SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
SOUTHWEST BANCSHARES, INC.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
844769 10 9
(CUSIP Number)
Robert I. Lipsher, Esq.
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
5335 Wisconsin Avenue
Suite 400
Washington, D.C. 20015
(202) 274-2000
(Name, Address, Telephone number of Person Authorized
to Receive Notices and Communications)
December 16, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and if filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box. / /
Check the following box if a fee is being paid with the statement
/X/. (A fee is not required only if the reporting person: (1)
has a previous statement on file reporting beneficial ownership
of more than five percent of the class of securities described in
Item 1; and (2) has filed no amendment subsequent thereto
reporting beneficial ownership of five percent or less of such
class.) (See Rule 13d-7.)
(Continued on following pages)
Page 1 of 9 Pages
<PAGE>
CUSIP NO. 844769 10 9 PAGE 2 OF 9 PAGES
- -----------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
Alliance Bancorp
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) / / (B) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC AF BK
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS PURSUANT TO
ITEMS 2(D) OR 2(e)
Not Applicable.
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH SOLE VOTING POWER
297,471
8. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH SHARED VOTING POWER
-0-
9. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH SOLE DISPOSITIVE POWER
297,471
10. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
297,471
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.9%
14. TYPE OF REPORTING PERSON
HC CO
<PAGE>
CUSIP NO. 844769 10 9 PAGE 3 OF 9 PAGES
Item 1. Security and Issuer
The securities as to which this Schedule 13D ("Schedule")
relates are shares of common stock, $.01 par value per share
("Common Stock"), of Southwest Bancshares, Inc. (the "Issuer" or
"Southwest"). The address of the Issuer's principal executive
office is 4062 Southwest Highway, Hometown, Illinois 60456.
Based upon the most recent information available to the filing
person, the Issuer has outstanding 2,707,295 shares of Common
Stock and no shares of Preferred Stock.
Item 2. Identity and Background
(a)-(c) This Schedule is filed on behalf of Alliance Bancorp
(the "Company" or "Alliance"). The Company's principal business
is to be the holding company for Liberty Federal Bank ("Liberty
Federal"), a federally-chartered savings bank offering a variety
of loan and deposit products to the communities it serves in
DuPage and Cook Counties in Illinois. The address of the
Company's principal executive office is One Grant Square,
Hinsdale, Illinois 60521.
Pursuant to General Instruction C of Schedule 13D, the
following information is being provided with respect to each
executive officer and director of the Company ("Insiders"):
<TABLE>
Name Principal Occupation or Employment and Address
<S> <C>
William R. Rybak Executive Vice President and Chief Financial Officer
Van Kampen American Capital, Inc.
c/o One Grant Square
Hinsdale, Illinois 60521
Kenne P. Bristol President and Chief Executive Officer
Alliance Bancorp
Liberty Federal Bank
One Grant Square
Hinsdale, Illinois 60521
Donald E. Sveen Retired, Former President and Chief Operating Officer
The John Nuveen Company
c/o One Grant Square
Hinsdale, Illinois 60521
Howard A. Davis President and Chief Executive Officer
Preferred Mortgage Associates, Ltd.
c/o One Grant Square
Hinsdale, Illinois 60521
Howard R. Jones President
Packaging Design Corporation
c/o One Grant Square
Hinsdale, Illinois 60521
Russell F. Stephens, Jr. President
Insurance Concepts & Design, Inc.
c/o One Grant Square
Hinsdale, Illinois 60521
<PAGE>
CUSIP NO. 844769 10 9 PAGE 4 OF 9 PAGES
Fredic G. Novy Chairman of the Board of Directors
Alliance Bancorp
Liberty Federal Bank
One Grant Square
Hinsdale, Illinois 60521
William C. O'Donnell President
ODON Communications Group
c/o One Grant Square
Hinsdale, Illinois 60521
Vernon B. Thomas, Jr. Attorney
c/o One Grant Square
Hinsdale, Illinois 60521
Edward J. Burns Retired
c/o One Grant Square
Hinsdale, Illinois 60521
Whit G. Hughes Chairman
Hughes Enterprises, Inc.
