiary has any material contingent
liabilities that are not reflected in the Seller Reports (defined below) or
disclosed in the financial statements described above.
2.06. Seller Reports. Except as set forth on Schedule 2.06, since
--------------
January 1, 1994, each of Seller and the Seller Subsidiaries has filed all
material reports, registrations and statements, together with any required
material amendments thereto, that it was required to file with (i)the OTS,
(ii) the FDIC, and (iii) any other federal, state, municipal, local or foreign
government, securities, banking, savings and loan, insurance and other
governmental or regulatory authority and the agencies and staffs thereof (the
entities in the foregoing clauses (i) through (iii) being referred to herein
collectively as the "Regulatory Authorities" and individually as a "Regulatory
Authority"). All such reports and statements filed with any such Regulatory
Authority are collectively referred to herein as the "Seller Reports." As of
its respective date, each Seller Report complied in all material respects with
all the rules and regulations promulgated by the applicable Regulatory Authority
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.07. Properties and Leases. Except as set forth on Schedule 2.07 or
---------------------
as may be reflected in the Seller Financial Statements, except for any Lien for
current taxes not yet delinquent and except with respect to assets classified
as real estate owned, Seller and its Subsidiaries have good title free and clear
of any material Lien to all the real and personal property reflected in Seller's
consolidated balance sheet as of December 31, 1996 included in the most recent
Selling Stockholder Form 10-K and, in each case, all real and personal property
acquired since such
9
<PAGE>
date, except such real and personal property as has been disposed of in the
ordinary course of business. All leases material to Seller or any Seller
Subsidiary pursuant to which Seller or any Seller Subsidiary, as lessee, leases
real or personal property, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any material
existing default by Seller or any Seller Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all of Seller's and Seller Subsidiaries' buildings, structures and
equipment in regular use have been well maintained in all material respects and
are in good and serviceable condition, normal wear and tear excepted.
2.08. Taxes. Except as set forth on Schedule 2.08, Seller and each
-----
Seller Subsidiary have timely filed or will timely (including extensions) file
all tax returns required to be filed at or prior to the Closing Date ("Seller
Returns"). Each of Seller and its Subsidiaries has paid, or set up adequate
reserves on the Seller Financial Statements for the payment of, all taxes
required to be paid in respect of the periods covered by such returns and has
set up adequate reserves on the most recent financial statements Selling
Stockholder has filed under the Exchange Act for the payment of all taxes
anticipated to be payable in respect of all periods up to and including the
latest period covered by such financial statements. Neither Seller nor any
Seller Subsidiary will have any liability material to the financial condition or
results of operations (the "Condition") of Seller and the Seller Subsidiaries,
taken as a whole, for any such taxes in excess of the amounts so paid or
reserves so established and no material deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against any of Seller or any Seller Subsidiary which would not be
covered by existing reserves. Neither Seller nor any Seller Subsidiary is
delinquent in the payment of any material tax, assessment or governmental
charge, nor, except as previously disclosed, has it requested any extension of
time within which to file any tax returns in respect of any fiscal year which
have not since been filed and no requests for waivers of the time to assess any
tax are pending. The federal and state income tax returns of Seller and the
Seller Subsidiaries have been audited and settled by the Internal Revenue
Service (the "IRS") or appropriate state tax authorities for all periods ended
through December 31, 1985 or the period for assessment of taxes in respect of
such periods has expired. There is no deficiency or refund litigation or matter
in controversy with respect to Seller Returns. Neither Seller nor any Seller
Subsidiary has extended or waived any statute of limitations on the assessment
of any tax due that is currently in effect.
2.09. Material Adverse Effect. Since December 31, 1996, there has
-----------------------
been no Material Adverse Effect on Seller and its Subsidiaries, taken as a
whole, except as may have resulted or may result from changes to laws and
regulations or changes in economic
10
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conditions applicable to thrift institutions generally or in general levels of
interest rates affecting thrift institutions generally.
2.10. Commitments and Contracts. (a) Except as set forth on
-------------------------
Schedule 2.10A, neither Seller nor any Seller Subsidiary is a party or subject
to any of the following (whether written or oral, express or implied):
(i) any material agreement, arrangement or commitment (A) not made in
the ordinary course of business or (B) pursuant to which Seller or any of
its Subsidiaries is or may become obligated to invest in or contribute
capital to any Seller Subsidiary;
(ii) any agreement, indenture or other instrument not disclosed in the
Seller Financial Statements relating to the borrowing of money by Seller or
any Seller Subsidiary or the guarantee by Seller or any Seller Subsidiary
of any such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any Seller
Subsidiary, such as deposits and Fed Funds borrowings);
(iii) any contract, agreement or understanding with any labor union or
collective bargaining organization;
(iv) any contract containing covenants which limit the ability of
Seller or any Seller Subsidiary to compete in any line of business or with
any person or which involve any restriction of the geographical area in
which, or method by which, Seller or any Seller Subsidiary may carry on its
business (other than as may be required by law or any applicable Regulatory
Authority);
(v) any other contract or agreement which is a material contract
within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the
SEC;
(vi) any lease with annual rental payments aggregating $250,000 or
more; or
(vii) any agreement, commitment or arrangement to make any distribution
or other payments to the Selling Stockholder.
(b) Neither Seller nor any Seller Subsidiary is in violation of its
certificate or articles of incorporation or bylaws or charter documents or
bylaws or in default under any material agreement, commitment, arrangement,
lease, insurance policy or other instrument, whether entered into in the
ordinary course of business or otherwise and whether written or oral, and there
has
11
<PAGE>
not occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default, except, in all cases, where such default would
not have a Material Adverse Effect on Seller and its Subsidiaries, taken as a
whole.
2.11. Litigation and Other Proceedings. Except as set forth on
--------------------------------
Schedule 2.11, neither Seller nor any Seller Subsidiary is a party to any
pending or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably could
not be expected to have, a Material Adverse Effect on Seller and its
Subsidiaries, taken as a whole, or which purports or seeks to enjoin or restrain
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, as of the date of this Agreement, there are no actions, suits,
or proceedings pending or, to the best knowledge of Seller, threatened against
Seller or any Seller Subsidiary or any of their respective officers or directors
by any stockholder (or any former stockholder), or involving claims under the
DGCL, the Securities Act, the Exchange Act, the Community Reinvestment Act of
1977 as amended (the "CRA"), or the fair lending laws.
2.12. Insurance. Each of Seller and its Subsidiaries has taken all
---------
requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby) occurring prior to the Effective Time that
are known to Seller, except for such matters which, individually or in the
aggregate, will not have and reasonably could not be expected to have a Material
Adverse Effect on Seller and its Subsidiaries, taken as a whole. Set forth on
Schedule 2.12 is a list of all insurance policies maintained by or for the
benefit of Seller or its Subsidiaries or their directors, officers, employees or
agents.
2.13. Compliance with Laws. (a) Except as set forth on Schedule
--------------------
2.13A, Seller and each of its Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all filings, applications
and registrations with, all Regulatory Authorities that are required in order to
permit them to own or lease their properties and assets and to carry on their
business as presently conducted and that are material to the business of Seller
and its Subsidiaries; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best knowledge of
Seller, no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current.
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<PAGE>
(b) Except as set forth on Schedule 2.13B and except for failures to
comply or defaults which individually or in the aggregate would not have a
Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, (i)
each of Seller and its Subsidiaries has complied with all laws, regulations and
orders (including without limitation zoning ordinances, building codes, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
securities, tax, environmental, civil rights, and occupational health and safety
laws and regulations and including without limitation in the case of any Seller
Subsidiary that is a bank or savings association, banking organization, banking
corporation or trust company, all statutes, rules, regulations and policy
statements pertaining to the conduct of a banking, deposit-taking, lending or
related business, or to the exercise of trust powers) and governing instruments
applicable to them and to the conduct of their business, and (ii) neither Seller
nor any Seller Subsidiary is in default under, and no event has occurred which,
with the lapse of time or notice or both, could result in the de fault under,
the terms of any judgment, order, writ, decree, permit, or license of any
Regulatory Authority or court, whether federal, state, municipal, or local and
whether at law or in equity. Except as set forth on Schedule 2.13B, as of the
date of this Agreement, neither Seller nor any Seller Subsidiary is subject to
or reasonably likely to incur a liability as a result of its ownership,
operation, or use of any Property (as defined below) of Seller (whether directly
or to the best knowledge of Seller, as a consequence of such Property being part
of the investment portfolio of Seller or any Seller Subsidiary) (A) that is
contaminated by or contains any hazardous waste, toxic substance, or related
materials, including, without limitation, asbestos, PCBs, pesticides,
herbicides, and any other substance or waste that is hazardous to human health
or the environment (collectively, a "Toxic Substance") or (B) on which any Toxic
Substance has been stored, disposed of, placed or used in the construction
thereof. "Property" of a person shall include all property (real or personal,
tangible or intangible) owned or controlled by such person, including, without
limitation, property under foreclosure, property held by such person or any
Subsidiary of such person in its capacity as a trustee and property in which any
venture capital or similar unit of such person or any Subsidiary of such person
has an interest. Except as set forth on Schedule 2.13B, no claim, action, suit,
or proceeding is pending against Seller or any Seller Subsidiary relating to
Property of Seller or any Seller Subsidiary before any court or other Regulatory
Authority or arbitration tribunal relating to hazardous substances, pollution,
or the environment, and there is no outstanding judgment, order, writ,
injunction, decree, or award against or affecting Seller or any Seller
Subsidiary with respect to the same. Except for statutory or regulatory
restrictions of general application, no Regulatory Authority has placed any
restriction on the business of Seller or any Seller Subsidiary which reasonably
could be expected to have a
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<PAGE>
Material Adverse Effect on Seller and its Subsidiaries, taken as a whole.
(c) From and after January 1, 1994, neither Seller nor any Seller
Subsidiary has received any notification or communication which has not been
resolved from any Regulatory Authority (i) asserting that any Seller or any
Subsidiary of Seller, is not in substantial compliance with any of the statutes,
regulations or ordinances that such Regulatory Authority enforces, except with
respect to matters which (A) are set forth on Schedule 2.13C or in any writing
previously furnished to Buyer and (B) reasonably could not be expected to have a
Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization that is material to the Condition of Seller and its Subsidiaries,
taken as a whole, including without limitation such company's status as an
insured depositary institution under the Federal Deposit Insurance Act (the
"FDIA"), or (iii) requiring or threatening to require Seller or any of its
Subsidiaries, or indicating that Seller or any of its Subsidiaries may be
required to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting or purporting to
direct, restrict or limit in any manner the operations of Seller or any of its
Subsidiaries, including, without limitation, any restriction on the making of
distributions or payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
(d) Except as set forth on Schedule 2.13D, neither Seller nor any
Seller Subsidiary is required by Section 32 of the FDIA to give prior notice to
any federal banking agency of the proposed addition of an individual to its
board of directors or the employment of an individual as a senior executive
officer.
2.14. Labor. No work stoppage involving Seller or any Seller
-----
Subsidiary is pending or, to the best knowledge of Seller, threatened, which
reasonably could be expected to have a Material Adverse Effect on Seller and its
Subsidiaries, taken as a whole. Except as set forth on Schedule 2.14, neither
Seller nor any Seller Subsidiary is involved in or, to the best knowledge of
Seller, threatened with or affected by any labor dispute, arbitration, lawsuit
or administrative proceeding. Employees of neither Seller nor any Seller
Subsidiary are represented by any labor union or any collective bargaining
organization.
2.15. Material Interests of Certain Persons. (a) Except as set forth
-------------------------------------
in Selling Stockholder's Form 10-K for the fiscal year ended December 31, 1996,
to the best knowledge of Seller no officer or director of Seller or any
Subsidiary of Seller or any "associate" (as such term is defined in Rule 14a-1
under the Exchange Act) of any such officer or director has any material
interest in any material contract or property (real or personal,
14
<PAGE>
tangible or intangible), used in, or pertaining to the business of, Seller or
any Subsidiary of Seller, which would be required to be so disclosed if Seller
or any such Subsidiary were required to disclose such information pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
(b) Except as set forth on Schedule 2.15B, there are no loans from
Seller or any Seller Subsidiary to any present officer, director, employee or
any associate or related interest of any such person which was or would be
required under any rule or regulation to be approved by or reported to Seller's
or Seller Bank's Board of Directors ("Seller Insider Loans"). All outstanding
Seller Insider Loans from Seller or Seller Bank were approved by or reported to
the appropriate partner or board of directors in accordance with applicable law
and regulations.
2.16. Allowance for Loan and Lease Losses; Non-performing Assets.
----------------------------------------------------------
(a) The allowances for loan and lease losses contained in the Seller Financial
Statements were established in accordance with the past practices and
experiences of Seller and its Subsidiaries, and the allowance for loan losses
shown on the consolidated condensed balance sheet of Selling Stockholder and its
Subsidiaries contained in the most recent Selling Stockholder Form 10-K is
adequate in all material respects under the requirements of GAAP to provide for
possible losses on loans (including without limitation accrued interest
receivable) and credit commitments (including without limitation stand-by
letters of credit) outstanding as of the date of such balance sheet.
(b) As of December 31, 1996, the aggregate amount of all Seller
Nonperforming Assets (as defined below) on the books of Seller and its
Subsidiaries does not exceed $11,700,000. "Seller Non-performing Assets" shall
mean (i) all loans and leases (A) that are contractually past due 90 days or
more in the payment of principal and/or interest, (B) that are on nonaccrual
status, (C) where a reasonable doubt exists, in the reasonable judgment of
Seller, as to the timely future collectibility of principal and/or interest,
whether or not interest is still accruing or the loan is less than 90 days past
due, (D) where the interest rate terms have been reduced and/or the maturity
dates have been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to pay in
accordance with such initial terms, (E) where a specific reserve allocation
exists in connection therewith, or (F) that have been classified "doubtful",
"loss" or the equivalent thereof by any Regulatory Authority and (ii) all
assets classified as real estate acquired through foreclosure or repossession
and other assets acquired through foreclosure or repossession.
2.17. Employee Benefit Plans. (a) Except as set forth on Schedule
----------------------
2.17A, neither Seller nor any Seller Subsidiary is a party to any existing
employment, management, consulting, deferred
15
<PAGE>
compensation, change-in-control or other similar contract. Schedule 2.17A lists
all pension, retirement, supplemental retirement, savings, profit sharing, stock
option, stock purchase, stock ownership, stock appreciation right, deferred
compensation, consulting, bonus, medical, disability, workers' compensation,
vacation, group insurance, severance and other material employee benefit,
incentive and welfare policies, contracts, plans and arrangements, and all trust
agreements related thereto, maintained (currently or at any time in the last
five years) by or contributed to by Seller or any Seller Subsidiary in respect
of any of the present or former directors, officers, or other employees of
and/or consultants to Seller or any Seller Subsidiary (collectively "Seller
Employee Plans"). The aggregate number of Rights (as defined in the Equity
Appreciation Plan (the "EAP")) granted under the EAP is 320,000. Seller has
furnished Buyer with the following documents with respect to each Seller
Employee Plan: (i) a true and complete copy of all written documents comprising
such Seller Employee Plan (including amendments and individual agreements
relating thereto) or, if there is no such written document, an accurate and
complete description of the Seller Employee Plan; (ii) the most recent Form 5500
or Form 5500-C (including all schedules thereto) if applicable; (iii) the most
recent financial statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications thereof, if any;
and (v) the most recent IRS determination letter, if any.
(b) All Seller Employee Plans have been maintained and operated
materially in accordance with their terms and with the material requirements of
all applicable statutes, orders, rules and final regulations, including without
limitation ERISA and the IRC. All contributions required to be made to Seller
Employee Plans have been made.
(c) With respect to each of the Seller Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA)(the "Seller Pension Plans"):
(i) each Seller Pension Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the IRC has been determined to be so qualified by
the IRS and, to the knowledge of Seller such determination letter may still be
relied upon, and each related trust is exempt from taxation under Section 501(a)
of the IRC; (ii) the actuarial present value of all benefits under each Seller
Pension Plan which is subject to Title IV of ERISA, valued using the assumptions
in the most recent actuarial report, did not, in each case, as of the last
applicable annual valuation date (as indicated on Schedule 2.17A), exceed the
value of the assets of the Seller Pension Plan allocable to such vested or
accrued benefits; (iii) to the best knowledge of Seller there has been no
"prohibited transaction," as such term is defined in Section 4975 of the IRC or
Section 406 of ERISA, which could subject any Seller Pension Plan or associated
trust, or the Seller or any Seller Subsidiary to any material tax or penalty;
(iv) except as set forth on Schedule 2.17C, no Seller Pension Plan
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<PAGE>
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" with respect to any
Seller Pension Plan, as that term is defined in Section 4043 of ERISA for which
the 30-day notice requirement has not been waived on or after January 1, 1985;
and (v) no Seller Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA (whether or not waived). Except as set forth on Schedule 2.17C, no Seller
Pension Plan is a "multiemployer plan" as that term is defined in Section 3(37)
of ERISA. With respect to each Seller Pension Plan that is described in Section
4063 (a) of ERISA (a "Multiple Employer Pension Plan"): (i) neither Seller nor
any Seller Subsidiary would have any liability or obligation to post a bond
under Section 4063 of ERISA if Seller and all Seller Subsidiaries were to
withdraw from such Multiple Employer Pension Plan; and (ii) neither Seller nor
any Seller Subsidiary would have any liability under Section 4064 of ERISA if
such Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 2.17D, neither Seller nor any
Seller Subsidiary has any liability for any post-retirement health, medical or
similar benefit of any kind whatsoever, except as required by statute or
regulation.
(e) Except as set forth on Schedule 2.17E, neither Seller nor any
Seller Subsidiary has any material liability under ERISA or the IRC as a result
of its being a member of a group described in Sections 414(b), (c), (m) or (o)
of the IRC.
(f) Except as set forth on Schedule 2.17F neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any material payment to any director or
employee of Seller or any Seller Subsidiary from any of such entities, (ii)
materially increase any benefit otherwise payable under any of the Seller
Employee Plans or (iii) result in the acceleration of the time of payment of any
such benefit.
(g) Except as set forth on Schedule 2.17G, there are no arrangements
or agreements of Seller or any Seller Subsidiary that could possibly result in
"parachute payments" (as defined in 280G of the IRC). Set forth on Schedule
2.17G are the names of the persons who could be "disqualified individuals" for
purposes of Section 280G of the IRC.
2.18. Conduct of Seller to Date. From and after January 1, 1997
-------------------------
through the date of this Agreement, except as set forth on Schedule 2.18 or in
Seller Financial Statements or Seller Reports: (i) Seller and the Seller
Subsidiaries have conducted their respective businesses in all material respects
in the ordinary and usual course consistent with past practices; (ii) neither
Seller nor any Seller Subsidiary has incurred any material obligation or
17
<PAGE>
liability (absolute or contingent), except normal trade or business obligations
or liabilities incurred in the ordinary course of business, or subjected to Lien
any of its assets or properties other than in the ordinary course of business
consistent with past practice; (iii) neither Seller nor any Seller Subsidiary
has discharged or satisfied any material Lien or paid any material obligation or
liability (absolute or contingent), other than in the ordinary course of
business; (iv) neither Seller nor any Seller Subsidiary has sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its material
properties or assets other than for a fair consideration in the ordinary course
of business; (v) except as required by contract or law or in the ordinary course
of business, neither Seller nor any Seller Subsidiary has (A) increased the rate
of compensation of, or paid any bonus to, any of its directors, officers, or
other employees, except merit, promotion or annual increases and bonuses in
accordance with existing policy, (B) entered into any new, or amended or
supplemented any existing employment, management, consulting, deferred
compensation, severance, or other similar contract, (C) entered into,
terminated, or substantially modified any of the Seller Employee Plans or (D)
agreed to do any of the foregoing; (vi) neither Seller nor any Seller Subsidiary
has suffered any material damage, destruction, or loss, whether as the result of
fire, explosion, earthquake, accident, casualty, labor trouble, requisition, or
taking of property by any Regulatory Authority, flood, windstorm, embargo, riot,
act of God or the enemy, or other casualty or event, and whether or not covered
by insurance; and (vii) neither Seller nor any Seller Subsidiary has canceled or
compromised any debt, except for debts charged off or compromised in accordance
with the past practice of Seller and its Subsidiaries.