c/o One Grant Square
Hinsdale, Illinois 60521
H. Verne Loeppert Retired
c/o One Grant Square
Hinsdale, Illinois 60521
David D. Mill Dentist
c/o One Grant Square
Hinsdale, Illinois 60521
Edward J. Nusrala President
Famous Brand Shoes, Inc.
c/o One Grant Square
Hinsdale, Illinois 60521
Richard A. Hojnicki Executive Vice President, Secretary
and Chief Financial Officer
Alliance Bancorp
Liberty Federal Bank
One Grant Square
Hinsdale, Illinois 60521
</TABLE>
(d) During the past five years, neither the Company nor the
Insiders have been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) During the past five years, neither the Company nor the
Insiders have been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or a
finding of any violation with respect to such laws.
(f) All of the Insiders are U.S. citizens.
<PAGE>
CUSIP NO. 844769 10 9 PAGE 5 OF 9 PAGES
Item 3. Source and Amount of Funds or Other Consideration
The source of funds to be used by Alliance in making a
purchase of shares of common stock of Southwest, upon exercise of
the Option (defined in Item 4 hereof) to which this Schedule 13-D
relates, if and to the extent the Option is exercised, will be
either cash on hand at Alliance, dividends from Liberty Federal
and/or non-bank subsidiaries of Alliance, a loan from an
unaffiliated bank or other financial service company, or other
borrowings. Alliance has not made, as of the date hereof, any
definitive plans or arrangements regarding the source of such
funds.
Assuming the number of shares of Southwest common stock
remains unchanged from the number issued and outstanding on
December 16, 1997 (i.e., 2,707,295 Shares), the exercise price of
the Option in full at an Option Price (defined in Item 4 hereof)
of $25.50 per share, will result in the purchase of 297,471
shares for an aggregate purchase price of $7,585,511.
Item 4. Purpose of Transaction
On December 16, 1997, Alliance and Southwest entered into a
Stock Option Agreement (the "Stock Option Agreement") in which
Southwest granted to Alliance the option (the "Option") (under
certain circumstances, described in this Item 4) to purchase up
to 297,471 shares of Southwest common stock at an exercise price
of $25.50 per share. The option was granted in connection with
the execution by Alliance and Southwest of a definitive Agreement
and Plan of Merger dated as of December 16, 1997 (the "Merger
Agreement"), a copy of which is attached hereto as Exhibit 7.1
and incorporated by reference herein. The Merger Agreement
provides for the merger of Southwest with and into Alliance (the
"Merger"). Upon consummation of the Merger, the registration of
Southwest common stock under Section 12(g) of the Securities
Exchange Act of 1934 will be terminated. At Closing, or as soon
thereafter as practicable, Southwest Federal Savings and Loan
Association of Chicago, will merge with and into Liberty Federal
Bank, with Liberty Federal Bank surviving the merger (the "Bank
Merger").
Alliance required Southwest to grant the Option as a
condition to Alliance entering into the Merger Agreement for the
purpose of increasing the likelihood that the Merger and the Bank
Merger will be completed. The Option is exercisable only upon
the occurrence of certain events that would jeopardize completion
of the Merger, none of which has occurred as of the date hereof.