2.19. Proxy Statement, etc. None of the information regarding Seller
--------------------
or any Seller Subsidiary supplied or to be supplied by Seller for inclusion or
included in (i) the registration statement on Form S-4 to be filed with the SEC
by Buyer for the purpose of registering the shares of Buyer Common Stock to be
issued pursuant to the provisions of this Agreement (the "Registration
Statement"), (ii) the proxy or information statement (the "Proxy Statement") to
be mailed to Limited Partners and BUC Holders of Selling Stockholder in
connection with the transactions contemplated by this Agreement or (iii) any
other documents to be filed with any Regulatory Authority in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and, in the case of the Proxy Statement,
when mailed, be false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of Limited Partners referred to
in Section 5.03 (the
18
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"Selling Stockholder Meeting") (or, if no Selling Stockholder Meeting is held,
at the time the Proxy Statement is first furnished to Limited Partners) and at
the time of the meeting of Buyer's stockholders referred to in Section 5.03 (the
"Buyer Meeting"), be false or misleading with respect to any material fact, or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Selling Stockholder Meeting. All documents which Seller or any Seller
Subsidiary is responsible for filing with any Regulatory Authority in connection
with the Merger will comply as to form in all material respects with the
provisions of applicable law.
2.20. Registration Obligations. Except as set forth on Schedule
------------------------
2.20, neither Seller nor any Seller Subsidiary is under any obligation,
contingent or otherwise to register any of its securities under the Securities
Act.
2.21. State Takeover Statutes. Except as set forth on Schedule 2.21,
-----------------------
the transactions contemplated by this Agreement are not subject to any
applicable state takeover law.
2.22. Accounting, Tax and Regulatory Matters. Neither Seller nor any
--------------------------------------
Seller Subsidiary has taken or agreed to take any action or has any knowledge of
any fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the IRC or (ii) materially impede or delay receipt of any approval referred to
in Section 6.01(b) or the consummation of the transactions contemplated by this
Agreement.
2.23. Brokers and Finders. Except for Merrill Lynch & Co., neither
-------------------
Seller nor any Seller Subsidiary nor any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Seller or any Seller
Subsidiary in connection with this Agreement or the transactions contemplated
hereby. Schedule 2.23 discloses bona fide estimates of the amounts of all fees
and expenses expected to be paid by Seller to all third parties in connection
with the Merger ("Merger Fees").
2.24. Interest Rate Risk Management Instruments. (a) Set forth on
-----------------------------------------
Schedule 2.24A is a list, as of the date hereof, of all interest rate swaps,
caps, floors, and option agreements and other interest rate risk management
arrangements to which Seller or any of its Subsidiaries is a party or by which
any of their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which Seller or any of its
Subsidiaries is a party or by which any
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<PAGE>
of their properties or assets may be bound were entered into in the ordinary
course of business and, to the best knowledge of Seller, in accordance with
prudent banking practice and applicable rules, regulations and policies of
Regulatory Authorities and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations and are in
full force and effect. Seller and each of its Subsidiaries has duly performed
in all material respects all of its obligations thereunder to the extent that
such obligations to perform have accrued, and there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
2.25. Accuracy of Information. To the best knowledge of Seller, the
-----------------------
statements of Seller contained in this Agreement, the Schedules and any other
written document executed and delivered by or on behalf of Seller pursuant to
the terms of this Agreement are true and correct in all material respects, and
such statements and documents do not omit any material fact necessary to make
the statements contained therein not misleading.
Selling Stockholder represents and warrants to and covenants with Buyer
as follows:
2.26. Authorization. Selling Stockholder has the partnership power
-------------
and authority to enter into this Agreement and, subject to the approval of this
Agreement by a Majority in Interest of the Limited Partners, to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by Selling Stockholder and the consummation by Selling Stockholder of the
transactions contemplated hereby have been duly authorized by all requisite
partnership action on the part of Selling Stockholder. Subject to approval by a
Majority in Interest of the Limited Partners, and the execution and delivery
hereof by the parties hereto, this Agreement is a valid and binding obligation
of Selling Stockholder enforceable against Selling Stockholder in accordance
with its terms.
2.27. Beneficial Ownership of Seller Equity Securities. Selling
------------------------------------------------
Stockholder beneficially owns all of the issued and outstanding shares of Seller
Common Stock. Selling Stockholder does not own, directly or indirectly, any
other Equity Securities of Seller.
2.28. Rights to Acquire Equity Securities. There is no subscription,
-----------------------------------
option, warrant, call, right, contract, agreement, commitment, understanding or
arrangement relating to the sale, delivery or transfer by Selling Stockholder of
any shares of Seller Common Stock, including any right of conversion or exchange
under any outstanding security or other instrument.
2.29 Title to Seller Common Stock. Selling Stockholder has good
----------------------------
and marketable title to all of the issued and outstanding
20
<PAGE>
shares of Seller Common Stock, free and clear of all pledges, security
interests, liens, charges, encumbrances, equities, claims and options of
whatever nature.
General Partner represents and warrants to and covenants with Buyer as
follows:
2.30. Authorization. General Partner has the partnership power and
-------------
authority to enter into this Agreement and, subject to the approval of this
Agreement by a Majority in Interest of the Limited Partners, to carry out its
obligations hereunder. The execution, delivery and performance of this
Agreement by General Partner and the consummation by General Partner of the
transactions contemplated hereby have been duly authorized by all requisite
partnership action on the part of General Partner. Subject to approval by a
Majority in Interest of the Limited Partners and the execution and delivery
hereof by the parties hereto, this Agreement is a valid and binding obligation
of General Partner enforceable against General Partner in accordance with its
terms.
ARTICLE III
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to and covenants with Seller as follows:
3.01. Organization and Authority. Buyer and each of its
--------------------------
Subsidiaries is a corporation, savings bank, trust company or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified except as set forth on
Schedule 3.01 and, except where the failure to be so qualified would not have a
Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted, except, in the case of the Buyer
Subsidiaries, where the failure to be so qualified would not have a Material
Adverse Effect on Buyer and its Subsidiaries, taken as a whole. Buyer is
registered as a unitary savings and loan holding company under HOLA. True and
complete copies of the Certificate of Incorporation and Bylaws of Buyer and of
the Charter and Bylaws of Buyer Bank, each as in effect on the date of this
Agreement, have been provided to Seller.
3.02. Subsidiaries. Schedule 3.02 sets forth, among other things, a
------------
complete and correct list of all of Buyer's Subsidiaries (each a "Buyer
Subsidiary" and collectively the "Buyer Subsidiaries"), all outstanding Equity
Securities of each of which, except as set forth on Schedule 3.02, are owned
directly or
21
<PAGE>
indirectly by Buyer. Except as set forth on Schedule 3.02, all of the
outstanding shares of capital stock of the Buyer Subsidiaries are validly
issued, fully paid and nonassessable, and those shares owned by Buyer are owned
free and clear of any Lien with respect thereto. Each of the Buyer Subsidiaries
is a corporation or savings bank duly incorporated or organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority to own or
lease its properties and assets and to carry on its business as it is now being
conducted. Each of the Buyer Subsidiaries is duly qualified to do business in
each jurisdiction where its ownership or leasing of property or the conduct of
its business requires it so to be qualified, except where the failure to so
qualify would not have a Material Adverse Effect on Buyer and its Subsidiaries,
taken as a whole. Except as set forth on Schedule 3.02, Buyer does not own
beneficially, directly or indirectly, any shares of any class of Equity
Securities or similar interests of any corporation, bank, business trust,
association or similar organization. Buyer Bank is chartered by the OTS. The
deposits of Buyer Bank are insured by the SAIF or the BIF. Except as set forth
on Schedule 3.02, neither Buyer nor any Buyer Subsid iary holds any interest in
a partnership, limited liability company, joint venture or any other kind of
business enterprise.
3.03. Capitalization of Buyer. The authorized capital stock of
-----------------------
Buyer consists of (i) 20,000,000 shares of Buyer Common Stock, of which, as of
May 8, 1997, 6,485,080 shares were issued and outstanding and (ii) 7,000,000
shares of preferred stock, par value $.01 per share ("Buyer Preferred Stock"),
issuable in series, none of which, as of May 8, 1997, is issued or outstanding.
As of May 8, 1997 Buyer had reserved (i) 1,654,715 shares of Buyer Common Stock
for issuance under various employee stock option and incentive plans ("Buyer
Stock Options") a list of which is set forth on Schedule 3.03. From May 8, 1997
through the date of this Agreement, no shares of Buyer Common Stock or other
Equity Securities of Buyer have been issued excluding any such shares which may
have been issued pursuant to stock-based employee benefit or incentive plans and
programs or pursuant to the foregoing agreements. Except as set forth above and
except pursuant to the Buyer Rights Agreement, there are no other Equity
Securities of Buyer outstanding as of May 8, 1997. All of the issued and
outstanding shares of Buyer Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive right of
any stockholder of Buyer. At the Effective Time, the Buyer Common Stock to be
issued in the Merger will be duly authorized, validly issued, fully paid and
non-assessable, and will not be issued in violation of any preemptive right.
3.04. Authorization. (a) Buyer has the corporate power and
-------------
authority to enter into this Agreement and, subject to the approval of this
Agreement by the stockholders of Buyer, to carry out its obligations hereunder.
The execution, delivery and
22
<PAGE>
performance of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Buyer. Subject to approval by the stockholders of Buyer and the
execution and delivery hereof by the parties hereto, this Agreement is a valid
and binding obligation of Buyer enforceable against Buyer in accordance with its
terms.
(b) Except as set forth on Schedule 3.04B neither the execution,
delivery and performance by Buyer of this Agreement, nor the consummation by
Buyer and Buyer Bank of the transactions contemplated hereby, nor compliance by
Buyer with any of the provisions hereof, or compliance by Buyer Bank with any of
the provisions of the Subsidiary Merger Agreement will (i) violate, conflict
with or result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any Lien upon any of the material properties or assets of Buyer or any Buyer
Subsidiary under any of the terms, conditions or provisions of (x) its articles
or certificate of incorporation, charter or bylaws, or (y) any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer or any of the material properties or
assets of Buyer or any Buyer Subsidiary is a party or by which it may be bound,
or to which Buyer may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (c) of this Section 3.04, to
the best knowledge of Buyer, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any of
its Subsidiaries or any of their respective material properties or assets.
(c) Other than in connection with or in compliance with the provisions
of the DGCL, the Securities Act, the Exchange Act, the securities or blue sky
laws of the various states or filings, consents, reviews, authorizations,
approvals or exemptions required by the FDIC or under the HOLA or the HSR Act,
or any required approvals of, or notice to, any other Regulatory Authority, no
notice to, filing with, exemption or review by, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Buyer or Buyer Bank of the transactions contemplated by this Agreement.
3.05. Buyer Financial Statements. The consolidated balance sheets of
--------------------------
Buyer and its Subsidiaries as of December 31, 1996, 1995 and 1994 and related
consolidated statements of income, cash flows and changes in stockholders'
equity for each of the three years in the three-year period ended December 31,
1996, together with the notes thereto, audited by Deloitte & Touche LLP ("Buyer
Auditors") and included in an annual report on Form 10-K as
23
<PAGE>
filed with the SEC (the "Buyer Financial Statements"), except as set forth on
Schedule 3.05 have been prepared in accordance with GAAP, present fairly the
consolidated financial position of Buyer and its Subsidiaries at the dates and
the consolidated results of operations, changes in stockholders' equity and cash
flows of Buyer and its Subsidiaries for the periods stated therein and are
derived from the books and records of Buyer and its Subsidiaries, which are
complete and accurate in all material respects and have been maintained in all
material respects in accordance with applicable laws and regulations. Except as
set forth on Schedule 3.05 neither Buyer nor any of its Subsidiaries has any
material contingent li abilities that are not reflected in the Buyer Reports
(defined below) or disclosed in the financial statements described above.
3.06. Buyer Reports. Except as set forth on Schedule 3.06, since
-------------
January 1, 1994, each of Buyer and the Buyer Subsidiaries has filed all material
reports, registrations and statements, together with any required material
amendments thereto, that it was required to file with any Regulatory Authority.
All such reports and statements filed with any such Regulatory Authority are
collectively referred to herein as the "Buyer Reports." As of its respective
date, each Buyer Report complied in all material respects with all the rules and
regulations promulgated by the applicable Regulatory Authority and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.07. Properties and Leases. Except as set forth on Schedule 3.07 or
---------------------
as may be reflected in the Buyer Financial Statements, except for any Lien for
current taxes not yet de linquent and except with respect to assets classified
as real estate owned, Buyer and its Subsidiaries have good title free and clear
of any material Lien to all the real and personal property reflected in Buyer's
consolidated balance sheet as of December 31, 1996 included in the most recent
Buyer Form 10-K and, in each case, all real and personal property acquired since
such date, except such real and personal property as has been disposed of in the
ordinary course of business. All leases material to Buyer or any Buyer
Subsidiary pursuant to which Buyer or any Buyer Subsidiary, as lessee, leases
real or personal property, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any material
existing default by Buyer or any Buyer Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all of Buyer's and Buyer Subsidiaries' buildings, structures and
equipment in regular use have been well maintained in all material respects and
are in good and serviceable condition, normal wear and tear excepted.
3.08. Taxes. Except as set forth on Schedule 3.08, Buyer
-----
24
<PAGE>
and each Buyer Subsidiary have timely filed or will timely (including
extensions) file all tax returns required to be filed at or prior to the Closing
Date ("Buyer Returns"). Each of Buyer and its Subsidiaries has paid, or set up
adequate reserves on the Buyer Financial Statements for the payment of, all
taxes required to be paid in respect of the periods covered by such returns and
has set up adequate reserves on the most recent financial statements Buyer has
filed under the Exchange Act for the payment of all taxes anticipated to be
payable in respect of all periods up to and including the latest period covered
by such financial statements. Neither Buyer nor any Buyer Subsidiary will have
any liability material to the Condition of Buyer and the Buyer Subsidiaries,
taken as a whole, for any such taxes in excess of the amounts so paid or
reserves so established and no material deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against any of Buyer or any Buyer Subsidiary which would not be
covered by existing reserves. Neither Buyer nor any Buyer Subsidiary is
delinquent in the payment of any material tax, assessment or governmental
charge, nor, except as previously disclosed, has it requested any extension of
time within which to file any tax re turns in respect of any fiscal year which
have not since been filed and no requests for waivers of the time to assess any
tax are pending. The federal and state income tax returns of Buyer and the
Buyer Subsidiaries have been audited and settled by the IRS or ap propriate
state tax authorities for all periods ended through December 31, 1989 or the
period for assessment of taxes in respect of such periods has expired. There is
no deficiency or refund litigation or matter in controversy with respect to
Buyer Returns. Neither Buyer nor any Buyer Subsidiary has extended or waived any
statute of limitations on the assessment of any tax due that is currently in
effect.
3.09. Material Adverse Effect. Since December 31, 1996, there has
-----------------------
been no Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole,
except as may have resulted or may result from changes to laws and regulations
or changes in economic conditions applicable to thrift institutions generally or
in general levels of interest rates affecting thrift institutions generally.
3.10. Commitments and Contracts. (a) Except as set forth on
-------------------------
Schedule 3.10A, neither Buyer nor any Buyer Subsidiary is a party or subject to
any of the following (whether written or oral, express or implied):
(i) any material agreement, arrangement or commitment (A) not made
in the ordinary course of business or (B) pursuant to which Buyer or any of its
Subsidiaries is or may become obligated to invest in or contribute capital to
any Buyer Subsidiary;
25
<PAGE>
(ii) any agreement, indenture or other instrument not disclosed in
the Buyer Financial Statements relating to the borrowing of money by Buyer
or any Buyer Subsidiary or the guarantee by Buyer or any Buyer Subsidiary
of any such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any Buyer
Subsidiary, such as deposits and Fed Funds borrowings);
(iii) any contract, agreement or understanding with any labor union
or collective bargaining organization;
(iv) any contract containing covenants which limit the ability of
Buyer or any Buyer Subsidiary to compete in any line of business or with
any person or which involve any restriction of the geographical area in
which, or method by which, Buyer or any Buyer Subsidiary may carry on its
business (other than as may be required by law or any applicable Regulatory
Authority);
(v) any other contract or agreement which is a material contract
within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the
SEC; or
(vi) any lease with annual rental payments aggregating $250,000 or
more.
(b) Neither Buyer nor any Buyer Subsidiary is in violation of its
certificate or articles of incorporation or charter documents or bylaws or in
default under any material agreement, commitment, arrangement, lease, insurance
policy or other instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not occurred
any event that, with the lapse of time or giving of notice or both, would
constitute such a default, except, in all cases, where such default would not
have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole.
3.11. Litigation and Other Proceedings. Except as set forth on Schedule
--------------------------------
3.11, neither Buyer nor any Buyer Subsidiary is a party to any pending or, to
the best knowledge of Buyer, threatened claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or reasonably could not be expected to
have, a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole,
or which purports or seeks to enjoin or restrain the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, as of the
date of this Agreement, there are no actions, suits, or proceedings pending or,
to the best knowledge of Buyer, threatened against Buyer or any Buyer Subsidiary
or any of their respective officers or directors
26
<PAGE>
by any holder of Buyer Common Stock (or any former holder of Buyer Common Stock)
or involving claims under the DGCL, the Securities Act, the Exchange Act, the
CRA, or the fair lending laws.
3.12. Insurance. Each of Buyer and its Subsidiaries has taken all requisite
---------
action (including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance policy or
policies in order to preserve all rights thereunder with respect to all matters
(other than matters arising in connection with this Agreement and the
transactions contemplated hereby) occurring prior to the Effective Time that are
known to Buyer, except for such matters which, individually or in the aggregate,
will not have and reasonably could not be expected to have a Material Adverse
Effect on Buyer and its Subsidiaries, taken as a whole. Set forth on Schedule
3.12 is a list of all insurance policies maintained by or for the benefit of
Buyer or its Subsidiaries or their directors, officers, employees or agents.
3.13. Compliance with Laws. (a) Except as set forth on Schedule 3.13A,
--------------------
Buyer and each of its Subsidiaries have all permits, licenses, authorizations,
orders and approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in order to
permit them to own or lease their properties and assets and to carry on their
business as presently conducted and that are material to the business of Buyer
and its Subsidiaries; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best knowledge of
Buyer no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current.
(b) Except as set forth on Schedule 3.13B and except for failures to comply
or defaults which individually or in the aggregate would not have a Material
Adverse Effect on Buyer and its Subsidiaries, taken as a whole, (i) each of
Buyer and its Subsidiaries has complied with all laws, regulations and orders
(including without limitation zoning ordinances, building codes, ERISA), and
securities, tax, environmental, civil rights, and occupational health and safety
laws and regulations and including without limitation in the case of any Buyer
Subsidiary that is a bank or savings association, banking organization, banking
corporation or trust company, all statutes, rules, regulations and policy
statements pertaining to the conduct of a banking, deposit-taking, lending or
related business, or to the exercise of trust powers) and governing instruments
applicable to them and to the conduct of their business, and (ii) neither Buyer
nor any Buyer Subsidiary is in default under, and no event has occurred which,
with the lapse of time or notice or both, could result in the de fault under,
the terms of any judgment, order, writ, decree, permit, or license of any
Regulatory Authority or court, whether federal, state, municipal, or local and
whether at law or in
27
<PAGE>
equity. Except as set forth on Schedule 3.13B, as of the date of this
Agreement, neither Buyer nor any Buyer Subsidiary is subject to or reasonably
likely to incur a liability as a result of its ownership, operation, or use of
any Property of Buyer (whether directly or to the best knowledge of Buyer, as a
consequence of such Property being part of the investment portfolio of Buyer or
any Buyer Subsidiary) (A) that is contaminated by or contains any Toxic
Substance or (B) on which any Toxic Substance has been stored, disposed of,
placed or used in the construction thereof. Except as set forth on Schedule
3.13B, no claim, action, suit, or proceeding is pending against Buyer or any
Buyer Subsidiary relating to Property of Buyer before any court or other
Regulatory Authority or arbitration tribunal relating to hazardous substances,
pollution, or the environment, and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting Buyer or any Buyer
Subsidiary with respect to the same. Except for statutory or regulatory
restrictions of general application, no Regulatory Authority has placed any
restriction on the business of Buyer or any Buyer Subsidiary which reasonably
could be expected to have a Material Adverse Effect on Buyer and its
Subsidiaries, taken as a whole.
(c) From and after January 1, 1994, neither Buyer nor any Buyer Subsidiary
has received any notification or communication which has not been resolved from
any Regulatory Authority (i) asserting that any Buyer or any Subsidiary of
Buyer, is not in substantial compliance with any of the statutes, regulations or
ordinances that such Regulatory Authority enforces, except with respect to
matters which (A) are set forth on Schedule 3.13C or in any writing previously
furnished to Seller and (B) reasonably could not be expected to have a Material
Adverse Effect on Buyer and its Subsidiaries, taken as a whole, (ii) threatening
to revoke any license, franchise, permit or governmental authorization that is
material to the Condition of Buyer and its Subsidiaries, taken as a whole,
including without limitation such company's status as an insured depositary
institution under the FDIA, or (iii) requiring or threatening to require Buyer
or any of its Subsidiaries, or indicating that Buyer or any of its Subsidiaries
may be required to enter into a cease and desist order, agreement or memorandum
of un derstanding or any other agreement restricting or limiting or purporting
to direct, restrict or limit in any manner the op erations of Buyer or any of
its Subsidiaries, including, without limitation, any restriction on the making
of distributions or payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
(d) Except as set forth on Schedule 3.13D, neither Buyer nor any Buyer
Subsidiary is required by Section 32 of the FDIA to give prior notice to any
federal banking agency of the proposed addition of an individual to its board of
directors or the employment of an individual as a senior executive officer.
28
<PAGE>
3.14. Labor. No work stoppage involving Buyer or any Buyer Subsidiary is
-----
pending or, to the best knowledge of Buyer, threatened, which reasonably could
be expected to have a Material Adverse Effect on Buyer and its Subsidiaries,
taken as a whole. Neither Buyer nor any Buyer Subsidiary is involved in or, to
the best knowledge of Buyer, threatened with or affected by any labor dispute,
arbitration, lawsuit or administrative proceeding. Employees of neither Buyer
nor any Buyer Subsidiary are represented by any labor union or any collective
bargaining organization.
3.15. Material Interests of Certain Persons. (a) Except as set forth on
-------------------------------------
Schedule 3.15A, to the best knowledge of Buyer no officer or director of Buyer
or any Subsidiary of Buyer or any "associate" (as such term is defined in Rule
14a-1 under the Exchange Act) of any such officer or director has any material
interest in any material contract or property (real or personal, tangible or
intangible), used in, or pertaining to the business of, Buyer or any Subsidiary
of Buyer, which would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
(b) Except as set forth on Schedule 3.15B, there are no loans from Buyer or
any Buyer Subsidiary to any present officer, director, employee or any associate
or related interest of any such person which was or would be required under any
rule or regulation to be approved by or reported to Buyer's or Buyer Bank's
Board of Directors ("Buyer Insider Loans"). All outstanding Buyer Insider Loans
from Buyer or Buyer Bank were approved by or reported to the appropriate board
of directors in accordance with applicable law and regulations.
3.16. Allowance for Loan Losses; Non-performing Assets.
------------------------------------------------
(a) The allowances for loan losses contained in the Buyer Financial
Statements were established in accordance with the past practices and
experiences of Buyer and its Subsidiaries, and the allowance for loan losses
shown on the consolidated condensed balance sheet of Buyer and its Subsidiaries
contained in the most recent Buyer Form 10-K is adequate in all material
respects under the requirements of GAAP to provide for possible losses on loans
(including without limitation accrued interest receivable) and credit
commitments (including without limitation stand-by letters of credit)
outstanding as of the date of such balance sheet.
(b) As of December 31, 1996, the aggregate amount of all Buyer
Nonperforming Assets (as defined below) on the books of Buyer and its
Subsidiaries does not exceed $24,310,000. "Buyer Non-performing Assets" shall
mean (i) all loans and leases(A) that are contractually past due 90 days or more
in the payment of principal and/or interest, (B) that are on nonaccrual status,
(C) where a reasonable doubt exists, in the reasonable judgment of Buyer, as to
the timely future collectibility of principal and/or interest,
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whether or not interest is still accruing or the loan is less than 90 days past
due, (D) where the interest rate terms have been reduced and/or the maturity
dates have been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to pay in
accordance with such initial terms, (E) where a specific reserve allocation
exists in connection therewith, or (F) that have been classified "doubtful",
"loss" or the equivalent thereof by any Regulatory Authority and (ii) all assets
classified as real estate acquired through foreclosure or repossession and other
assets acquired through foreclosure or repossession.
3.17. Employee Benefit Plans. (a) Except as set forth on Schedule 3.17A,
----------------------
neither Buyer nor any Buyer Subsidiary is a party to any existing employment,
management, consulting, deferred compensation, change-in-control or other
similar contract. Schedule 3.17A lists all pension, retirement, supplemental
retirement, savings, profit sharing, stock option, stock purchase, stock
ownership, stock appreciation right, deferred compensation, consulting, bonus,
medical, disability, workers' compensation, vacation, group insurance, severance
and other material employee benefit, incentive and welfare policies, contracts,
plans and arrangements, and all trust agreements related thereto, maintained
(currently or at any time in the last five years) by or contributed to by Buyer
or any Buyer Subsidiary in respect of any of the present or former directors,
officers, or other employees of and/or consultants to Buyer or any Buyer
Subsidiary (collectively "Buyer Employee Plans").
(b) All Buyer Employee Plans have been maintained and operated materially
in accordance with their terms and with the material requirements of all
applicable statutes, orders, rules and final regulations, including without
limitation ERISA and the IRC. All contributions required to be made to Buyer
Employee Plans have been made.
(c) With respect to each of the Buyer Employee Plans which is a pension
plan (as defined in Section 3(2) of ERISA) (the "Buyer Pension Plans"): (i) each
Buyer Pension Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the IRC has been determined to be so qualified by the IRS and,
to the knowledge of Buyer such determination letter may still be relied upon,
and each related trust is exempt from taxation under Section 501(a) of the IRC;
(ii) the actuarial present value of all benefits under each Buyer Pension Plan
which is subject to Title IV of ERISA, valued using the assumptions in the most
recent actuarial report, did not, in each case, as of the last applicable annual
valuation date (as indicated on Schedule 3.17A), exceed the value of the assets
of the Buyer Pension Plan allocable to such vested or accrued benefits; (iii) to
the best knowledge of Buyer there has been no "prohibited transaction," as such
term is defined in Section 4975 of the IRC or Section 406 of ERISA, which could
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subject any Buyer Pension Plan or associated trust, or the Buyer or any Buyer
Subsidiary to any material tax or penalty; (iv) except as set forth on Schedule
3.17C, no Buyer Pension Plan subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable events" with
respect to any Buyer Pension Plan, as that term is defined in Section 4043 of
ERISA for which the 30-day notice requirement has not been waived on or after
January 1, 1985; and (v) no Buyer Pension Plan or any trust created thereunder
has incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived). Except as set forth on Schedule
3.17C, no Buyer Pension Plan is a "multiemployer plan" as that term is defined
in Section 3(37) of ERISA. With respect to each Buyer Pension Plan that is
described in Section 4063 (a) of ERISA (a "Multiple Employer Pension Plan"):
(i) neither Buyer nor any Buyer Subsidiary would have any liability or
obligation to post a bond under Section 4063 of ERISA if Buyer and all Buyer
Subsidiaries were to withdraw from such Multiple Employer Pension Plan; and (ii)
neither Buyer nor any Buyer Subsidiary would have any liability under Section
4064 of ERISA if such Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 3.17D, neither Buyer nor any Buyer
Subsidiary has any liability for any post-retirement health, medical or similar
benefit of any kind whatsoever, except as required by statute or regulation.
(e) Except as set forth on Schedule 3.17E, neither Buyer nor any Buyer
Subsidiary has any material liability under ERISA or the IRC as a result of its
being a member of a group described in Sections 414(b), (c), (m) or (o) of the
IRC.
(f) Except as set forth on Schedule 3.17F neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any material payment becoming due to any
director or employee of Buyer or any Buyer Subsidiary from any of such entities,
(ii) materially increase any benefit otherwise payable under any of the Buyer
Employee Plans or (iii) result in the acceleration of the time of payment of any
such benefit.
3.18. Conduct of Buyer to Date. From and after January 1, 1997 through the
------------------------
date of this Agreement, except as set forth on Schedule 3.18 or in Buyer
Financial Statements or Buyer Reports: (i) Buyer and the Buyer Subsidiaries have
conducted their respective businesses in all material respects in the ordinary
and usual course consistent with past practices; (ii) neither Buyer nor any
Buyer Subsidiary has incurred any material obligation or liability (absolute or
contingent), except normal trade or business obligations or liabilities incurred
in the ordinary course of business, or subjected to Lien any of its assets or
properties other than in the ordinary course of business consistent with past
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practice; (iii) neither Buyer nor any Buyer Subsidiary has discharged or
satisfied any material Lien or paid any material obligation or liability
(absolute or contingent), other than in the ordinary course of business; (iv)
neither Buyer nor any Buyer Subsidiary has sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its material properties or assets
other than for a fair consideration in the ordinary course of business; (v)
except as required by contract or law or in the ordinary course of business,
neither Buyer nor any Buyer Subsidiary has (A) increased the rate of
compensation of, or paid any bonus to, any of its directors, officers, or other
employees, except merit, promotion or annual increases and bonuses in accordance
with existing policy, (B) entered into any new, or amended or supplemented any
existing employment, management, consulting, deferred compensation, severance,
or other similar contract, (C) entered into, terminated, or substantially
modified any of the Buyer Employee Plans or (D) agreed to do any of the
foregoing; (vi) neither Buyer nor any Buyer Subsidiary has suffered any material
damage, destruction, or loss, whether as the result of fire, explosion,
earthquake, accident, casualty, labor trouble, requisition, or taking of
property by any Regulatory Authority, flood, windstorm, embargo, riot, act of
God or the enemy, or other casualty or event, and whether or not covered by
insurance; and (vii) neither Buyer nor any Buyer Subsidiary has canceled or
compromised any debt, except for debts charged off or compromised in accordance
with the past practice of Buyer and its Subsidiaries.
3.19. Proxy Statement, etc. None of the information regarding Buyer or any
--------------------
Buyer Subsidiary supplied or to be supplied by Buyer for inclusion or included
in (i) the Registration Statement, (ii) the Proxy Statement or (iii) any other
documents to be filed with any Regulatory Authority in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and,, with respect to the Proxy Statement,
when mailed, be false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Buyer Meeting and the Selling Stockholder
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Buyer
Meeting. All documents which Buyer or any Buyer Subsidiary is responsible for
filing with any Regulatory Authority in connection with the Merger will comply
as to form in all material respects with the provisions of applicable law.
3.20. State Takeover Statutes. Except as set forth on Schedule 3.20, the
-----------------------
transactions contemplated by this Agreement are not subject to any applicable
state takeover law.
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3.21. Accounting, Tax and Regulatory Matters. Neither Buyer nor any Buyer
--------------------------------------
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent the transactions contemplated hereby
from qualifying as a reorganization within the meaning of Section 368 of the IRC
or (ii) materially impede or delay receipt of any approval referred to in
Section 6.01(b) or the consummation of the transactions contemplated by this
Agreement.
3.22. Brokers and Finders. Except for Hovde Financial, Inc., neither Buyer
-------------------
nor any Buyer Subsidiary nor any of their respective directors, officers or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Buyer or any Buyer
Subsidiary in connection with this Agreement or the transactions contemplated
hereby. Schedule 3.22 discloses bona fide estimates of the amounts of all fees
and expenses expected to be paid by Buyer to all third parties in connection
with the Merger.
3.23. Interest Rate Risk Management Instruments. (a) Set forth on Schedule
-----------------------------------------
3.23A is a list, as of the date hereof, of all interest rate swaps, caps,
floors, and option agreements and other interest rate risk management
arrangements to which Buyer or any of its Subsidiaries is a party or by which
any of their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Buyer or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the best
knowledge of Buyer, in accordance with prudent banking practice and applicable
rules, regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations and are in full force and effect. Buyer and each
of its Subsidiaries has duly performed in all material respects all of its
obligations thereunder to the extent that such obligations to perform have
accrued, and there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
3.24. Accuracy of Information. To the best knowledge of Buyer, the
-----------------------
statements of Buyer contained in this Agreement, the Schedules and any other
written document executed and delivered by or on behalf of Buyer pursuant to the
terms of this Agreement are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary to make the
statements contained therein not misleading.
ARTICLE IV
----------
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CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective Time. Except as
-------------------------------------------------
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, each of Buyer and Seller shall, and shall
cause each of their respective Subsidiaries to, conduct its business according
to the ordinary and usual course consistent with past practices and shall cause
each such Subsidiary to use, consistent with the provisions of Sections 4.02 and
4.04, its best efforts to maintain and preserve its business organization,
employees and advantageous business relationships and retain the services of its
officers and key employees.
4.02. Forbearances of Seller. Except as set forth on Schedule 4.02 or as
----------------------
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, Seller shall not and shall not permit any
of the Seller Subsidiaries to, without the prior written consent of Buyer:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from a Subsidiary of Seller to Seller or another Subsidiary of
Seller), except that Seller may (i) declare and pay cash dividends on the
Seller Common Stock in the aggregate of not more than $2.4 million per
calendar quarterly period and (ii) distribute management fees in the
aggregate of not more than $250,000 per calendar quarterly period;
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any, director, officer or employee, or modify
any of the Seller Employee Plans or grant any salary or wage increase
including incentive or bonus payments), except normal individual increases
in compensation to rank and file employees consistent with past practice,
or as required by law or contract; provided, that Seller may (i) pay
management performance bonuses at times and in amounts consistent with past
practice, which shall be in amounts in the aggregate equal to bonuses
granted with respect to services in 1996 and (ii) make severance and
retention payments pursuant to all employment, severance or similar
agreements or arrangements in effect as of the date hereof or subsequent to
the date hereof (including, without limitation, all employment contracts)
in an aggregate amount not to exceed $5.5 million, subject to cut-back in
individual payments, if necessary, except as set forth on Schedule 4.02B to
assure that no payment to any person will be, when aggregated with all
other payments and benefits to be received by such person, an excess
parachute payment under Section 280G of the IRC;
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(c) authorize, recommend, propose or announce an intention to
authorize, so recommend or propose, or enter into an agreement in principle
with respect to, any merger, consolidation or business combination (other
than the Merger), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
any release or relinquishment of any material contract rights; or
(d) propose or adopt any amendments to its Certificate of
Incorporation or other charter document or Bylaws; or
(e) issue, sell, grant, confer or award any of its Equity Securities
or effect any split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement; or
(f) purchase, redeem, retire, repurchase, or exchange, or otherwise
acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise; or
(g) (i) without first consulting with Buyer, enter into, renew or
increase any loan or credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person or entity or modify
any of the material provisions or renew or otherwise extend the maturity
date of any existing loan or credit commitment (collectively, "Lend to") in
an amount in excess of (A) $1,000,000 in respect of commercial
transactions, including commercial real estate transactions ("Commercial
Transactions") and (B) $1,000,000 in respect of residential real estate
transactions, or in an amount which, or when aggregated with any and all
loans or credit commitments to such person or entity, would be in excess of
(A) $1,000,000 in respect of commercial transactions, including Commercial
Transactions and (B) $1,000,000 in respect of residential real estate
transactions; (ii) without first obtaining the written consent of Buyer,
lend to any person or entity in an amount in excess of $1,000,000 in
respect of Commercial Transactions or in an amount which, when aggregated
with any and all loans or credit commitments to such person or entity,
would be in excess of $1,000,000 in respect of Commercial Transactions;
(iii) Lend to any person other than in accordance with lending policies as
in effect on the date hereof; provided that in the case of clauses (ii) and
--------
(iii) Seller or any Seller Subsidiary may make any such loan in the event
(A) Seller or any Seller Subsidiary has delivered to Buyer or its
designated representative a notice of its intention to make such loan and
such information as Buyer or its designated representative may reasonably
require in respect thereof and (B) Buyer or its designated representative
shall not have reasonably objected
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to such loan by giving written or facsimile notice of such objection within
two business days following the delivery to Buyer of the notice of
intention and information as aforesaid; or (iv) Lend to any person or
entity any of the loans or other extensions of credit to which or
investments in which are on a "watch list" or similar internal report of
Seller or any Seller Subsidiary (except those denoted "pass" thereon), in
an amount in excess of $500,000; provided, however, that nothing in this
-------- -------
paragraph shall prohibit Seller or any Seller Subsidiary from honoring any
contractual obligation in existence on the date of this Agreement.
Notwithstanding the provisions of clauses (i) and (ii) of this Section
4.02(g), Seller shall be authorized without first consulting with Buyer or
obtaining Buyer's prior written consent, to increase the aggregate amount
of any credit facilities theretofore established in favor of any person or
entity (each a "Pre-Existing Facility"), provided that the aggregate amount
of any and all such increases with respect to any Pre-Existing Facility
shall not without Buyer's prior written consent, which consent shall not be
unreasonably withheld or delayed, be in excess of the lesser of 5% of such
Pre-Existing Facility or $25,000; or;
(h) directly or indirectly (including through its officers,
directors, employees, other representatives or the partners of the Selling
Stockholder (including any general or limited partner of the General
Partner of the Selling Stockholder)) initiate, solicit or encourage any
discussions, inquiries or proposals with any third party relating to the
disposition of any significant portion of the business or assets of Seller
or any Seller Subsidiary or the acquisition of Equity Securities of Seller
or any Seller Subsidiary or the merger of Seller or any Seller Subsidiary
with any person (other than Buyer, Seller or another Seller Subsidiary) or
any similar transaction (each such transaction being referred to herein as
an "Acquisition Transaction"), or provide any such person with information
or assistance or negotiate with any such person with respect to an
Acquisition Transaction, and Seller shall promptly notify Buyer orally of
all the relevant details relating to all inquiries, indications of interest
and proposals which it may receive with respect to any Acquisition
Transaction and promptly confirm the same to Buyer in writing; or
(i) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (B) prevent
the transactions contemplated hereby from qualifying as a
36
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reorganization within the meaning of Section 368 of the IRC; or
(j) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible or
liable for the obligations of any other individual, partnership,
corporation or other entity or pay without prior approval of Buyer, which
shall not be unreasonably withheld, any Merger Fees in excess of the amount
set forth on Schedule 2.23; or
(k) materially restructure or materially change its investment
securities portfolio, without prior written consent of Buyer, which consent
shall not be unreasonably withheld or delayed, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported,
or execute any individual investment transaction for its own account (i) in
securities backed by the full faith and credit of the United States or an
agency thereof in excess of $1,000,000 and (ii) in any other investment
securities in excess of $500,000; or
(l) make any awards or agree to make any awards under Seller Employee
Plans which have not been previously disclosed to Buyer in Section 2.17A;
or
(m) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or
omit to take any other act which would make any of the representations and
warranties in Article II of this Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
4.03 Forbearances of Selling Stockholder. During the period from the
-----------------------------------
date of this Agreement to the Effective Time, Selling Stockholder shall not,
without the prior written consent of Buyer authorize, recommend, propose or
announce an intention to authorize, so recommend or propose, or enter into an
agreement in principle with respect to any sale, pledge or other transfer of any
part of the capital stock of Seller.
4.04. Forbearances of Buyer. Except as set forth on Schedule 4.04 or as
---------------------
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, Buyer shall not and shall not permit any
of the Buyer Subsidiaries to, without the prior written consent of Seller:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the Buyer
37
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Subsidiaries to Buyer or to another of the Buyer Subsidiaries), except
that Buyer may pay its regular quarterly dividends in amounts as it shall
determine from time to time and may effect any stock split in the form of a
stock dividend as discussed in the Proxy Statement of Buyer for the 1997
annual meeting of shareholders of Buyer, or such additional stock split in
the form of a stock dividend after consultation with Seller;
(b) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or in any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
except for an acquisition which involves the payment of consideration by
Buyer in an amount equal to less than 25% of the Market Value of the issued
and outstanding shares of Buyer Common Stock as of the date the definitive
agreement relating to such acquisition is executed by all applicable
parties (the "Execution Date"). "Market Value" shall mean the Closing Price
on the last business day preceding the Execution Date multiplied by the
number of issued and outstanding shares of Buyer Common Stock on the
Execution Date;
(c) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Seller or Buyer to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (B) prevent
the transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code; or
(d) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other action which would make any of
the representations and warranties in Article III of this Agreement untrue
or incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
action.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01. Access and Information. Buyer and its Subsidiaries, on the one hand,
----------------------
and Seller and its Subsidiaries, on the other hand, shall each afford to each
other, and to the other's accountants, counsel and other representatives,
reasonable access
38
<PAGE>
during normal business hours, during the period prior to the Effective Time, to
all their respective properties, books, contracts, commitments and records and,
during such period, each shall furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it during such period
pursuant to the requirements of federal and state securities laws and (ii) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Each party hereto shall, and shall cause
its advisors and representatives to, (A) hold confidential all information
obtained in connection with any transaction contemplated hereby with respect to
the other party which is not otherwise public knowledge, (B) return all
documents (including copies thereof) obtained hereunder from the other party to
such other party and (C) use its best efforts to cause all information obtained
pursuant to this Agreement or in connection with the negotiation of this
Agreement to be treated as confidential and not use, or knowingly permit others
to use, any such information unless such information becomes generally available
to the public.