The Option is exerciseable, in whole or part, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as defined). An "Initial Triggering Event" is defined as
follows:
(i) Southwest or any of its Subsidiaries (each a
"Southwest Subsidiary"), without having received Alliance's prior
written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as hereinafter defined) with any
person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934, and the rules and
regulations thereunder (the "1934 Act")) other than Alliance or
any of its Subsidiaries (each an "Alliance Subsidiary"). For
purposes of the Option Agreement, "Acquisition Transaction" shall
mean (x) a merger or consolidation, or any similar transaction,
involving Southwest or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the SEC) of Southwest,
(y) a purchase, lease or other acquisition of all or
substantially all of the assets of Southwest or any Significant
Subsidiary of Southwest, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of beneficial ownership of securities representing 25%
or more of the voting power of Southwest or any Significant
Subsidiary of Southwest, provided that the term "Acquisition
Transaction" does not include any internal merger or
consolidation involving only Southwest and/or Southwest
Subsidiaries;
(ii) (A) Any person other than Alliance, or any Alliance
Subsidiary, or any Southwest Subsidiary acting in a fiduciary
capacity (collectively, "Excluded Persons"), alone or together
with such person's affiliates and associates (as such terms are
defined in Rule 12b-2 under the 1934 Act) shall have acquired
beneficial ownership or the right to acquire beneficial ownership
of 25% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement
having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder) or (B) any group
(as such term is defined in Section 13(d)(3) of the
<PAGE>
CUSIP NO. 844769 10 9 PAGE 6 OF 9 PAGES
1934 Act), other than a group of which only Excluded Persons are
members, shall have been formed that beneficially owns 25% or
more of the shares of Common Stock then outstanding;
(iii) Any person other than Alliance or any Alliance
Subsidiary shall have made a bona fide proposal to Southwest or
its shareholders by public announcement or written communication
that is or becomes the subject of public disclosure to (A) engage
in an Acquisition Transaction or (B) commence a tender or
exchange offer the consummation of which would result in such
person acquiring beneficial ownership of securities representing
25% or more of Southwest's voting power;
(iv) The Board of Directors of Southwest shall have failed
to recommend to its stockholders the adoption of the Merger
Agreement or shall have withdrawn, modified or changed its
recommendation in a manner adverse to Alliance;
(v) After a proposal is made by a third party (other than
an Excluded Person) to Southwest to engage in an Acquisition
Transaction, Southwest shall have intentionally and knowingly
breached any representation, warranty, covenant or agreement
contained in the Merger Agreement and such breach (x) would
entitle Alliance to terminate the Merger Agreement pursuant to
Section 7.01(b) therein (without regard to any grace period
provided for therein) and (y) shall not have been cured prior to
the date Alliance sends to Southwest a written notice indicating
that it wishes to exercise the Option (the "Notice Date"); or
(vi) Any person other than Alliance or any Alliance
Subsidiary, other than in connection with a transaction to which
Alliance has given its prior written consent, shall have filed an
application or notice with the Office of Thrift Supervision
("OTS") or other federal or state bank regulatory authority, for
approval to engage in an Acquisition Transaction.
A "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date of the
merger agreement:
(i) The acquisition by any person other than an Excluded
Person (as defined) of beneficial ownership of 25% or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in (i) on the preceding page.
Additionally, at the request of Alliance at any time
commencing upon the first occurrence of a Repurchase Event (as
defined) and ending 12 months immediately thereafter, Southwest
shall repurchase from Alliance (i) the Option and (ii) all shares
of Southwest Common Stock purchased by Alliance pursuant hereto
with respect to which Alliance then has beneficial ownership.
The date on which Alliance exercises its rights under this
section is referred to as the "Request Date". Such repurchase
shall be at an aggregate price (the "Repurchase Consideration")
equal to the sum of:
(i) the aggregate Option Price paid by Alliance for any
shares of Southwest Common Stock acquired pursuant to the Option
with respect to which Alliance then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined in the Stock Option Agreement) for each share of Common
Stock over (y) the Option Price (subject to adjustment),
multiplied by the number of shares of Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Option paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by Alliance for each share of Common Stock
with respect to which the Option has been exercised and with
respect to which Alliance then has beneficial ownership,
multiplied by the number of such shares.
If Alliance exercises its rights, Southwest shall, within 10
business days after the Request Date, pay the Repurchase
Consideration to Alliance in immediately available funds, and
contemporaneously with such payment, Alliance shall surrender to
Southwest the Option and the certificates evidencing the shares
of Common Stock
<PAGE>
CUSIP NO. 844769 10 9 PAGE 7 OF 9 PAGES
purchased thereunder with respect to which Alliance then has
beneficial ownership, and Alliance shall warrant that it has sole
record and beneficial ownership of such shares and that the same
are then free and clear of all liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of any federal or state regulatory authority is required in
connection with the payment of all or any portion of the
Repurchase Consideration, Alliance shall have the ongoing option
to revoke its request for repurchase pursuant to this section, in
whole or in part, or to require that Southwest deliver from time
to time that portion of the Repurchase Consideration that it is
not then so prohibited from paying and promptly file the required
notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing
of any such notice or application and the obtaining of any such
approval). If any federal or state regulatory authority
prohibits the repurchase in part but not in whole, then Alliance
shall have the right (i) to revoke the repurchase request or (ii)
to the extent permitted by such regulatory authority, determine
whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Alliance shall thereupon
have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to (ii) above and
the number of shares covered by the portion of the Option (if
any) that has been repurchased.