5.02. Registration Statement Regulatory Matters. (a) Buyer shall prepare
-----------------------------------------
and, subject to the review and consent of Seller with respect to matters
relating to Seller, file with the SEC as soon as is reasonably practicable the
Registration Statement (or the equivalent in the form of preliminary proxy
material) with respect to the shares of Buyer Common Stock to be issued in the
Merger after the Effective Time and distributed pursuant to the Distribution.
Buyer shall use all reasonable efforts to cause the Registration Statement to
become effective. Buyer shall also take any action required to be taken under
any applicable state blue sky or securities laws in connection with the issuance
of such shares, and Seller and its Subsidiaries shall furnish Buyer all
information concerning Seller and its Subsidiaries and the Selling Stockholder
thereof as Buyer may reasonably request in connection with any such action.
Buyer shall use its best efforts to cause the shares of Buyer Common Stock to be
issued in the Merger to be approved for listing on the Nasdaq subject to
official notice of issuance, prior to the Effective Time.
(b) Seller and Buyer shall cooperate and use their respective best efforts
to prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement and, as and if directed by Buyer, to consummate such other mergers,
consolidations or asset transfers or other transactions by and among Buyer's
Subsidiaries and Seller's Subsidiaries concurrently with or following the
Effective Time, provided, however, that the foregoing shall not (A) alter or
-------- -------
change the Merger Consideration, (B) adversely affect the tax treatment to
Selling Stockholder as a result of receiving the Merger Consideration or (C)
materially impede or delay receipt of any approval referred to in Section
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6.01(b) or the consummation of the transactions contemplated by this Agreement.
5.03. Approval of Merger and Distribution. Buyer shall call the Buyer
-----------------------------------
Meeting and Selling Stockholder and the General Partner shall call the Seller
Stockholder Meeting, in each case to be held as soon as practicable after the
Registration Statement becomes effective for the purpose of voting upon this
Agreement and the Merger and, in the case of the Selling Stockholder Meeting,
the Distribution. In connection therewith, Buyer shall prepare the Proxy
Statement and, with the approval of each of Buyer and Seller, the Proxy
Statement shall be filed with the SEC and mailed to the stockholders of Buyer
and the Limited Partners and BUC Holders. The Board of Directors of Buyer shall
submit for approval of Buyer's stockholders the matters to be voted upon in
order to authorize the Merger. The General Partner shall submit for approval of
the Limited Partners and BUC Holders the matters to be voted upon in order to
authorize the Merger and the Distribution. The Board of Directors of Buyer
hereby does and will recommend this Agreement and the transactions contemplated
hereby to stockholders of Buyer and will use its best efforts to obtain any vote
of Buyer's stockholders that is necessary for the approval and adoption of this
Agreement and consummation of the transactions contemplated hereby. The General
Partner of Selling Stockholder hereby does and will recommend the Distribution
and this Agreement and the transactions contemplated hereby to the Limited
Partners and BUC Holders and will use its best efforts to obtain any vote of the
Limited Partners and BUC Holders that is necessary for the approval and adoption
of the Distribution and this Agreement and consummation of the transactions
contemplated hereby.
5.04. Current Information. During the period from the date of this
-------------------
Agreement to the Effective Time, each party shall promptly furnish the other
with copies of all monthly and other interim financial statements produced in
the ordinary course of business as the same become available and shall cause one
or more of its designated representatives to confer on a regular and frequent
basis with representatives of the other party. Further, Seller shall furnish to
Buyer within five business days of the end of each month a description of all
loans (including, without limitation, the name of the borrower, the loan amount
and a description of the collateral) originated by Seller Bank during such
month. Each party shall promptly notify the other party of any material change
in its business or operations and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party or the
transactions contemplated hereby and shall keep the other party fully informed
of such events.
5.05. Agreements of Affiliates. As soon as practicable after the date of
------------------------
this Agreement, Seller shall deliver to Buyer a
40
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letter identifying all persons and entities whom Seller believes to be, at the
time this Agreement is submitted to a vote of the Limited Partners, "affiliates"
of Seller for purposes of Rule 145 under the Securities Act. Seller shall use
its best efforts to cause each person or entity who is so identified as an
"affiliate" to deliver to Buyer as soon as practicable thereafter and in any
event no later than ten calendar days after the date hereof, a written agreement
providing that from the date of such agreement each such person will agree not
to sell, pledge, transfer or otherwise dispose of any BUCs held by such person
or any shares of Buyer Common Stock to be received by such person in the
Distribution except in compliance with the applicable provisions of the
Securities Act. Prior to the Effective Time, Seller shall amend and supplement
such letter and use its best efforts to cause each additional person or entity
who is identified as an "affiliate" to execute a written agreement as set forth
in this Section 5.05.
5.06. Expenses. Each party hereto shall bear its own expenses incident to
--------
preparing, entering into and carrying out this Agreement and to consummating the
Merger.
5.07. Miscellaneous Agreements and Consents. (a) Subject to the terms and
-------------------------------------
conditions herein provided, each of the parties hereto agrees to use its
respective best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including without
limitation using its respective best efforts to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby. Each party shall,
and shall cause each of its respective subsidiaries to, use its best efforts to
obtain consents of all third parties and Regulatory Authorities necessary, or in
the opinion of Buyer desirable, for the consummation of the transactions
contemplated by this Agreement.
(b) Subject to applicable laws, regulations and requirements of Regulatory
Authorities, Seller, immediately prior to the Effective Time, shall (i) consult
and cooperate with Buyer regarding the implementation of those policies and
procedures established by Buyer for its governance and that of its Subsidiaries
and not otherwise referenced in Section 5.15 hereof, including, without
limitation, policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources, treasury and legal
functions, and (ii) at the request of Buyer, conform Seller's existing policies
and procedures in respect of such matters to Buyer's policies and procedures or
in the absence of any existing Seller policy or procedure regarding any such
function, introduce Buyer's policies or procedures in respect thereof, unless to
do so would cause Seller or any of the Seller
41
<PAGE>
Subsidiaries to be in violation of any law, rule or regulation of any Regulatory
Authority having jurisdiction over Seller and/or the Seller Subsidiary affected
thereby; provided, however, that prior to the date that it shall be a
--------- -------
requirement hereunder for such policies and procedures to be established, Buyer
shall certify to Seller that Buyer's representations and warranties are true and
correct as of such date, that the approval conditions to its obligations
contemplated by Section 6.01(b) have been satisfied or waived (except to the
extent that any waiting period associated therewith may then have commenced but
not expired) and that Buyer is otherwise in compliance with this Agreement; and
provided, further that Seller shall not be required to take any such action
that is not consistent with GAAP and regulatory accounting principles.
5.08. Employee Benefits. The Seller Employee Plans shall not be terminated
-----------------
by reason of the Merger but shall continue thereafter as plans of the Surviving
Bank until such time as the employees of Seller and the Seller Subsidiaries are
integrated into Buyer's employee benefit plans that are available to other
employees of Buyer and Buyer Subsidiaries, 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. Buyer shall take such steps as are
necessary or required to integrate the employees of Seller and the Seller
Subsidiaries in Buyer's employee benefit plans available to other employees of
Buyer and Buyer Subsidiaries as soon as practicable after the Effective Time,
(i) with full credit for prior service with Seller or any of the Seller
Subsidiaries for all purposes other than determining the amount of benefit
accruals under any defined benefit plan, (ii) without any waiting periods,
evidence of insurability, or application of any pre-existing condition
limitations, and (iii) with full credit for claims arising prior to the
Effective Time for purposes of deductibles, out-of-pocket maximums, benefit
maximums, and all other similar limitations for the applicable plan year during
which the Merger is consummated. Except as otherwise disclosed, each of Buyer
and Seller shall use all reasonable efforts to insure that no amounts paid or
payable by Seller, Seller Subsidiaries, Buyer or Buyer Subsidiaries to or with
respect to any director, former director, employee or former employee of Seller
or any Seller Subsidiary will fail to be deductible for federal income tax
purposes by reason of Section 162(m), 280G or any other Section of the IRC.
5.09. Equity Appreciation Plan and Long Term Incentive Compensation Plan.
------------------------------------------------------------------
Seller shall take all necessary action to insure that the EAP and the Long Term
Incentive Compensation Plan (the "LTIP") shall be paid on or before the
Effective Time and terminate as of the Effective Time.
5.10. Press Releases. Except as may be required by law, Seller and Buyer
--------------
shall consult and agree with each other as to the
42
<PAGE>
form and substance of any proposed press release relating to this Agreement or
any of the transactions contemplated hereby.
5.11. State Takeover Statutes. Seller and Buyer will each take all steps
-----------------------
necessary to exempt the transactions contemplated by this Agreement and any
agreement contemplated hereby from, and if necessary challenge the validity of,
any applicable state takeover law.
5.12. D&O Indemnification. From and after the Effective Time, Buyer agrees
-------------------
to indemnify and hold harmless the past and present employees, agents, directors
or officers of Seller or the Seller Subsidiaries for all acts or omissions
occurring at or prior to the Effective Time to the same extent such persons are
indemnified and held harmless (A) under their respective Certificate of
Incorporation, Charter or Bylaws in the form in effect at the date of this
Agreement, (B) by operation of law, or (C) by virtue of any contract, resolution
or other agreement or document existing at the date of this Agreement, and such
duties and obligations shall continue in full force and effect for so long as
they would (but for the Merger) otherwise survive and continue in full force and
effect. Buyer will provide, or cause to be provided, for a period of not less
than six years from the Effective Time, to the extent available at a cost not
in excess of 200% of the current annual premium cost, single premium tail
coverage, on behalf of the officers and directors of Seller and Seller
Subsidiaries immediately prior to the Effective Time, with policy limits equal
to Seller's existing annual coverage limits.
5.13. Best Efforts. Each of Buyer and Seller undertakes and agrees to use
------------
its best efforts to cause the Merger to qualify as a reorganization within the
meaning of Section 368 of the IRC (including, if necessary, to take reasonable
steps to restructure the transactions contemplated by this Agreement to so
qualify). Each of Buyer and Seller agrees to not take any action that would
materially impede or delay the consummation of the transactions contemplated by
this Agreement or the ability of Buyer or Seller to obtain any approval of any
Regulatory Authority required for the transactions contemplated by this
Agreement or to perform its covenants and agreements under this Agreement.
5.14. Insurance. Each of Buyer and Seller shall cause each of its
---------
respective Subsidiaries to, use its best efforts to maintain its existing
insurance.
5.15. Conforming Entries. (a) Notwithstanding that Seller believes that
------------------
Seller and the Seller Subsidiaries have established all reserves and taken all
provisions for possible loan losses required by GAAP and applicable laws, rules
and regulations, Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to
43
<PAGE>
applicable laws, regulations and the requirements of Regulatory Authorities,
from and after the date of this Agreement to the Effective Time, Seller and
Buyer shall consult and cooperate with each other with respect to conforming the
loan accrual and reserve policies of Seller and the Seller Subsidiaries to those
policies of Buyer, as specified in each case in writing to Seller, based upon
such consultation and as herein after provided.
(b) Subject to applicable laws, regulations and the requirements of Regulatory
Authorities, in addition, from and after the date of this Agreement to the
Effective Time, Seller and Buyer shall consult and cooperate with each other
with respect to determining appropriate Seller accruals, reserves and charges to
establish and take in respect of excess equipment write-off or write-down of
various assets and other appropriate charges and accounting adjustments taking
into account the parties' business plans following the Merger, as specified in
each case in writing to Seller based upon such consultation and as hereinafter
provided.
(c) Subject to applicable laws, regulations and the requirements of Regulatory
Authorities, Seller and Buyer shall consult and cooperate with each other with
respect to determining, as specified in a written notice from Buyer to Seller,
based upon such consultation and as hereinafter provided, the amount and the
timing for recognizing for financial accounting purposes Seller's expenses of
the Merger and the restructuring charges relating to or to be incurred in
connection with the Merger.
(d) Subject to applicable laws, regulations and the requirements of Regulatory
Authorities, Seller shall (i) establish and take such reserves and accruals at
such time as Buyer shall reasonably request to conform Seller's loan, accrual
and reserve policies to Buyer's policies, and (ii) 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, in each case at such times as are reasonably requested by
Buyer; provided, however, that such reserves, accruals and charges are not be
-------- -------
taken until immediately prior to the Effective Time and that on the date such
reserves, accruals and charges are to be taken, Buyer shall certify to Seller
that Buyer's representations and warranties are true and correct as of such
date, that the approval conditions to its obligations contemplated by Section
6.01(b) have been satisfied or waived and that Buyer is otherwise in compliance
with this Agreement; and provided, further that Seller shall not be required to
take any such action that is not consistent with GAAP and regulatory accounting
principles.
44
<PAGE>
(e) No reserves, accruals or charges taken in accordance with Section 5.15(d)
above may be a basis to assert a violation of a breach of a representation,
warranty or covenant of Seller herein.
5.16. Environmental Reports. Seller shall cooperate with Buyer so that
---------------------
Buyer may as soon as reasonably practicable obtain, at Buyer's expense, a report
of a phase one environmental investigation on all real property owned, leased or
operated by Seller or any of the Seller Subsidiaries as of the date hereof and
within ten days after the acquisition or lease of any real property acquired or
leased by Seller or any of the Seller Subsidiaries after the date hereof. If
advisable in light of the phase one report with respect to any parcel of real
property referred to above, in the reasonable opinion of Buyer, Seller shall
also cooperate with Buyer so that Buyer may obtain, at Buyer's expense, a phase
two investigation report to such designated parcels.
5.17. Seller Bank Securities. Seller Bank shall call for redemption at the
----------------------
earliest practicable date permitted pursuant to the related certificate of
designation all issued and outstanding shares of Seller Bank Preferred Stock.
5.18. Agreement with FDIC. Seller shall use its best efforts to obtain the
-------------------
termination on or prior to the Effective Time of all agreements, instruments or
other obligations to which Seller or any Seller Subsidiary and the FDIC is a
party. Seller shall use its best efforts to have received a letter from the
FDIC on or before the Effective Time to the effect that upon the Merger the FDIC
has no claim or rights against any Seller Subsidiary, the Surviving Corporation
or any Surviving Corporation Subsidiary and neither the Seller, any Seller
Subsidiary, the Surviving Corporation nor any Surviving Corporation Subsidiary
has any obligations to the FDIC pursuant to the Assistance Agreement, Limited
Partnership Agreement, this Agreement, the Merger, or otherwise, except for
payment for unredeemed shares of Series A Preferred Stock of Seller Bank in an
amount not to exceed $100 per share.
5.19. Directors of Buyer. The Board of Directors of Buyer shall take all
------------------
requisite corporate action so that at the Effective Time the directors of Buyer
shall include Stephen T. McLin and another person selected by Seller acceptable
to Buyer.
5.20. Indemnification of Buyer. From and after the Effective Time, Selling
------------------------
Stockholder and the General Partner, jointly and severally, agree to indemnify
and hold harmless Buyer and each Buyer Subsidiary and their past and present
employees, agents, directors or officers against any loss, liability, claim,
damage and expense whatsoever, as incurred, for all acts or omissions by Selling
Stockholder or the General Partner arising out of the Distribution and for all
claims of the FDIC arising out of the Assistance Agreement or other rights or
entitlements of the
45
<PAGE>
FDIC as successor to the Federal Savings and Loan Insurance Corporation (the
"FSLIC") in connection with the acquisition of Seller Bank from the FSLIC
(except for payment for unredeemed shares of Series A Preferred Stock of Seller
Bank in an amount not to exceed $100 per share).
5.21. Selling Stockholder and General Partner Approval. Selling Stockholder,
------------------------------------------------
as sole stockholder of Seller, and General Partner as general partner of Selling
Stockholder, shall approve this Agreement, the Merger and the Distribution in
accordance with applicable law.
5.22. Distribution. The Distribution will be conducted by Selling
------------
Stockholder pursuant to the terms of the Limited Partnership Agreement, the
Delaware Revised Uniform Limited Partnership Act and otherwise in accordance
with applicable law, and will occur immediately after the Effective Time.
Selling Stockholder will not vote any shares of Buyer Common Stock prior to the
Distribution.
5.23 EAP and LTIP Distributions. In the event that the approval conditions
--------------------------
to Buyer's obligations contemplated by Section 6.01(b) have been satisfied or
waived and Buyer shall notify Seller pursuant to Section 1.03 hereof at least
five business days prior to December 31, 1997 that the Effective Time shall
occur on a date after December 31, 1997, then at the written request of Buyer,
Seller shall cause Seller Bank to make all distributions pursuant to the EAP and
the LTIP on or prior to December 31, 1997.
ARTICLE VI
----------
CONDITIONS
6.01. Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement, including the Merger (and in the case of the Selling
Stockholder, the Distribution) shall have received the requisite approval of
stockholders of Buyer in accordance with the applicable provisions of the Bylaws
of Buyer and the DGCL and the requisite approval of the Limited Partners and BUC
Holders of Selling Stockholder in accordance with the applicable provisions of
the Limited Partnership Agreement and the Delaware Revised Uniform Limited
Partnership Act.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Regulatory Authorities
without the imposition of any
46
<PAGE>
condition which differs from conditions customarily imposed by such Regulatory
Authorities in orders approving acquisitions of the type contemplated hereby and
in the good faith opinion of Buyer, compliance with which would materially
adversely affect the reasonably anticipated benefits to Buyer.
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to any order, decree or
injunction, and there shall be no pending or threatened order decree or
injunction, of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of any of the Transactions.
(e) There shall be no legislative, statutory or regulatory action (whether
federal or state) pending which prohibits or threatens to prohibit consummation
of the Transactions or which otherwise materially adversely affects the
Transactions.
(f) Each of Buyer and Seller shall have received, from counsel reasonably
satisfactory to it, an opinion reasonably satisfactory in form and substance to
it to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the IRC and that no gain or loss will be recognized by
Selling Stockholder to the extent it receives Buyer Common Stock solely in
exchange for Seller Common Stock.
6.02. Conditions to Obligations of Seller To Effect the Merger. The
--------------------------------------------------------
obligations of Seller to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties of
------------------------------
Buyer set forth in Article III of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time (as though made on and as of the Effective Time except (i) to the extent
such representations and warranties are by their express provisions made as of a
specified date or period which shall, subject to clause (iii), be true and
correct as of such date or period, and (ii) for the effect of transactions
contemplated by this Agreement) and (iii) where the failure or failures of such
representations and warranties to be so true and correct, individually or in the
aggregate, does not result or would not reasonably be expected to result in a
Material Adverse Effect. Seller shall have received a certificate of the
chairman or vice chairman of Buyer to that effect.
47
<PAGE>
(b) Performance of Obligations. Buyer shall have performed in all material
--------------------------
respects all obligations required to be performed by it under this Agreement
prior to the Effective Time, and Seller shall have received a certificate of the
chairman or vice chairman of Buyer to that effect.
6.03. Conditions to Obligations of Buyer To Effect the Merger. The
-------------------------------------------------------
obligations of Buyer to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of
------------------------------
Seller, Selling Stockholder and General Partner set forth in Article II of this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time (as though made on and as of the
Effective Time except (i) to the extent such representations and warranties are
by their express provisions made as of a specific date or period which shall,
subject to clause (iii), be true and correct as of such date or period, and (ii)
for the effect of transactions contemplated by this Agreement) and (iii) where
the failure or failures of such representations and warranties to be so true and
correct, individually or in the aggregate, does not result or would not
reasonably be expected to result in a Material Adverse Effect. Buyer shall have
received a certificate of the President of Seller, the General Partner and the
general partner of the General Partner, as appropriate, to that effect.
(b) Performance of Obligations. Seller, General Partner and Selling
--------------------------
Stockholder shall have performed in all material respects all obligations
required to be performed by them under this Agreement prior to the Effective
Time, and Buyer shall have received a certificate of the President of Seller,
the General Partner and the general partner of the General Partner, as
appropriate, to that effect.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after any requisite approval by
stockholders of Buyer or the Limited Partners and BUC Holders:
(a) by mutual consent by the Board of Directors of Buyer and the Board of
Directors of Seller;
(b) by the Board of Directors of Buyer or the Board of Directors of Seller
at any time after the date that is 12
48
<PAGE>
months after the date of this Agreement or such later date as mutually agreed
upon by the parties if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);
(c) by the Board of Directors of Buyer or the Board of Directors of Seller
if (i) the OTS has denied approval of the Merger and such denial has become
final and nonappealable, (ii) stockholders of Buyer shall not have approved this
Agreement at the Buyer Meeting following a favorable recommendation of Buyer's
Board of Directors or (iii) the Limited Partners or the BUC Holders shall not
have approved this Agreement at the Selling Stockholder Meeting following a
favorable recommendation of the General Partner;
(d) by the Board of Directors of Buyer in the event of a material breach
by Seller or Selling Stockholder of any representation, warranty covenant or
other agreement contained in this Agreement, which breach is not cured within 30
days after written notice thereof to Seller by Buyer;
(e) by the Board of Directors of Seller in the event of a material breach
by Buyer of any representation, warranty, covenant or other agreement contained
in this Agreement, which breach is not cured within 30 days after written notice
thereof is given to Buyer by Seller;
(f) by the Board of Directors of Seller, no earlier than the fifth trading
day or later than the third full trading day immediately preceding the Closing
Date, if the Average Price is less than $42.00 (subject to adjustment pursuant
to Section 1.10), provided that the Board of Directors of Seller will have no
right to terminate pursuant to this paragraph (f) unless Seller shall have
given, during the three trading day period referred to above, one full trading
day's prior written notice of its intention to terminate pursuant to this
Section 7.01(f) and (y) Buyer during such one full trading day notice period
shall not have given written notice (an "Adjustment Election") to Seller that
the Buyer Stock Price shall be calculated pursuant to clause (a) of the second
sentence of Section 1.07(ii)(1).
7.02. Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Sections 7.01(a) through 7.01(c) and Section 7.01(f) above, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Buyer or Seller or their respective officers or
directors except as set forth in the second sentence of Section 5.0l and in
Section 5.06. In the event that this Agreement is terminated by a party (the
"Aggrieved Party") solely by reason of the material breach by
49
<PAGE>
the other party ("Breaching Party") of any of its representations, warranties,
covenants or agreements contained herein then the Aggrieved Party shall be
entitled to such remedies and relief against the Breaching Party as are
available at law or in equity. Moreover, the Aggrieved Party without terminating
this Agreement shall be entitled to a decree of specific performance against the
Breaching Party provided that the Aggrieved Party is not in material breach
hereunder.
7.03. Amendment. This Agreement and the Schedules hereto may be amended by
---------
the parties hereto, by action taken by or on behalf of their respective Boards
of Directors or at any time before or after approval of this Agreement by the
stockholders of Buyer and the Limited Partners and BUC Holders; provided,
---------
however, that after any such approval no such modification shall alter or change
- -------
the amount or the composition of the Merger Consideration. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
Buyer and Seller.
7.04. Severability. Any term, provision, covenant or restriction contained
------------
in this Agreement held by a court or a Regulatory Authority of competent
jurisdiction or the Board to be invalid, void or unenforceable, shall be
ineffective to the extent of such invalidity, voidness or unenforceability, but
neither the remaining terms, provisions, covenants or restrictions contained in
this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
7.05. Waiver. Any term, condition or provision of this Agreement may be
------
waived in writing at any time by the party which is, or whose securityholders
are, entitled to the benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties and Agreements. No
----------------------------------------------------------
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein and
each such representation and warranty shall survive such investigation. Except
as set forth below in this Section 8.01, all representations, warranties and
agreements in this Agreement of Buyer and Seller or in any instrument delivered
by Buyer or Seller pursuant to or in connection with this Agreement shall expire
at the Effective Time or upon termination of this Agreement in accordance with
its terms or, in the case of any other such instrument, in accordance with the
terms of such instrument. In the event of consummation of the
50
<PAGE>
Merger, the agreements contained in or referred to in Sections 5.02(b), 5.07,
5.08, 5.09, 5.12, 5.20 and 5.22 shall survive the Effective Time. In the event
of termination of this Agreement in accordance with its terms, the agreements
contained in or referred to in the second sentence of Section 5.01, Section 5.06
and Section 7.02 shall survive such termination.
8.02. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to be duly received (i) on the date given if
delivered personally or (ii) upon confirmation of receipt, if by facsimile
transmission or (iii) on the date received if mailed by registered or certified
mail (return receipt requested), or (iv) on the business date after being
delivered to a reputable overnight delivery service, if by such service, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Buyer:
Bay View Capital Corporation
2121 South El Camino Real
San Mateo, California 94403-1897
Attention: Robert J. Flax,
Executive Vice President
Copies to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor
Washington, D.C. 20005
Attention: Barry P. Taff, P.C.
Christopher R. Kelly, P C.
Telecopy: (202) 682-0354
(ii) if to Seller:
AMERICA FIRST EUREKA HOLDINGS, INC.
C/O AMERICA FIRST FINANCIAL CORP.
555 California Street, Suite 4490
San Francisco, CA 94104
Attention: Stephen T. McLin
Telecopy: 415-362-7100
Copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq
Telecopy: (212) 403-2000
51
<PAGE>
8.03. Miscellaneous. This Agreement (including the Schedules and other
-------------
written documents referred to herein or provided hereunder) (i) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof, including any confidentiality agreement between the
parties hereto, (ii) except for the provisions of Section 5.08, 5.09, 5.12 and
5.20, is not intended to confer upon any person not a party hereto any rights or
remedies hereunder, (iii) shall not be assigned by operation of law or otherwise
and (iv) shall be governed in all respects by the laws of the State of Delaware.
Nothing in this Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or fail to take any
action in violation of applicable law, rule or regulation. This Agreement may be
executed in counterparts which together shall constitute a single agreement.
52
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller, General Partner and Selling Stockholder
have caused this Agreement to be signed and, by such signature, acknowledged by
their respective partners or officers thereunto duly authorized, and such
signatures to be duly attested to, all as of the date first written above.
Attest: BAY VIEW CAPITAL CORPORATION
- -------
/s/ Robert J. Flax By: /s/ Edward H. Sondker
- ---------------------------------- -----------------------------
Name: Robert J. Flax Name: Edward H. Sondker
Title: Secretary Title: President and Chief
Executive Officer
Attest: AMERICA FIRST EUREKA HOLDINGS,
- ------- INC.
/s/ George H. Krauss By: /s/ Stephen T. McLin
- ---------------------------------- -----------------------------
Name: George H. Krauss Name: Stephen T. McLin
Title: Chairman of the Board Title: Chief Executive
Officer and President
Attest: AMERICA FIRST FINANCIAL FUND
- ------- 1987-A LIMITED PARTNERSHIP
By: American First Capital
Associates Limited Partnership
Five, a general partner
By: AFCA-5 Management
Corporation, a general
partner
/s/ Stephen T. McLin By: /s/ George H. Krauss
- ---------------------------------- -----------------------------
Name: Stephen T. McLin Name: George H. Krauss
Title: Chairman of the Board
and Secretary
53
<PAGE>
Attest:
- ------- AMERICA FIRST CAPITAL ASSOCIATES
LIMITED PARTNERSHIP FIVE
By: AFCA-5 Management
Corporation, a general
partner
/s/ Stephen T. McLin By: /s/ George H. Krauss
- ---------------------------------- -----------------------------
Name: Stephen T. McLin Name: George H. Krauss
Title: Chairman of the Board
and Secretary
54
<PAGE>
EXHIBIT 10.1
OPTION AGREEMENT
----------------
OPTION AGREEMENT ("Option Agreement") dated May 8, 1997, among BAY VIEW
CAPITAL CORPORATION ("Buyer"), a Delaware corporation registered as a savings
and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"),
AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP, a Delaware limited
partnership ("Selling Stockholder"), and AMERICA FIRST CAPITAL ASSOCIATES
LIMITED PARTNERSHIP FIVE, a Delaware limited partnership and the General Partner
of Selling Stockholder (the "General Partner").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of Buyer and the General Partner of Selling
Stockholder have approved an Agreement and Plan of Merger dated as of even date
herewith (the "Agreement") providing for, among other things, the merger of
America First Eureka Holdings, Inc., ("Seller") with and into Buyer;
WHEREAS, as a condition to Buyer entering into the Merger Agreement, Buyer
has required that Selling Stockholder agree, and Selling Stockholder has agreed,
to grant to Buyer the option set forth herein to purchase from Selling
Stockholder authorized but unissued Beneficial Unit Certificates ("BUCs").
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
<PAGE>
1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the same meanings
as in the Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Selling Stockholder
hereby grants to Buyer an option (the "Option") to purchase from Selling
Stockholder up to 1,196,107 authorized but unissued BUCs at a price of $31.08
per unit (the "Purchase Price") payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
------------------
(a) Buyer may exercise the Option, in whole or in part, at any time or from
time to time if a Purchase Event (as defined below) shall have occurred;
provided, however, that (i) to the extent the Option shall not have been
- -------- -------
exercised, it shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) the termination
of the Agreement in accordance with Sections 7.01(a) through 7.01(c) or Sections
7.01(e) through 7.01(f) thereof, and (C) three years following the termination
of the Agreement in accordance with Section 7.01(d) thereof, provided that if
--------
such termination follows an Extension Event (as defined below), the Option shall
not terminate until the date that is 12 months following such termination; (ii)
if the Option cannot be exercised on such day because of any injunction, order
or similar restraint issued by a court of competent jurisdiction, the Option
shall expire on the 30th business day after such injunction, order or restraint
shall have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the
2
<PAGE>
case may be; and (iii) that any such exercise shall be subject to compliance
with applicable law, including the HOLA.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) Selling Stockholder or any of its Subsidiaries, without having
received prior written consent from Buyer, shall have entered into,
authorized, recommended, proposed or publicly announced its intention to
enter into, authorize, recommend, or propose, an agreement, arrangement or
understanding with any person (other than Buyer or any of its Subsidiaries)
to (A) effect a merger or consolidation or similar transaction involving
Seller or any of its Subsidiaries (other than internal mergers,
reorganizing actions, consolidations or dissolutions involving only
existing Subsidiaries of Seller), (B) purchase, lease or otherwise acquire
15% or more of the assets of Seller or any of its Subsidiaries, or (C)
purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or similar transaction) Beneficial Ownership (as defined
below) of BUCs representing more than 15% of the voting power of Selling
Stockholder or any of its Subsidiaries;
(ii) any person (other than Buyer or any Subsidiary of Buyer or any
person acting in concert with Buyer, or Seller or any Subsidiary of Seller
in a fiduciary capacity) shall have acquired Beneficial Ownership or the
right to acquire Beneficial Ownership of more than 15% of the voting power
of Selling Stockholder; or
3
<PAGE>
(iii) The General Partner shall have withdrawn or modified in a manner
adverse to Buyer the recommendation of the General Partner with respect to
the Agreement or the Distribution, in each case after an Extension Event;
or
(iv) the Limited Partners of Seller shall not have approved the
Agreement or the Distribution at the Selling Stockholder Meeting, or such
Meeting shall not have been held or shall have been canceled prior to
termination of the Agreement in accordance with its terms, in each case
after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any
of the following events :
(i) a Purchase Event of the type specified in clauses (b) (i) and (b)
(ii) above;
(ii) any person (other than Buyer or any of its Subsidiaries) shall
have "commenced" (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase BUCs such
that, upon consummation of such offer, such person would have Beneficial
Ownership or the right to acquire Beneficial Ownership of more than 15% of
the voting power of Selling Stockholder; or,
(iii) any person (other than Buyer or any Subsidiary of Buyer, or
Selling Stockholder or any Subsidiary of Selling Stockholder in a fiduciary
capacity) shall have publicly announced its willingness, or shall have
publicly announced a proposal, or publicly disclosed an intention to make a
4
<PAGE>
proposal, (x) to make an offer described in clause (ii) above or (y) to
engage in a transaction described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and "Beneficially Own"
shall have the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
(e) In the event Buyer wishes to exercise the Option, it shall deliver to
Selling Stockholder a written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of BUCs it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 calendar days from the Notice Date for the
closing of such purchase (the "Closing Date").
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Buyer shall pay to
Selling Stockholder the aggregate purchase price for the BUCs purchased pursuant
to the exercise of the Option in immediately available funds by wire transfer to
a bank account designated by Selling Stockholder.
(b) At such closing, simultaneously with the delivery of cash as provided
in Section 4(a), Selling Stockholder shall deliver to Buyer a certificate or
certificates representing the number of BUCs purchased by Buyer, registered in
the name of Buyer or a nominee designated in writing by Buyer, and Buyer shall
deliver to Selling Stockholder a letter agreeing that Buyer shall not offer to
sell, pledge or otherwise dispose of such BUCs in violation of applicable law or
the provisions of this Option Agreement.
5
<PAGE>
(c) If at the time of issuance of any BUCs pursuant to any exercise of the
Option, Selling Stockholder shall have issued any BUC purchase rights or similar
securities to holders of BUCs, then each such BUC shall also represent rights
with terms substantially the same as and at least as favorable to Buyer as those
issued to other holders of BUCs.
(d) Certificates for BUCs delivered at any closing hereunder shall be
endorsed with a restrictive legend which shall read substantially as follows:
The transfer of the Beneficial Unit Certificates represented by this
certificate is subject to certain provisions of an agreement between the
registered holder hereof and ___________________, a copy of which is on
file at the principal office of _____________, and to resale restrictions
arising under the Securities Act of 1933 and any applicable state
securities laws. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by ___________________ of a written
request therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Buyer shall have delivered
to Selling Stockholder an opinion of counsel, in form and substance reasonably
satisfactory to Selling Stockholder and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and any applicable
state securities laws.
5. Authorization, etc.
-------------------
(a) Selling Stockholder hereby represents and warrants to Buyer that:
(i) Selling Stockholder has full partnership authority to execute and
deliver this Option Agreement and, subject to Section 11(i), to consummate
the transactions contemplated hereby;
6
<PAGE>
(ii) such execution, delivery and consummation have been authorized by
the General Partner, and no other partnership proceedings are necessary
therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Selling
Stockholder, enforceable against Selling Stockholder in accordance with its
terms; and
(iv) Selling Stockholder has taken all necessary partnership action to
authorize and reserve and, subject to Section 11(i), permit it to issue
and, at all times from the date hereof through the date of the exercise in
full or the expiration or termination of the Option, shall have reserved
for issuance upon exercise of the Option, 1,196,107 BUCs of Selling
Stockholder, all of which, upon issuance pursuant hereto, shall be duly
authorized, validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all claims, liens, encumbrances, restrictions
(other than federal and state securities restrictions) and security
interests and not subject to any preemptive rights.
(b) Buyer hereby represents and warrants to Selling Stockholder that:
(i) Buyer has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Buyer, and no other corporate proceedings
are necessary therefor;
7
<PAGE>
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms; and
(iv) any BUC or other securities acquired by Buyer upon exercise of
the Option will not be taken with a view to the public distribution thereof
and will not be transferred or otherwise disposed of except in compliance
with the Securities Act.
6. Adjustment upon Changes in Capitalization.
-----------------------------------------
In the event of any change in the securities of Selling Stockholder by
reason of dividends, split-ups, recapitalizations or the like, the type and
number of BUCs subject to the Option, and the purchase price per unit, as the
case may be, shall be adjusted appropriately. In the event that any additional
BUCs are issued after the date of this Option Agreement (other than pursuant to
an event described in the preceding sentence or pursuant to this Option
Agreement), the number of BUCs subject to the Option shall be adjusted so that,
after such issuance, it equals at least 19.9% of the number of BUCs then issued
and outstanding (without considering any shares subject to or issued pursuant to
the Option).
7. Repurchase.
----------
(a) Subject to Section 11(i), at the request of Buyer at any time
commencing upon the occurrence of a Purchase Event and ending 13 months
immediately thereafter (the "Repurchase Period"), Selling Stockholder (or any
successor entity thereof) shall repurchase the Option from Buyer together with
all (but not less than all, subject
8
<PAGE>
to Section 10) BUCs purchased by Buyer pursuant thereto with respect to which
Buyer then has Beneficial Ownership, at a price (per unit, the "Per Unit
Repurchase Price") equal to the sum of:
(i) The exercise price paid by Buyer for any BUCs acquired pursuant
to the Option;
(ii) The difference between (A) the "Market/Tender Offer Price" for
BUCs (defined as the higher of (x) the highest price per unit at which a
tender or exchange offer has been made for BUCs or (y) the highest closing
mean of the "bid" and the "ask" price per BUC reported by the Nasdaq, the
automated quotation system of the National Association of Securities
Dealers, Inc., for any day within that portion of the Repurchase Period
which precedes the date Buyer gives notice of the required repurchase under
this Section 7) and (B) the exercise price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6),
multiplied by the number of BUCs with respect to which the Option has not
been exercised, but only if the Market/Tender Offer Price is greater than
such exercise price;
(iii) The difference between the Market/Tender Offer Price and the
exercise price paid by Buyer for any BUC purchased pursuant to the exercise
of the Option, multiplied by the number of units so purchased, but only if
the Market/Tender Offer Price is greater than such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses incurred in connection
with the transactions contemplated by the Merger
9
<PAGE>
Agreement, including, without limitation, legal, accounting and investment
banking fees.
(b) In the event Buyer exercises its rights under this Section 7, Selling
Stockholder shall, within ten business days thereafter, pay the required amount
to Buyer by wire transfer of immediately available funds to an account
designated by Buyer and Buyer shall surrender to Selling Stockholder the Option
and the certificates evidencing the BUCs purchased thereunder with respect to
which Buyer then has Beneficial Ownership, and Buyer shall warrant that it has
sole record and Beneficial Ownership of such certificates and that the same are
free and clear of all liens, claims, charges, restrictions and encumbrances of
any kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Buyer and reasonably acceptable
to Selling Stockholder.
8. Repurchase at Option of Selling Stockholder and First Refusal.
-------------------------------------------------------------
(a) Except to the extent that Buyer shall have previously exercised its
rights under Section 7, at the request of Selling Stockholder during the six-
month period commencing 13 months following the first occurrence of a Purchase
Event, Selling Stockholder may repurchase from Buyer, and Buyer shall sell to
Selling Stockholder, all (but not less than all, subject to Section 10) of the
BUCs acquired by Buyer pursuant hereto and with respect to which Buyer has
Beneficial Ownership at the time of such repurchase at a price per unit equal to
the greater of (i) 110% of
10
<PAGE>
the Market/Tender Offer Price per BUC, (ii) the Per Unit Repurchase Price or
(iii) the sum of (A) the aggregate Purchase Price of the BUCs so repurchased
plus (B) interest on the aggregate Purchase Price paid for the BUCs so
repurchased from the date of purchase to the date of repurchase at the highest
rate of interest announced by Buyer Bank as its prime or base lending or
reference rate during such period, less any dividends received on the BUCs so
repurchased, plus (C) Buyer's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Agreement, including,
without limitation, legal, accounting and investment banking fees. Any
repurchase under this Section 8(a) shall be consummated in accordance with
Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and prior to
the earlier of (i) the expiration of 18 months immediately following such
Purchase Event or (ii) the expiration or termination of the Option, Buyer shall
desire to sell, assign, transfer or otherwise dispose of the Option or all or
any of the BUCs acquired by it pursuant to the Option, it shall give Selling
Stockholder written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by Buyer to Selling
Stockholder, which may be accepted within ten business days of the receipt of
such Offeror's Notice, on the same terms and conditions and at the same price at
which Buyer is proposing to transfer the Option or such BUCs to a third party.
The purchase of the Option or any such BUCs by Selling Stockholder shall be
closed within ten business days of the date of the acceptance of the offer and
the purchase
11
<PAGE>
price shall be paid to Buyer by wire transfer of immediately available funds to
an account designated by Buyer. In the event of the failure or refusal of
Selling Stockholder to purchase the Option or all the BUCs covered by the
Offeror's Notice or if any Regulatory Authority disapproves Selling
Stockholder's proposed purchase of the Option or such BUCs, Buyer may, within 60
days from the date of the Offeror's Notice, sell all, but not less than all, of
the Option or such BUCs to such third party at no less than the price specified
and on terms no more favorable to the purchaser than those set forth in the
Offeror's Notice. The requirements of this Section 8(b) shall not apply to (i)
any disposition as a result of which the proposed transferee would Beneficially
Own not more than 2% of the voting power of Selling Stockholder or (ii) any
disposition of BUCs by a person to whom Buyer has sold BUCs issued upon exercise
of the Option.
9. Registration Rights.
-------------------
At any time after a Purchase Event, Selling Stockholder shall, if requested
by any holder or beneficial owner of BUCs issued upon exercise of the Option
(except any beneficial holder who acquired all of such holder's BUCs in a
transaction exempt from the requirements of Section 8(b) by reason of clause (i)
thereof) (each a "Holder"), as expeditiously as possible file a registration
statement on a form for general use under the Securities Act if necessary in
order to permit the sale or other disposition of the BUCs that have been
acquired upon exercise of the Option in accordance with the intended method of
sale or other disposition requested by any such Holder (it being understood and
agreed that any such sale or other disposition shall be effected on a widely
12
<PAGE>
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall Beneficially Own more than 2% of the BUCs then outstanding). Each such
Holder shall provide all information reasonably requested by Selling Stockholder
for inclusion in any registration statement to be filed hereunder. Selling
Stockholder shall use its best efforts to cause such registration statement
first 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 as may be reasonably necessary to effect such sales or other
dispositions. The registration effected under this Section 9 shall be at
Selling Stockholder's expense except for underwriting commissions and the fees
and disbursements of such Holders' counsel attributable to the registration of
such BUCs. In no event shall Selling Stockholder be required to effect more
than one registration hereunder. The filing of the registration statement
hereunder may be delayed for such period of time as may reasonably be required
to facilitate any public distribution by Selling Stockholder of BUCs or if a
special audit of Selling Stockholder would otherwise be required in connection
therewith. If requested by any such Holder in connection with such
registration, Selling Stockholder shall become a party to any underwriting
agreement relating to the sale of such certificates, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
parties similarly situated. Upon receiving any request for registration under
this Section 9 from any Holder, Selling Stockholder agrees to send a copy
thereof to any other person known to Selling
13
<PAGE>
Stockholder to be entitled to registration rights under this Section 9, in each
case by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies.