A "Repurchase Event" shall occur if (i) any person (other
than Alliance or any Alliance subsidiary) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), or the right to acquire
beneficial ownership of, or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Southwest Common Stock, or
(ii) any of the transactions described in Section 7(a)(I),
7(a)(ii) or 7(a)(iii) of the Stock Option Agreement shall be
consummated.
The Stock Option Agreement provides that it will terminate
upon completion of the transactions contemplated by the Merger
Agreement.
The foregoing description of the Stock Option Agreement does
not purport to be complete and is qualified in its entirety by
the text of such Stock Option Agreement which is incorporated
herein by reference and attached hereto as Exhibit 7.2.
Item 5. Interest in Securities of the Issuer
(a) As of December 16, 1997, the Company directly and
beneficially owned 297,471 shares of the Issuer's Common Stock,
which represented 9.9% of the issued and outstanding shares of
Common Stock on such date.
(b) The Company has the sole power to vote and the sole
power to dispose of the 297,471 shares of Common Stock owned by
it.
(c) There were no transactions in the common stock of
Southwest effected by Alliance or any person identified in Item
2(a)-(c) above during the sixty days preceding the date of this
Schedule 13-D.
(d) No person or entity other than the Company has the
right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, the shares of
the Issuer's Common Stock reported in this Schedule.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
Except for the Merger Agreement, the Stock Option Agreement,
and related agreements, neither Alliance nor any person
identified in Item 2(a)-(c) above is a party to any contract,
arrangement, understanding or relationship (legal or otherwise)
among themselves or with any other person with respect to any
securities of the Issuer, including but not limited to transfer
or voting of any of the Common Stock, finder's fees, joint
ventures, loan or option
<PAGE>
CUSIP NO. 844769 10 9 PAGE 8 OF 9 PAGES
arrangements, puts or calls, guarantees of profits, division of
profits or loss, the giving or withholding of proxies, or
otherwise subject to a contingency the occurrence of which would
give another person voting or investment power over the Common
Stock.
Item 7. Material to be Filed as Exhibits
7.1 Agreement and Plan of Merger, dated as of December 16, 1997
between Alliance Bancorp and Southwest Bancshares, Inc.
7.2 Stock Option Agreement, dated December 16, 1997, between
Alliance Bancorp and Southwest Bancshares, Inc. (attached as
Exhibit A to the Agreement and Plan of Merger, which is attached
hereto as Exhibit 7.1).
<PAGE>
CUSIP NO. 844769 10 9 PAGE 9 OF 9 PAGES
SIGNATURE
After reasonable inquiry and to the best of the knowledge
and belief of the undersigned, the undersigned certifies that the
information set forth in this Statement on Schedule 13D is true,
complete and correct.
ALLIANCE BANCORP
By: /s/ Kenne P. Bristol
-----------------------------------
Kenne P. Bristol
President and Chief Executive
Officer
Date: December 24, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
By and Between
ALLIANCE BANCORP
And
SOUTHWEST BANCSHARES, INC.