10. Severability.
------------
Any term, provision, covenant or restriction contained in this Option
Agreement held by a court or a Regulatory Authority of competent jurisdiction to
be invalid, void or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the remaining terms,
provisions, covenants or restrictions contained in this Option Agreement nor the
validity or enforceability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or restriction contained in
this Option Agreement that is so found to be so broad as to be unenforceable
shall be interpreted to be as broad as is enforceable. If for any reason such
court or Regulatory Authority determines that applicable law will not permit
Buyer or any other person to acquire, or Selling Stockholder to repurchase or
purchase, the full number of BUCs provided in Section 2 hereof (as adjusted
pursuant to Section 6 hereof), it is the express intention of the parties hereto
to allow Buyer or such other person to acquire, or Selling Stockholder to
repurchase or purchase, such lesser number BUCs as may be permissible, without
any amendment or modification hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall pay all costs and expenses
--------
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of
14
<PAGE>
its own financial consultants, investment bankers, accountants and counsel,
except as otherwise provided herein.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
----------------
Option Agreement and the Agreement contain the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
(c) Successors; No Third Party Beneficiaries. The terms and conditions of
----------------------------------------
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(d) Assignment. Other than as provided in Sections 8 and 9 hereof, neither
----------
of the parties hereto may sell, transfer, assign or otherwise dispose of any of
its rights or obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or otherwise),
without the express written consent of the other party.
(e) Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.02 of the Agreement (which is incorporated herein by
reference).
(f) Counterparts. This Option Agreement may be executed in counterparts,
------------
and each such counterpart shall be deemed to be an
15
<PAGE>
original instrument, but both such counterparts together shall constitute but
one agreement.
(g) Specific Performance. The parties hereto agree that if for any reason
--------------------
Buyer or Selling Stockholder shall have failed to perform its obligations under
this Option Agreement, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to
agreements made and entirely to be performed within such state. Nothing in this
Option Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of applicable law, rule or regulation.
(i) Regulatory Approvals; Section 16(b). If, in connection with (A) the
-----------------------------------
exercise of the Option under Section 3 or a sale by Buyer to a third party under
Section 8, (B) a repurchase by Selling Stockholder under Section 7 or a
repurchase or purchase by Selling Stockholder under Section 8, prior
notification to or approval of the OTS or any other Regulatory Authority is
required, then the required notice or application for approval shall be promptly
filed
16
<PAGE>
and expeditiously processed and periods of time that otherwise would run
pursuant to such Sections shall run instead from the date on which any such
required notification period has expired or been terminated or such approval has
been obtained, and in either event, any requisite waiting period shall have
passed. In the case of clause (A) of this subsection (i), such filing shall be
made by Buyer, and in the case of clause (B) of this subsection (i), such filing
shall be made by Selling Stockholder, provided that each of Buyer and Selling
Stockholder shall use its best efforts to make all filings with, and to obtain
consents of, all third parties and Regulatory Authorities necessary to the
consummation of the transactions contemplated hereby. Periods of time that
otherwise would run pursuant to Sections 3, 7 or 8 shall also be extended to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act.
(j) No Breach of Agreement Authorized. Nothing contained in this Option
---------------------------------
Agreement shall be deemed to authorize Selling Stockholder to issue any BUCs in
breach of, or otherwise breach any of, the provisions of the Agreement.
(k) Waiver and Amendment. Any provision of this Agreement may be waived at
--------------------
any time by the party that is entitled to the benefits of such provision. This
Option Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
17
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
BAY VIEW CAPITAL CORPORATION
By:/s/ Edward H. Sondker
-----------------------------
Name: Edward H. Sondker
Title: President and Chief
Executive Officer
AMERICA FIRST FINANCIAL FUND
1987-A LIMITED PARTNERSHIP
By: American First Capital
Associates Limited Partnership
Five, a general partner
By: AFCA-5 Management
Corporation, a
general partner
By:/s/ George H. Krauss
-----------------------------
Name: George H. Krauss
Title: Chairman of the Board and
Secretary
AMERICA FIRST CAPITAL ASSOCIATES
LIMITED PARTNERSHIP FIVE
By: AFCA-5 Management Corporation,
a general partner
By:/s/ George H. Krauss
-----------------------------
Name: George H. Krauss
Title: Chairman of the Board and
Secretary
18
<PAGE>
EXHIBIT 10.2
OPTION AGREEMENT
----------------
OPTION AGREEMENT ("Option Agreement") dated May 8, 1997, among BAY VIEW
CAPITAL CORPORATION ("Buyer"), a Delaware corporation registered as a savings
and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"),
and AMERICA FIRST EUREKA HOLDINGS, INC., a Delaware corporation ("Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of Buyer and the Board of Directors of
Seller have approved an Agreement and Plan of Merger dated as of even date
herewith (the "Agreement") providing for, among other things, the merger of
Seller with and into Buyer;
WHEREAS, as a condition to Seller entering into the Merger Agreement,
Seller has required that Buyer agree, and Buyer has agreed, to grant to Seller
the option set forth herein to purchase authorized but unissued shares of Buyer
Common Stock.
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
<PAGE>
1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the same meanings
as in the Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Buyer hereby grants
to Seller an option (the "Option") to purchase from Buyer up to 1,290,530
authorized and unissued shares of Buyer Common Stock at a price of $51 3/4 per
share (the "Purchase Price") payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
------------------
(a) Seller may exercise the Option, in whole or in part, at any time or
from time to time if a Purchase Event (as defined below) shall have occurred;
provided, however, that (i) to the extent the Option shall not have been
- -------- -------
exercised, it shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) the termination
of the Agreement in accordance with Sections 7.01(a) through 7.01(d) or
Section 7.01(f) thereof, and (C) three years following the termination of the
Agreement in accordance with Section 7.01(e) thereof, provided that if such
--------
termination follows an Extension Event (as defined below), the Option shall not
terminate until the date that is 12 months following such termination; (ii) if
the Option cannot be exercised on such day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the Option shall
expire on the 30th business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be; and
2
<PAGE>
(iii) that any such exercise shall be subject to compliance with applicable law,
including the HOLA.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) Buyer or any of its Subsidiaries, without having received prior
written consent from Seller, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or
understanding with any person (other than Seller or any of its
Subsidiaries, Selling Stockholder or General Partner) to (A) effect a
merger or consolidation or similar transaction involving Buyer or any of
its Subsidiaries (other than internal mergers, reorganizing actions,
consolidations or dissolutions involving only existing Subsidiaries of
Buyer), (B) purchase, lease or otherwise acquire 15% or more of the assets
of Buyer or any of its Subsidiaries, or (C) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or similar
transaction) Beneficial Ownership (as defined below) of Common Stock
representing more than 15% of the voting power of Buyer or any of its
Subsidiaries;
(ii) any person (other than Seller or any of its Subsidiaries, Selling
Stockholder or General Partner or any person acting in concert with any
such parties, or Buyer or any Subsidiary of Buyer in a fiduciary capacity)
shall have acquired Beneficial Ownership or the right to acquire Beneficial
Ownership of more than 15% of the voting power of Buyer; or
3
<PAGE>
(iii) Buyer's Board of Directors shall have withdrawn or modified in a
manner adverse to Seller the recommendation of the Board of Directors with
respect to the Agreement, in each case after an Extension Event; or
(iv) the holders of Buyer Common Stock shall not have approved the
Agreement at the Buyer Meeting, or such Meeting shall not have been held or
shall have been canceled prior to termination of the Agreement in
accordance with its terms, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event of the type specified in clauses (b) (i) and
(b) (ii) above;
(ii) any person (other than Seller or any of its Subsidiaries, Selling
Stockholder or General Partner) shall have "commenced" (as such term is
defined in Rule 14d-2 under the Exchange Act), or shall have filed a
registration statement under the Securities Act with respect to, a tender
offer or exchange offer to purchase shares of Buyer Common Stock such that,
upon consummation of such offer, such person would have Beneficial
Ownership or the right to acquire Beneficial Ownership of more than 15% of
the voting power of Buyer; or,
(iii) any person (other than Seller or any Subsidiary of Seller,
Selling Stockholder or General Partner, or Buyer or any Subsidiary of Buyer
in a fiduciary capacity) shall have publicly announced its willingness, or
shall have publicly announced a proposal, or publicly disclosed an
intention to
4
<PAGE>
make a proposal, (x) to make an offer described in clause (ii) above or (y)
to engage in a transaction described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and "Beneficially Own"
shall have the meanings ascribed to them in Rule 13d-3 under the Exchange Act.
(e) In the event Seller wishes to exercise the Option, it shall deliver to
Buyer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares of Buyer Common Stock
it intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 calendar days from the Notice
Date for the closing of such purchase (the "Closing Date").
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Seller shall pay to
Buyer the aggregate purchase price for the shares of Buyer Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Buyer.
(b) At such closing, simultaneously with the delivery of cash as provided
in Section 4(a), Buyer shall deliver to Seller a certificate or certificates
representing the number of shares of Buyer Common Stock purchased by Seller,
registered in the name of Seller or a nominee designated in writing by Seller,
and Seller shall deliver to Buyer a letter agreeing that Seller shall not offer
to sell, pledge or otherwise dispose of such shares in violation of applicable
law or the provisions of this Option Agreement.
5
<PAGE>
(c) If at the time of issuance of any Buyer Common Stock pursuant to any
exercise of the Option, Buyer shall have issued any share purchase rights or
similar securities to holders of Buyer Common Stock, then each such share of
Buyer Common Stock shall also represent rights with terms substantially the same
as and at least as favorable to Seller as those issued to other holders of Buyer
Common Stock.
(d) Certificates for Buyer Common Stock delivered at any closing hereunder
shall be endorsed with a restrictive legend which 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
___________________, a copy of which is on file at the principal office of
_____________, and to resale restrictions arising under the Securities Act
of 1933 and any applicable state securities laws. A copy of such agreement
will be provided to the holder hereof without charge upon receipt by
___________________ of a written request therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Seller shall have delivered
to Buyer an opinion of counsel, in form and substance reasonably satisfactory to
Buyer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and any applicable state securities laws.
5. Authorization, etc.
-------------------
(a) Buyer hereby represents and warrants to Seller that:
(i) Buyer has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
6
<PAGE>
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors, and no other corporate actions are necessary
therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms; and
(iv) Buyer has taken all necessary corporate action to authorize and
reserve and, subject to Section 11(i), permit it to issue and, at all times
from the date hereof through the date of the exercise in full or the
expiration or termination of the Option, shall have reserved for issuance
upon exercise of the Option, 1,290,530 shares of Buyer Common Stock, all of
which, upon issuance pursuant hereto, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, encumbrances, restrictions (other than federal and
state securities restrictions) and security interests and not subject to
any preemptive rights.
(b) Seller hereby represents and warrants to Buyer that:
(i) Seller has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Seller, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally
7
<PAGE>
binding obligation of Seller, enforceable against Seller in accordance with
its terms; and
(iv) any Buyer Common Stock or other securities acquired by Seller
upon exercise of the Option will not be taken with a view to the public
distribution thereof and will not be transferred or otherwise disposed of
except in compliance with the Securities Act.
6. Adjustment upon Changes in Capitalization.
-----------------------------------------
In the event of any change in Buyer Common Stock by reason of dividends,
split-ups, recapitalizations or the like, the type and number of shares subject
to the Option, and the purchase price per share, as the case may be, shall be
adjusted appropriately. In the event that any additional shares of Buyer Common
Stock are issued after the date of this Option Agreement (other than pursuant to
an event described in the preceding sentence or pursuant to this Option
Agreement), the number of Shares of Buyer Common Stock subject to the Option
shall be adjusted so that, after such issuance, it equals at least 19.9% of the
number of shares of Buyer Common Stock then issued and outstanding (without
considering any shares subject to or issued pursuant to the Option).
7. Repurchase.
----------
(a) Subject to Section 11(i), at the request of Seller at any time
commencing upon the occurrence of a Purchase Event and ending 13 months
immediately thereafter (the "Repurchase Period"), Buyer (or any successor entity
thereof) shall repurchase the Option from Seller together with all (but not less
than all, subject to Section 10) shares of Buyer Common Stock purchased by
Seller pursuant thereto with respect to which Seller then has Beneficial
Ownership,
8
<PAGE>
at a price (per share, the "Per share Repurchase Price") equal to the sum of:
(i) The exercise price paid by Seller for any shares of Buyer Common
Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer Price" for
share of Buyer Common Stock (defined as the higher of (x) the highest price
per share at which a tender or exchange offer has been made for shares of
Buyer Common Stock or (y) the highest closing mean of the "bid" and the
"ask" price per share of Buyer Common Stock reported by the Nasdaq, the
automated quotation system of the National Association of Securities
Dealers, Inc., for any day within that portion of the Repurchase Period
which precedes the date Seller gives notice of the required repurchase
under this Section 7) and (B) the exercise price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6),
multiplied by the number of shares of Buyer Common Stock with respect to
which the Option has not been exercised, but only if the Market/Tender
Offer Price is greater than such exercise price;
(iii) The difference between the Market/Tender Offer Price and the
exercise price paid by Seller for any shares of Buyer Common Stock
purchased pursuant to the exercise of the Option, multiplied by the number
of shares so purchased, but only if the Market/Tender Offer Price is
greater than such exercise price; and
(iv) Seller's reasonable out-of-pocket expenses incurred in connection
with the transactions contemplated by the Merger
9
<PAGE>
Agreement, including, without limitation, legal, accounting and investment
banking fees.
(b) In the event Seller exercises its rights under this Section 7, Buyer
shall, within ten business days thereafter, pay the required amount to Seller by
wire transfer of immediately available funds to an account designated by Seller
and Seller shall surrender to Buyer the Option and the certificates evidencing
the shares of Buyer Common Stock purchased thereunder with respect to which
Seller then has Beneficial Ownership, and Seller shall warrant that it has sole
record and Beneficial Ownership of such certificates and that the same are free
and clear of all liens, claims, charges, restrictions and encumbrances of any
kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Seller and reasonably acceptable
to Buyer.
8. Repurchase at Option of Buyer and First Refusal.
-----------------------------------------------
(a) Except to the extent that Seller shall have previously exercised its
rights under Section 7, at the request of Buyer during the six-month period
commencing 13 months following the first occurrence of a Purchase Event, Buyer
may repurchase from Seller, and Seller shall sell to Buyer, all (but not less
than all, subject to Section 10) of the Buyer Common Stock acquired by Seller
pursuant hereto and with respect to which Seller has Beneficial Ownership at the
time of such repurchase at a price per share equal to the greater of (i) 110% of
the Market/Tender Offer Price per share, (ii) the Per Share Repurchase Price or
(iii) the sum of (A)
10
<PAGE>
the aggregate Purchase Price of the shares so repurchased plus (B) interest on
the aggregate Purchase Price paid for the shares so repurchased from the date of
purchase to the date of repurchase at the highest rate of interest announced by
Seller Bank as its prime or base lending or reference rate during such period,
less any dividends received on the shares so repurchased, plus (C) Seller's
reasonable out-of-pocket expenses incurred in connection with the transactions
contemplated by the Agreement, including, without limitation, legal, accounting
and investment banking fees. Any repurchase under this Section 8(a) shall be
consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and prior to
the earlier of (i) the expiration of 18 months immediately following such
Purchase Event or (ii) the expiration or termination of the Option, Seller shall
desire to sell, assign, transfer or otherwise dispose of the Option or all or
any of the share of Buyer Common Stock acquired by it pursuant to the Option, it
shall give Buyer written notice of the proposed transaction (an "Offeror's
Notice"), identifying the proposed transferee, and setting forth the terms of
the proposed transaction. An Offeror's Notice shall be deemed an offer by
Seller to Buyer, which may be accepted within ten business days of the receipt
of such Offeror's Notice, on the same terms and conditions and at the same price
at which Seller is proposing to transfer the Option or such shares to a third
party. The purchase of the Option or any such shares by Buyer shall be closed
within ten business days of the date of the acceptance of the offer and the
purchase price shall be paid to Seller by wire transfer of immediately available
funds to an
11
<PAGE>
account designated by Seller. In the event of the failure or refusal of Buyer
to purchase the Option or all the shares covered by the Offeror's Notice or if
any Regulatory Authority disapproves Buyer's proposed purchase of the Option or
such shares, Seller may, within 60 days from the date of the Offeror's Notice,
sell all, but not less than all, of the Option or such shares to such third
party at no less than the price specified and on terms no more favorable to the
purchaser than those set forth in the Offeror's Notice. The requirements of
this Section 8(b) shall not apply to (i) any disposition as a result of which
the proposed transferee would Beneficially Own not more than 2% of the voting
power of Buyer or (ii) any disposition of Buyer Common Stock by a person to whom
Seller has sold Buyer Common Stock issued upon exercise of the Option.
9. Registration Rights.
-------------------
At any time after a Purchase Event, Buyer shall, if requested by any holder
or beneficial owner of shares of Buyer Common Stock issued upon exercise of the
Option (except any beneficial holder who acquired all of such holder's shares in
a transaction exempt from the requirements of Section 8(b) by reason of clause
(i) thereof) (each a "Holder"), as expeditiously as possible file a registration
statement on a form for general use under the Securities Act if necessary in
order to permit the sale or other disposition of the shares of Buyer Common
Stock that have been acquired upon exercise of the Option in accordance with the
intended method of sale or other disposition requested by any such Holder (it
being understood and agreed that any such sale or other disposition shall be
effected on a widely distributed basis so
12
<PAGE>
that, upon consummation thereof, no purchaser or transferee shall Beneficially
Own more than 2% of the shares of Buyer Common Stock then outstanding). Each
such Holder shall provide all information reasonably requested by Buyer for
inclusion in any registration statement to be filed hereunder. Buyer shall use
its best efforts to cause such registration statement first 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 as may be reasonably
necessary to effect such sales or other dispositions. The registration effected
under this Section 9 shall be at Buyer's expense except for underwriting
commissions and the fees and disbursements of such Holders' counsel attributable
to the registration of such Buyer Common Stock. In no event shall Buyer be
required to effect more than one registration hereunder. The filing of the
registration statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by Buyer of Buyer
Common Stock or if a special audit of Buyer would otherwise be required in
connection therewith. If requested by any such Holder in connection with such
registration, Buyer shall become a party to any underwriting agreement relating
to the sale of such certificates, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for parties similarly
situated. Upon receiving any request for registration under this Section 9 from
any Holder, Buyer agrees to send a copy thereof to any other person known to
Buyer to be entitled to registration rights under this Section 9, in each case
by promptly mailing the same, postage
13
<PAGE>
prepaid, to the address of record of the persons entitled to receive such
copies.
10. Severability.
------------
Any term, provision, covenant or restriction contained in this Option
Agreement held by a court or a Regulatory Authority of competent jurisdiction to
be invalid, void or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the remaining terms,
provisions, covenants or restrictions contained in this Option Agreement nor the
validity or enforceability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or restriction contained in
this Option Agreement that is so found to be so broad as to be unenforceable
shall be interpreted to be as broad as is enforceable. If for any reason such
court or Regulatory Authority determines that applicable law will not permit
Seller or any other person to acquire, or Buyer to repurchase or purchase, the
full number of shares of Buyer Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of the
parties hereto to allow Seller or such other person to acquire, or Buyer to
repurchase or purchase, such lesser number of shares as may be permissible,
without any amendment or modification hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall 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, except as otherwise provided
herein.
14
<PAGE>
(b) Entire Agreement. Except as otherwise expressly provided herein, this
----------------
Option Agreement and the Agreement contain the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
(c) Successors; No Third Party Beneficiaries. The terms and conditions of
----------------------------------------
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(d) Assignment. Other than as provided in Sections 8 and 9 hereof, neither
----------
of the parties hereto may sell, transfer, assign or otherwise dispose of any of
its rights or obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or otherwise),
without the express written consent of the other party.
(e) Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.02 of the Agreement (which is incorporated herein by
reference).
(f) Counterparts. This Option Agreement may be executed in counterparts,
------------
and each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
15
<PAGE>
(g) Specific Performance. The parties hereto agree that if for any reason
--------------------
Seller or Buyer shall have failed to perform its obligations under this Option
Agreement, then either party hereto seeking to enforce this Option Agreement
against such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to any other rights that either party hereto may have
against the other party hereto for any failure to perform its obligations under
this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to
agreements made and entirely to be performed within such state. Nothing in this
Option Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of applicable law, rule or regulation.
(i) Regulatory Approvals; Section 16(b). If, in connection with (A) the
-----------------------------------
exercise of the Option under Section 3 or a sale by Seller to a third party
under Section 8, (B) a repurchase by Buyer under Section 7 or a repurchase or
purchase by Buyer under Section 8, prior notification to or approval of the OTS
or any other Regulatory Authority is required, then the required notice or
application for approval shall be promptly filed and expeditiously processed and
periods of time that otherwise would run pursuant to such Sections shall run
instead from the date on which any such
16
<PAGE>
required notification period has expired or been terminated or such approval has
been obtained, and in either event, any requisite waiting period shall have
passed. In the case of clause (A) of this subsection (i), such filing shall be
made by Seller, and in the case of clause (B) of this subsection (i), such
filing shall be made by Buyer, provided that each of Seller and Buyer shall use
its best efforts to make all filings with, and to obtain consents of, all third
parties and Regulatory Authorities necessary to the consummation of the
transactions contemplated hereby. Periods of time that otherwise would run
pursuant to Sections 3, 7 or 8 shall also be extended to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act.
(j) No Breach of Agreement Authorized. Nothing contained in this Option
---------------------------------
Agreement shall be deemed to authorize Buyer to issue any shares of Buyer Common
Stock in breach of, or otherwise breach any of, the provisions of the Agreement.
(k) Waiver and Amendment. Any provision of this Agreement may be waived at
--------------------
any time by the party that is entitled to the benefits of such provision. This
Option Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
17
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
BAY VIEW CAPITAL CORPORATION
By: /s/ Edward H. Sondker
--------------------------
Name: Edward H. Sondker
Title: President and Chief
Executive Officer
AMERICA FIRST EUREKA HOLDINGS, INC.
By: /s/ Stephen T. McLin
---------------------------
Name: Stephen T. McLin
Title: Chief Executive Officer
and President
18
<PAGE>
Exhibit 99.1
NASDAQ Symbol: BVCC
Web Site: Http://www.bvfs.com
Contact: David A. Heaberlin
(415) 312-7272
FOR IMMEDIATE RELEASE
May 8, 1997
BAY VIEW ANNOUNCES ACQUISITION OF EUREKABANK AND
AUTHORIZES ADDITIONAL $25 MILLION SHARE REPURCHASE
ACQUISITION OF AMERICA FIRST EUREKA HOLDINGS, INC./ EUREKABANK
San Mateo, California - Bay View Capital Corporation (the "Company" or "Bay
View" or "BVCC"), a diversified financial services holding company for Bay View
Bank ("Banking Platform" or "BVB"), Bay View Securitization Corporation
("BVSC"), California Thrift & Loan ("Consumer Finance Platform" or "CTL") and
Concord Growth Corporation ("Commercial Finance Platform" or "CGC") today
announced that it has executed a definitive agreement to acquire America First
Eureka Holdings, Inc. ("AFEH") and its wholly owned bank subsidiary, EurekaBank
("Eureka").
Edward H. Sondker, President and Chief Executive Officer of Bay View, said,
"This acquisition clearly represents the premier "in-market" opportunity to
expand and enhance our banking/depository platform. This combination will
create the largest bank/deposit franchise among financial institutions which
operate exclusively in the San Francisco Bay Area."
Transaction Structure
Under the terms of the definitive agreement, America First Financial Fund
1987-A Limited Partnership (NASDAQ:"AFFZ"), the shareholder of AFEH capital
stock, will receive $300 million comprised of Bay View common stock valued at
$210 million and cash of $90 million. The $300 million purchase price includes
$65 million being paid for approximately $187 million of tax loss carry-
forwards. The $300 million purchase price represents 1.6 times estimated book
value at closing and is consistent with recent multiples paid in thrift
transactions. The purchase price excluding the $65 million paid for tax loss
carry-forwards, represents 1.25 times estimated book value at closing.
The BVCC common stock component of the purchase price will be computed
utilizing a 20-day moving average of BVCC common stock prior to closing. If the
20-day average stock price is above $52.00 or below $42.00, the exchange ratio
will be fixed based on the $52.00 or $42.00 share price, as applicable. Eureka
has the right to terminate this transaction if the stock price falls below
$42.00. However, Bay View has the right to increase the purchase price if so
desired, for any shortfall below $42.00 and cause Eureka to complete the
transaction. This transaction is subject to customary conditions and will
require regulatory and shareholder approvals. Both parties have their respective
due diligence processes, therefore, this transaction is not subject to any
further due diligence.
Bay View estimates that the 1998 accounting EPS dilution from this
transaction will be approximately $0.37 per share and will be accretive by
approximately $0.19 per share in 1999. Cash basis EPS enhancement from this
transaction, which excludes the amortization of goodwill arising from the
transaction, estimated at $0.14 for 1998 and $0.74 for 1999. David A. Heaberlin,
Executive Vice President and Chief Financial Officer of Bay View, indicated that
"While this transaction will be immediately accretive on a cash EPS basis, the
real strength of this transaction is the shareholder value enhancement resulting
from the combination of these two deposit franchises. The accounting basis EPS
will grow as we utilize this low-cost funding platform to domicile assets
created from BVCC's rapidly expanding consumer and commercial finance
platforms."
The acquisition of AFEH/Eureka will be accounted for as a purchase and is
expected to be completed on or about December 31, 1997 or January 1, 1998. The
purchase price is currently estimated to exceed the fair value of the net assets
acquired by approximately $112 million which Bay View anticipates amortizing
over a 15-year period. This $112 million of goodwill represents approximately
6.1% of the total deposits acquired and compares favorably with recent premiums
paid in thrift transactions.
<PAGE>
Eureka will be merged into Bay View Bank and all EurekaBank branches will
operate as Bay View Bank branches. BVCC executive management will remain
unchanged. Messrs. Sondker and Heaberlin will remain, respectively, as
President and Chief Executive Officer, and Executive Vice President and Chief
Operating Officer of Bay View Bank.
Purchase Price Distribution
Bay View will deliver the $300 million of stock and cash to AFFFZ. The
general partner of AFFFZ intends to wind up the affairs of AFFFZ upon completion
of the merger in accordance with the terms of the AFFFZ limited partnership
agreement, including the discharge all of the liabilities of AFFFZ and the
distribution of the remaining assets of AFFFZ to its partners as appropriate.
While no definite estimate of the per-unit liquidating distribution can be made
now, AFFFZ management expects that approximately $250 million of the $300
million in cash and stock to be received in the merger will be paid to
unitholders, or approximately $41.50 per unit, after satisfaction of all other
liabilities of the partnership required to be satisfied in connection with its
liquidation. The general partner will receive approximately $36 million in
connection with the merger and dissolution in profit participation interest. The
FDIC will receive approximately $12.8 million in cash, representing its
participation in the sales proceeds, in addition to payments of $50 million that
it has or will receive with respect to the preferred stock it holds in
EurekaBank. The transaction is structured to be tax-free to the unitholders with
respect to the shares of Bay View common stock to be received in exchange for
the AFFFZ units.
"This transaction represents a completion of a commitment which I made to
our nearly 11,000 investors nine years ago when we bought EurekaBank in May,
1988," said Stephen T. McLin, Chairman of the Board of EurekaBank and President
and Chief Executive Officer of America First Eureka Holdings. "We started with
$100 million in proceeds from our initial offering, we will have paid $98
million in dividends to our unitholders, and the unitholders will receive in
excess of $250 million in proceeds from this transaction, for a total return of
nearly $350 million. The FDIC will have received $50 million payment for the
preferred stock it holds, and an additional $12.8 million in participation
payments. It is a tribute to the management team and employees of EurekaBank
that these spectacular results have been accomplished."
Market Share Analysis
Headquartered in Foster City, California, EurekaBank has total assets of
$2.2 billion and operates 36 branches throughout the San Francisco Bay Area. Bay
View Bank is headquartered in San Mateo, California and has total assets of $2.8
billion. Bay View Bank operates 27 branches throughout the San Francisco Bay
Area. EurekaBank has total deposits of $1.85 billion ($617 million of
transaction accounts or 33.6%) and Bay View Bank has total deposits of $1.58
billion ($478 million of transaction accounts or 30.3%). Total transaction
accounts on a combined basis are $1.1 billion or 33% of total deposits.
EurekaBank will be merged into Bay View's banking platform and consolidation of
only seven branches is anticipated.
Mr. Heaberlin, Executive Vice President and Chief Financial Officer for
BVCC and Executive Vice President and Chief Operating
Page 2
<PAGE>
Officer for BVB, indicated "This transaction is consistent with our mission
statement to position Bay View Bank as the best community banking platform in
Northern California. Bay View Bank and Eureka's combined deposit platform will
represent the 5th largest in San Francisco County and the 3rd largest in San
Mateo and Solano Counties."
Mr. Byron A. Scordelis, President and Chief Executive Officer of EurekaBank
said, The job done by the people at EurekaBank over the past nine years has been
nothing short of exceptional. Our results have been outstanding by every
measure, and we are pleased that they have been translated into excellent
performance for our investors. We now look forward with enthusiasm to working
with the Bay View team as we bring our two banks together."
Financial Projections
<TABLE>
<CAPTION>
1998 EPS
----------------------
Tangible
Accounting Cash
---------- --------
<S> <C> <C>
*Forecasted Accounting EPS Before
Eureka/$25 Million $ 3.85 $ 3.85
Additional Buy-Back
Cash Basis Adjustments
Intangible Amortization and
Stock-Based Compensation -- 0.55
---------- --------
Forecasted Before Eureka/
$25 Million Additional Buy-Back 3.85 4.40
Eureka EPS Impact/$25 Million
Share Buy-Back (0.37) 0.14
---------- --------
Forecasted After Eureka/
$25 Million Additional Buy-Back $ 3.48 $ 4.54
========== ========
*Assumes 10% Earnings Growth
from 1997 Consensus
<CAPTION>
1999 EPS
-----------------------
Tangible
Accounting Cash
---------- --------
<S> <C> <C>
*Forecasted Accounting EPS Before
Eureka/$25 Million
Additional Buy-Back $ 4.23 $ 4.23
Cash Basis Adjustments
Intangible Amortization and
Stock-Based Compensation -- 0.55
---------- --------
Forecasted Before Eureka/
$25 Million Additional Buy-Back 4.23 4.78
Page 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Eureka EPS Impact/$25 Million
Share Buy-Back $ 0.19 $ 0.74
----------- ---------
Forecasted After Eureka/
$25 Million Additional Buy-Back $ 4.42 $ 5.52
=========== =========
*Assumes 10% Earnings Growth
from 1998 Forecast
</TABLE>
In recognition of the low-cost funding platform which will be created, Bay
View will immediately cease auto securitization activities. This will reduce Bay
View's 1997 net income by an estimated $2.9 million ($0.44 per share). It is
estimated that net income for the second quarter of 1997 will be reduced by an
estimated $1.0 million ($0.15 per share). Earnings for 1998 will be unaffected
by this decision and enhanced thereafter. Edward H. Sondker, President and Chief
Executive Officer of Bay View, stated "We believe this decision will allow us to
more effectively utilize the resulting funding platform at BVB. For 1998 and
beyond, we believe that this decision will further enhance our financial
performance."
Bay View also expects to record restructuring charges in 1997 associated
with this transaction of approximately $5 million pretax ($2.9 million after tax
or $0.44 per share). These charges represent primarily severance, facilities,
relocation and debt restructuring costs directly related to this transaction.
$25 Million Share Repurchase
The Board of Directors of Bay View has authorized the repurchase of an
additional $25 million of shares of Bay View's common stock. This authorization,
combined with the outstanding portion ($12 million of the $25 million authorized
in January 1997), should enable Bay View to repurchase approximately 750,000
additional shares at current market prices. Following the completion of this
repurchase authorization, Bay View will have repurchased approximately 1.8
million shares, or nearly 25% of the 7.4 million shares outstanding when the
initial share repurchase program was announced. The previous 1,028,000 share
repurchase was completed at an average cost of $36.89 per share.
Statements contained in this news release that are not historical facts may be
forward-looking statements within the meaning of Section 21E of the Securities
Act of 1924 and Section 27A of the Securities Act of 1933. Further, such
statements are subject to important factors that could cause actual results to
differ materially from those in this presentation, including the following:
regional and national economic conditions; changes in the levels of market
interest rates; credit risks or real estate, consumer, commercial and other
lending activities; regulatory factors; changes in the market value of Bay View
common stock and the ability to repurchase same; Bay View's ability to achieve
synergies in previously announced acquisitions and sustain or improve the
performance of same; Bayview's ability to achieve synergies in the Eureka
acquisition and to sustain or improve the performance of Eureka; and the ability
to identify suitable acquisition candidates.
Page 4
<PAGE>
EXHIBIT 99.2
BAY VIEW
CAPITAL CORPORATION
INVESTOR/ANALYST CONFERENCE CALL
ACQUISITION OF AMERICA FIRST EUREKA HOLDINGS, INC.
May 9, 1997/10:00 AM PST (1:00 PM EST)
-------------------------------------
Investor Dial-In conference call
Friday May 9, 1997 at 1:00 PM EST (Please call 10 minutes in advance):
Dial-In Number (800) 779-3152
Dial-In Password: Bayview
Recorded Playback of the Investor Call Available at:
Replay Number: (800) 765-3099 Replay Password: 1234
Statements contained in this presentation that are not historical facts may be
forward-looking statements within the meaning of Section 21E of the Securities
Act of 1924 and Section 27A of the Securities Act of 1933. Certain of such
statements are identified as being based on consensus estimates (by analysts not
affiliated with Bay View). Further, such statements are subject to important
factors that could cause actual results to differ materially from those in this
presentation, including the following: regional and national economic
conditions; changes in the levels of market interest rates; credit risks or real
estate, consumer, commercial and other lending activities; regulatory factors;
changes in the market value of Bay View common stock and the ability to
repurchase same; Bay View's ability to achieve synergies in the CGC and Eureka
acquisition and to sustain or improve performance
<PAGE>
of CTL, CGC and Eureka; and the ability to identify suitable future acquisition
candidates.
<PAGE>
CREATING THE LARGEST DEPOSIT
FRANCHISE AMONG FINANCIAL INSTITUTIONS WHICH
OPERATE EXCLUSIVELY IN THE SAN FRANCISCO BAY AREA
______________________________________
Presented by:
EDWARD H. SONDKER, President & CEO
DAVID A. HEABERLIN, Executive Vice President & CFO
<PAGE>
AGENDA
___________________________
- - Transaction Highlights
- - Transaction Structure
- - Strategic Review
- - Market Share Analysis
- - Financial Projections
- - Critical Assumptions
- - Key Considerations
- - Other Issues
- - Summary
<PAGE>
TRANSACTION HIGHLIGHTS
- ----------------------------------
- - Bay View Capital Corporation ("BVCC")
Executed Definitive Agreement to Acquire
America First Eureka Holdings, Inc. ("AFEH")
and Wholly-Owned Bank Subsidiary,
EurekaBank ("Eureka") from America First
Financial Fund 1987-A Limited Partnership
("AFFFZ")
- Due Diligence Completed
- - Bay View Bank("BVB")/EurekaBank Combined Will
Create the Preeminent Independent Banking
Franchise in the San Francisco Bay Area
<PAGE>
TRANSACTION HIGHLIGHTS
(continued)
- -------------------------------------
- $300 Million Purchase Price Represents
Cash of $90 Million and Stock Valued at
$210 Million (subject to adjustment)
- Transaction Will Be Immediately Accretive to Tangible
Cash Basis EPS
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION HIGHLIGHTS
(continued)
_________________________________________
<S> <C>
. Transaction Summary
- Aggregate Offer Value (subject to adjustment): $300 Million
- Estimated Book Value at Purchase Date: $188 Million
- $300 Million Price/Book: 160%
- $235 Million Adjusted Price/Book: 125%
- Deposit Premium: 6.1%
- 1998 EPS
. Accounting EPS: $3.48 (-$0.37 or -9.6%)
. Tangible Cash EPS: $4.54 (+$0.14 or +3.2%)
- 1999 EPS
. Accounting EPS: $4.42 (+$0.19 or +4.5%)
. Tangible Cash EPS: $5.52 (+$0.74 or +15.5%)
- Expected Purchase Date
. December 31, 1997 or January 1, 1998
. Purchase Accounting Applied
</TABLE>
TRANSACTION HIGHLIGHTS
(continued)
_________________________________________
- - BVCC Board of Directors Has Authorized
Further Share Repurchases of $25 Million
- Represents ability to repurchase
approximately $37 Million (roughly 700,000
Shares at $52-$53 Per Share) when
combined with $12 Million remaining from
January 1997 $25 Million authorization
- When completed BVCC will have
repurchased approximately 1,750,000 Shares
or nearly 24% of the 7.4 million BVCC Shares
outstanding when the initial share repurchase
program was announced.
<PAGE>
TRANSACTION STRUCTURE
- ----------------------------------------
- - $300 Million Purchase Price represents
Cash of $90 Million and Stock valued at
$210 Million
- Tax-Free Exchange for Stock Portion
- - AFEH/EurekaBank will be Merged into
Bay View Bank
- EurekaBank branches will operate as Bay
View Bank Branches
<PAGE>
TRANSACTION STRUCTURE
(continued)
- --------------------------------------
- - $300 Million Purchase Price represents
- 1.6 Times Book Value at Purchase Date
- $65 Million Purchase of Embedded Federal
and State Tax Loss Carryforwards
. $52 Million Premium above $13 Million
Recorded by Eureka
- $235 Million Adjusted Acquisition Price
Attributable to Assets Purchased and
Liabilities Assumed
- 1.25 Times Book Value
<PAGE>
TRANSACTION STRUCTURE
(continued)
_________________________________________
- - Acquisition will be accounted for as a
purchase utilizing purchase accounting
- - Goodwill is preliminarily estimated at $112
Million and is currently anticipated to be
amortized utilizing a conservative 15-year
life
- 25 years open used in Similar Transactions
- - AFFFZ Unitholders will represent 40% of
BVCC Shareholders and will receive 2
BVCC Board Seats
<PAGE>
TRANSACTION STRUCTURE
(continued)
- ------------------------------------------
. $112 Million of Goodwill Approximates
6.1% of Deposits ($1.85 Billion)
. Planned Transaction Closing on or
About 12/31/97
- Subject to Normal Regulatory and BVCC
Shareholder and AFFFZ Unitholder Approvals
- - Mutual 19.9% "Lock-Up" Options
<PAGE>
Transaction Structure
(continued)
- ----------------------
. $210 Million Stock Component Will be
Determined Based on 20-Day Average
Stock Price Prior to Closing
- If BVCC's 20-Day Average Stock Price is
Above $52 or Below $42, the Exchange Ratio
Will be Fixed Based at $52 or $42 Share Price
(As Applicable)
- AFEH Has Right to Terminate if Bay View's
Stock Price Falls Below $42.00
. Bay View Has Right to Adjust Purchase Price
for AFEH Shortfall if Stock Price Falls Below
$42.00
<PAGE>
TRANSACTION STRUCTURE
(continued)
- -----------------------------------------
- - For Every $1 That BVCC Stock
Exceeds $52.00
- Goodwill Will Increase By $4 Million
- 1998/1999 Net Income Will Be Reduced by
$270,000
- 1998/1999 EPS Will Be Reduced by $0.03 Per
Share
<PAGE>
Transaction Structure
(Continued)
- ---------------------
- - Pricing Attractive Relative to Recently
Announced Transactions
- Bay View Will Pay 160% of Book Value at
Purchase Date for Eureka, Which Is
Comparable to the Median Multiple of 162%
Paid by Acquirers in Thrift Acquisitions
Between 1996 and the Present
- Bay View Will Pay a 6.1% premium to deposits
($11.85 billion) for Eureka, which compares
favorably with a median premium of 7.52% paid
by acquirers in thrift acquisitions between 1996
and the present.
TRANSACTION STRUCTURE
(continued)
- ------------------------------------------
- - Pricing Summary of Recently Announced Transactions
<TABLE>
<CAPTION>
Ann'd
Deal Deal Pr/ Deal Pr/ TgBk Prem/
Value Tg Bk 4-Qtr CoreDeps
Buyer ST Seller ST ($M) (%) EPS (x) (%)
- ------------------------ ----- ------------------------ ------ ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
TCF Financial Corp- MN Standard Financial- IL 423.30 151.06 33.33 9.97
Marshall & Isley- WI Security Capital Corp- WI 915.20 161.07 25.34 15.72
CCB Financial Corp- NC American Federal BN- SC 341.60 330.71 24.40 26.61
Sovereign Bancorp- PA Bankers Corp- NJ 322.70 171.49 15.27 8.90
Temple-Inland Inc- TX California Financial- CA 147.00 164.20 30.30 7.58
Webster Fin'l Corp- CT DB Bancorp Inc- CT 133.10 159.67 15.25 5.48
UST Corp- MA Walden Bancorp Inc- MA 165.90 196.16 16.16 11.38
North Fork Bancorp- NY North Side SB- NY 216.30 170.07 11.78 7.98
First Union Corp- NC Center Fin'l Corp- CT 384.50 176.18 14.96 7.17
First Union Corp- NC Home Financial Corp- FL 341.20 106.00 15.05 3.58
Nations Bank Corp- NC TAC Bancshares FL 279.80 188.07 15.03 8.35
Union Planters Corp- TN Leader Financial Corp- TN 504.70 192.54 13.05 18.46
Norwest Corporation- MN Primerit Bank FSB- NV 190.70 163.64 26.90 7.32
Standard Federal Bank- MI Bell Bancorp- IL 362.80 114.68 27.57 4.60
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
MAF Bancorp- IL N.S. Bancorp- IL 275.70 113.22 16.40 6.05
First Union Corp- NC Society First FSB- FL 188.00 145.84 29.85 5.79
SouthTrust Corp- AL Bankers First Corp- GA 145.80 150.65 11.30 7.92
Bank of Boston- MA Boston Bancorp- MA 218.50 118.98 11.55 3.22
Republic New York- NY Brooklyn Bancorp- NY 529.60 140.68 14.46 4.78
MacAndrews & Forbes- NY SFFed Corp- CA 266.10 133.00 N/A 3.34
Norwest Corporation- MN AMFED Financial- NV 196.60 168.87 17.98 7.00
Nations Bank Corp- NC CSF Holdings- FL 516.00 183.69 12.40 7.46
Crestar Financial- VA Loyola Capital Corp- MD 279.30 147.74 17.44 7.93
First Union Corp- NC Columbia First FSB- VA 232.80 176.21 20.62 8.05
First Union Corp- NC Coral Gables Fedcorp- FL 513.80 139.43 14.37 9.81
First Union Corp- NC American Savings of FL-FL 253.00 163.30 10.88 5.05
Median 277.50 162.19 15.27 7.52
Bay View Capital Corp- CA America First Eureka- CA 300.00 160.00* 11.49 6.10
</TABLE>
* Based on Book Value at Purchase Date
TRANSACTION STRUCTURE
(continued)
_________________________________________
- - Transaction Economics
- Significantly Accretive to Cash Earnings Per
Share
- Internal Rate of Return of 12.75%
- Expense Savings-$21 Million Pre-Tax
Annually, Representing Approximately 46% of
AFEH's Expense Base and 20% of
combined Noninterest Expenses
- 7 Branch Closings Expected
- One-time BVCC Restructuring Charges of
$5.0 Million Pre-tax (2.9 Million After Tax or $0.44 per share)
. Debt/Securitization Restructuring $2.5 Million
. Severance $1.0 Million
. Facilities/Relocation $1.0 Million
. Other $0.5 Million
--------------
. Total $5.0 Million
<PAGE>
STRATEGIC REVIEW
- -------------------------------------
- - Consistent With BVCC Mission Statement
to Create Diversified Financial Services
Company and Enhance Shareholder Value
- - Consistent With Bay View Bank Mission
Statement to Become Best Northern
California Community Bank
<PAGE>
STRATEGIC REVIEW
(continued)
- ------------------------------------------
- - EUREKA ACQUISITION WILL
- Create Largest Deposit Franchise Among
Financial Institutions Which Operate Exclusively
In Bay Area
- Dramatically Enhance Retail Deposit Franchise
Value
- Expand low cost funding platform for BVCC's
rapidly expanding consumer and commercial finance
platforms.
<PAGE>
STRATEGIC REVIEW
(continued)
- ------------------------------------------
- - EUREKA ACQUISITION WILL (continued)
- Enable Bay View Bank to Rapidly Reduce
Wholesale Borrowings
- Facilitate Further Transaction Account
Expansion Which Will Reduce Certificate of
Deposit Funding Component
- Accelerate transition of Bay View Bank to
community bank status
- - Expect to Pursue $100-$150 million
Subordinated debt issuance at either
BVCC and/or BVB
<PAGE>
STRATEGIC REVIEW
(continued)
- ------------------------------------------
- - Transaction Will Generate Significant
Regulatory Capital Prospectively
- Estimated at $250 Million for 1998-2001
- This Capital Creation will support future
asset growth of $5 billion
- Significant portion of this capital creation will
likely be returned to BVCC for
redeployment through
- Accretive Acquisitions
- Share Repurchases
<PAGE>
MARKET SHARE ANALYSIS
(continued)
- --------------------------------------------
- - WELL POSITIONED IN KEY MARKETS
<TABLE>
<CAPTION>
Branches in Total Deposits in Market Share
Rank Institution (State) Bay Area Bay Area of Bay Area
- ---- ------------------- -------- -------- -----------
<S> <C> <C> <C> <C>
1 BankAmerica Corp (CA) 255 $27,359.201 23.51%
2 Wells Fargo & Co (CA) 263 25,307,789 21.74
3 Washington Mutual Inc (WA) 112 9,510,106 8.17
4 UnionBanCal Corp (CA) 39 6,454,742 5.55
5 MacAndrews & Forbes Holdings 74 5,191,053 4.46
6 HF Ahmanson & Company (CA) 55 4,000,540 3.44
* Pro Forma Bay View Cap Corp 63 3,530,993 3.03
7 Citicorp (NY) 59 3,208,676 2.76
8 Bank of the West (CA) 75 3,202,502 2.75
9 Golden West Fin'l Corp (CA) 38 2,669,097 2.29
10 Comerica, Inc (MI) 21 1,903,920 1.64
11 EurekaBank (CA) 36 1,796,379 1.54
12 Bay View Capital Corp (CA) 26 1,734,614 1.49
13 WestAmerica Bancorp (CA) 39 1,519,729 1.31
14 Glendale Federal Bank (CA) 30 1,518,327 1.30
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
15 Sumitomo Bank (Foreign) 16 1,472,473 1.27
</TABLE>
Source: SNL Securities, L.P.; data as of 6/30/96 adjusted for mergers and
acquisitions.
(a) Bay Area consists of Alameda, Contra Costa, Marin, Napa, San Francisco,
San Mafeo, Santa Clara, Santa Cruz, Solano and Sonoma Counties
<PAGE>
MARKET SHARE ANALYSIS
(continued)
- --------------------------------------------
- - BAY VIEW INCREASES ITS MARKET SHARE FIGURES
<TABLE>
<CAPTION>
Bay View Capital Corp America First/Eureka Hold. ProForma Combined Co.
----------------------- -------------------------- ---------------------
County County County
Deposits Market Deposits Market Deposits Market
County Rank $ (000) Share Rank $ (000) Share Rank $ (000) Share
- ------ ---- -------- ----- ---- ------- ----- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alameda 23 104,537 0.67 19 151,050 0.97 15 255,587 1.64
Contra Costa 24 56,842 0.40 14 158,720 1.12 13 215,562 1.52
Marin 14 75,938 1.82 15 71,644 1.72 9 147,582 3.55
San Francisco 11 554,686 1.43 15 347,190 0.90 5 901,876 2.33
San Mateo 3 703,698 6.88 4 505,205 4.94 3 1,208,903 11.82
Santa Clara - - - 15 337,047 1.47 15 337,047 1.47
Solano 3 193,823 10.11 11 45,274 2.36 3 239,097 12.47
Sonoma 19 54,169 1.08 16 94,400 1.89 12 148,569 2.97
Data as of June 30, 1996
</TABLE>
<PAGE>
MARKET SHARE ANALYSIS
- ----------------------------------------
- - BAY VIEW BANK/EUREKABANK COMBINED
- Will Represent Largest Deposit Franchise Among
Financial Institutions Which Operate Exclusively
in Bay Area
- 5th Largest Deposit Franchise in San Francisco
County
- 3rd Largest Deposit Franchise in San Mateo and
Solano Counties
- - Only Bank of America and Wells Fargo will have larger
deposit franchises
<PAGE>
MARKET SHARE ANALYSIS
(continued)
- ------------------------------------------
- - EUREKABANK VERSUS BAY VIEW BANK
- Branch Locations
- EurekaBank 36
- Bay View Bank 27
- Deposits
- EurekaBank $1.85 Million
- Bay View Bank $1.58 Million
<PAGE>
MARKET SHARE ANALYSIS
(continued)
- ----------------------------------------
- - EUREKABANK VERSUS BAY VIEW BANK (continued)
- Transaction Accounts/Deposits
- EurekaBank = 33.6%
- Bay View Bank = 30.3%
- Combination Provides Broad Bay Area Retail
Distribution Network
- Consolidation of Only 7 Branches Anticipated
- Average Deposit per Branch = $60 million
<PAGE>
MARKET SHARE ANALYSIS
(continued)
- -------------------------------------------
- - BAY VIEW BANK/EUREKABANK COMBINED
(POST-ACQUISITION) DEPOSIT DATA
- Branches = 56
- Deposits = $3.4 Billion
- Deposit Transaction Accounts = $1.1 Billion or 33%
<PAGE>
FINANCIAL PROJECTIONS
- ---------------------------------------------
- - FORECASTED BENEFIT - 1998
- Management Estimates That While the 1998
Accounting EPS Benefit from the Eureka
Acquisition Will Be Dilutive, the Cash
Accounting EPS is Accretive
- Book EPS Dilution Estimated at $.37 Per Share
- Tangible Cash EPS Enhancement Estimated at
$.14 Per Share
- Goodwill Amortization Estimated at $7.5 Million
<PAGE>
FINANCIAL PROJECTIONS (Continued)
- ---------------------------------------
- - FORECASTED BENEFIT - 1999
- Management Estimates that While the 1999
Accounting EPS Benefit from The Eureka
Acquisition Will Be Accretive, Cash
Accounting EPS is Significantly Accretive
- Book EPS Enhancement Estimated at $.19 Per Share
- Tangible Cash EPS Enhancement Estimated at
$.74 per share
- Goodwill Amortization Estimated at $7.5 Million
<PAGE>
FINANCIAL PROJECTIONS
(continued)
- ---------------------------------------------------
- - PROJECTED CONSOLIDATED BALANCE SHEET
BALANCE SHEET PROJECTIONS
-------------------------
<TABLE>
<CAPTION>
Period End Period End
ProForma Dec. 31, Dec. 31,
Jan. 1, 1998 1998 1999
------------ ----------- -----------
<S> <C> <C> <C>
Cash and Investments $ 1,414,726 $ 1,142,679 $ 1,032,085
Net Loans 3,692,200 3,730,007 3,769,813
Intangibles 132,345 121,463 110,681
Other Assets 148,630 237,789 231,399
--------- --------- ---------
Total Assets $ 5,387,901 $ 5,231,938 $ 5,143,978
========= ========= =========
Deposits $ 3,240,051 $ 3,428,140 $ 3,473,853
Subordinated Debt 90,000 90,000 90,000
Other Liabilities 1,674,898 1,319,491 1,183,225
--------- --------- ---------
Total Liabilities 5,004,949 4,837,631 4,747,078
Total Equity 382,952 394,307 396,900
Liabilities and
Shareholder Equity 5,387,937 5,330,214 5,509,333
========= ========= =========
Book Value Per share $ 37.61 $ 38.73 $ 41.08
Tangible Book Value
Per share $ 24.61 $ 26.80 $ 29.63
</TABLE>
<PAGE>
FINANCIAL PROJECTIONS
(continued)
- --------------------------------------------
- - INCOME STATEMENT FORECAST - 1998
PRELIMINARY ESTIMATED IMPACT OF EUREKA ACQUISITION
<TABLE>
<CAPTION>
First Year EPS
---------------------
Tangible
Accounting Cash
---------- --------
<S> <C> <C>
Forecasted Accounting EPS Before Eureka/$25 Million
Additional Buy-Back $ 3.85* $3.85*
Cash Basis Adjustments
Intangible Amortization and
Stock Based Compensation - 0.55
------ -----
Forecasted Before Eureka/$25 Million Additional
Buy-Back $ 3.85 $4.45
Eureka EPS Impact/$25 Million Share Buy-Back $(0.37) $0.14
------ -----
Forecasted After Eureka/$25 Million Additional Buy-Back $ 3.48 $4.54
====== =====
</TABLE>
<PAGE>
*Assumes 10% Earnings Growth from 1997 Consensus
<PAGE>
FINANCIAL PROJECTIONS
(continued)
- --------------------------------------------------------------------------------
- - Income Statement Forecast - 1999
<TABLE>
<CAPTION>
Second Year EPS
--------------------
Tangible
Accounting Cash
---------- --------
<S> <C> <C>
*Forecasted Accounting EPS Before
Eureka/$25 Million Additional Buy-Back $ 4.23 $4.23
Cash Basis Adjustments
Intangible Amortization and
Stock Based Compensation $ - $0.55
------ =====
Forecasted Before Eureka/$25
Million Additional Buy-Back $ 4.23 $4.78
====== =====
Eureka EPS Impact/$25 Million
Share Buy-Back ($51.75) $(0.19) $0.74
------ -----
Forecasted After Eureka/$25
Million Additional Buy-Back $ 4.42 $5.52
====== =====
</TABLE>
*Assumes 10% Earnings Growth from 1998 Forecast
<PAGE>
CRITICAL ASSUMPTIONS
- -----------------------------------------------
- - CRITICAL ASSUMPTIONS INCLUDE
- $21 Million of Expense Reductions
- Realization of $65 Million of Tax Loss
Carryforward
- Stable Interest Rate Environment
- Asset Quality Maintained
- Asset Size Maintained
- No Significant Asset Growth
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------------
- - Cost Savings Assumptions Consistent with
Prior In-Market Transactions
TRANSACTION ASSUMED COST SAVINGS (%)
----------- ------------------------
Bank Boston/BayBanks 39%
Chemical/Chase 40%
Fleet/Shawmut 43%
Mercantile/Roosevelt 37%
NationsBank/BankSouth 60%
Wells/First Interstate 46%
Average 44%
Bay View/Eureka 46%
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------------
- - $21 Million of Cost Savings Achievable by
June 30, 1998 Due to
- Corporate Headquarters/Operational Functions
Located Within Close Proximity
- Corporate Headquarters Located 2 Blocks Apart
- Branch Consolidations Limited to 7 Branches
- Believe MIS Conversion Can be Completed by
Mid-1998
- Critical Driver in Achieving Cost Savings
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------------
- BVCC and EurekaBank Both use Third Party
for Processing
- No "In House" Processing
- - BVCC Has Demonstrated Success and
Commitment to Cost Reduction
- BVCC CEO, BVB COO, and BVB EVP/Sales
Manager Have Extensive Consolidation
Expertise
- BVB G&A/Assets Now 1.35%; Down from
1.60% in Early 1995
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- ---------------------------------------------
- - BVCC Has Demonstrated Success and
Commitment to Cost Reduction (continued)
- Consumer Finance Platform G&A Now Nearly
3.00%; Down from 4.25% at June 1996
Acquisition Date
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -------------------------------------------
- - Expect Merger of 7 EurekaBank Branches
Into BVB Branches
- EurekaBank Belmont Branch to BVB Belmont
Branch
- EurekaBank Menlo Park Branch to BVB Menlo
Park Branch
- EurekaBank San Francisco-Stockton Street to BVB
San Francisco-Columbus Street Branch
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------------
- EurekaBank San Bruno Branch to BVB Millbrae
Branch
- EurekaBank San Leandro Branch to BVB San
Leandro Branch
- EurekaBank San Mateo Branch to BVB San
Mateo Branch
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------
- EurekaBank South San Francisco Branch to
BVB South San Francisco Branch
- - Cost Savings From Branch Consolidation
Estimated at $2.8 Million
- - Bay View Bank and Eureka Bank annual Branch
Attrition Rates approximate 35%
<PAGE>
CRITICAL ASSUMPTION
(continued)
- -----------------------------------------
<TABLE>
<S> <C>
. Summary of Cost Savings ($ Millions)
- Branch Consolidation $2.8
- Eliminate Eureka Executive Management 1.3
. Eureka Has High Senior Management Salaries
- Eliminate Administrative Office Space 1.9
- Eliminate Holding Company Partnership Costs 1.7
- Eliminate Duplicative Administrative Functions 4.0
- Eliminate Operational Functions 1.1
- Eliminate Duplicative Loan Origination &
Servicing Functions 6.8
- Eliminate Duplicative Marketing Costs 1.4
-----
- Aggregate Cost Savings Identified $21.0
=====
</TABLE>
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------
- - Aggregate Cost Savings Identified = $21
Million Represents Roughly 46% of
Anticipated Eureka's 1997 G&A and 20%
of Combined Noninterest Expense
- - We Expect These Cost Savings Can be
Achieved by June 30, 1998
- 50% of Savings Will be Realized in 1998
- 100% of Savings Will be Realized in 1999
- - Further Cost Savings May be Achievable
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------
- - $65 Million Tax Asset Represents
Future Utilization of $187 Million
of Tax Loss Carryforwards Which
Expire through 2007
- - Full Utilization Will Require BVCC Annual
Taxable Income of $20 Million
- Represents 25% of Projected 1998 Pre-Tax
Income
<PAGE>
CRITICAL ASSUMPTIONS
(continued)
- -----------------------------------------
<TABLE>
<CAPTION>
TAXLOSS CARRYFORWARDS
Beginning Ending
Year Balance Amortization Balance
<S> <C> <C> <C>
1997 65,661
1998 65,661 (8,563) 57,097
1999 57,097 (8,563) 48,534
2000 48,534 (8,563) 39,971
2001 39,971 (8,563) 31,407
2002 31,407 (8,563) 22,844
2003 22,844 (5,775) 17,069
2004 17,069 (5,775) 11,294
2005 11,294 (5,775) 5,519
2006 5,519 (5,519) 0
2007 0 0 0
</TABLE>
<PAGE>
KEY CONSIDERATIONS
- ----------------------------------------
- - Cost Savings Are Not Achieved
- Utilized Independent Third Parties to Verify
Achievability of Cost Savings
- Expect to Utilize Third Party Assistance to
Implement
- - Tax Losses Are Not Utilized
- Projected Taxable Income Sufficient to Absorb
Loss Carryforward Even with 75% Decline in
Taxable Income
<PAGE>
KEY CONSIDERATIONS
(continued)
- -----------------------------------------
- - Deposits Are Not Retained
- BVB Familiar With Markets
- Minimal Branch Disruption Expected
- Only 7 Branch Closures Identified
- Deposit Franchises Very Similar
- - Asset Quality Deteriorates
- Eureka Non-Accruals/TDRs = .36%
- BVB Non-Accruals/TDRs = .63%
<PAGE>
KEY CONSIDERATIONS
(continued)
- -----------------------------------------
- - Interest Rate Risk
- Both BVB and Eureka Have Hedges in Place
to Significantly Mitigate Interest Rate Risk
Exposure
- Consolidated COFI Exposure Will Decline
- Eureka Exposure = 13% ($300 Million)
- BVB Exposure = 43% ($1.3 Billion)
- Combined Exposure = 30% (1.6 Billion)
- $500 Million of Eureka's Assets are Rapidly Indexing LIBOR Based
Mortgages
- Reduction of Wholesale Borrowings and Expansion of Core Deposits will
Further Miligate Interest Rate Risk
<PAGE>
OTHER ISSUES
- ----------------------------------------
- - Expect to Pursue $100-$150 Million
Subordinated Debt Issuance at Either BVCC
and/or BVB
- - Expect to Discontinue Auto Securitization
Activities
- Reduces 1997 Net Income by $2.9 million ($0.44 per share)
- - $1.0 million after Tax in Second Quarter ($0.15 per share)
- Enhances 1998 and Future EPS Performance
<PAGE>
OTHER ISSUES
(continued)
- -----------------------------------------
- - Expect to Explore Restructuring BVB
Balance Sheet to Reduce COFI/Wholesale
Assets Exposure
<PAGE>
SUMMARY
- -----------------------------------------
- - Creates the Premier Independent
Banking/Deposit Franchise in San Francisco
Bay Area
- - Provides Significant Cost Savings Due to In-
Market Transaction
- - Expands Low Cost Funding Base for
BVCC'S Consumer/Commercial Finance
Platforms
<PAGE>
SUMMARY
(continued)
- - Accelerate Transition of Bay View Bank to
Community Bank Status
- - Represents Low Risk Transaction