Dated as of December 16, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions 2
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Conversion and Exchange of Shares 6
Section 2.02 The Exchange Ratio 7
Section 2.03 Surviving Corporation in the Company Merger. 8
Section 2.04 Authorization for Issuance of Alliance
Bancorp Common Stock; Exchange of
Certificates 9
Section 2.05 No Fractional Shares 11
Section 2.06 Stock Options. 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SWB
Section 3.01 Organization 12
Section 3.02 Capitalization 13
Section 3.03 Authority; No Violation 14
Section 3.04 Consents 15
Section 3.05 Financial Statements 15
Section 3.06 Taxes 16
Section 3.07 No Material Adverse Effect 16
Section 3.08 Contracts 16
Section 3.09 Ownership of Property; Insurance Coverage 17
Section 3.10 Legal Proceedings 18
Section 3.11 Compliance With Applicable Law 18
Section 3.12 ERISA 19
Section 3.13 Brokers, Finders and Financial Advisors 20
Section 3.14 Environmental Matters 20
Section 3.15 Loan Portfolio 21
Section 3.16 Information to be Supplied 21
Section 3.17 Securities Documents 21
<PAGE>
Section 3.18 Related Party Transactions 21
Section 3.19 Schedule of Termination Benefits 22
Section 3.20 Loans 22
Section 3.21 Antitakeover Provisions Inapplicable 22
Section 3.22 Fairness Opinion 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIANCE BANCORP
Section 4.01 Organization 23
Section 4.02 Capitalization 23
Section 4.03 Authority; No Violation 24
Section 4.04 Consents 25
Section 4.05 Financial Statements 25
Section 4.06 Taxes 26
Section 4.07 No Material Adverse Effect 26
Section 4.08 Ownership of Property; Insurance Coverage 26
Section 4.09 Legal Proceedings 27
Section 4.10 Compliance With Applicable Law 28
Section 4.11 Information to be Supplied 28
Section 4.12 ERISA and Employment Arrangements 28
Section 4.13 Securities Documents 29
Section 4.14 Environmental Matters 30
Section 4.15 Loan Portfolio 30
Section 4.16 Brokers, Finders and Financial Advisors 30
Section 4.17 Loans 30
Section 4.18 Antitakeover Provisions Inapplicable 31
Section 4.19 Fairness Opinion 31
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01 Conduct of SWB's Business 31
Section 5.02 Access; Confidentiality 34
Section 5.03 Regulatory Matters and Consents 35
Section 5.04 Taking of Necessary Action 36
Section 5.05 Certain Agreements 37
Section 5.06 No Other Bids and Related Matters 38
Section 5.07 Duty to Advise; Duty to Update SWB's
Disclosure Schedule 38
Section 5.08 Conduct of Alliance Bancorp's Business 39
Section 5.09 Board and Committee Minutes 39
Section 5.10 Undertakings by Alliance Bancorp and SWB 39
Section 5.11 Employee and Termination Benefits;
Directors and Management 42
<PAGE>
Section 5.12 Duty to Advise; Duty to Update Alliance
Bancorp's Disclosure Schedule 43
Section 5.13 Affiliate Letter 43
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to SWB's Obligations under this
Agreement 44
Section 6.02 Conditions to Alliance Bancorp's Obligations
under this Agreement 45
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination 47
Section 7.02 Effect of Termination 48
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Expenses 48
Section 8.02 Non-Survival of Representations and
Warranties 49
Section 8.03 Amendment, Extension and Waiver 49
Section 8.04 Entire Agreement 49
Section 8.05 No Assignment 49
Section 8.06 Notices 49
Section 8.07 Captions 50
Section 8.08 Counterparts 50
Section 8.09 Severability 50
Section 8.10 Governing Law 51
<PAGE>
Exhibits:
Exhibit A Stock Option Agreement
Exhibit B Form of Alliance Bancorp Voting Agreement
Exhibit C Form of SWB Voting Agreement
Exhibit 2.1 Bank Plan of Merger
Exhibit 6.1 Form of Opinion of Counsel for Alliance
Bancorp
Exhibit 6.2 Form of Tax Opinion of Luse Lehman Gorman
Pomerenk & Schick, P.C.
Exhibit 6.3 Form of Opinion of Counsel for SWB
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of December 16, 1997, is by and among by and among Alliance
Bancorp, a Delaware corporation and Southwest Bancshares, Inc., a
Delaware corporation ("SWB"). Each of Alliance Bancorp and SWB
is sometimes individually referred to herein as a "party," and
Alliance Bancorp and SWB are sometimes collectively referred to
herein as the "parties."
RECITALS
WHEREAS, Alliance Bancorp, a non-diversified, unitary
savings and loan holding company, with principal offices in
Hinsdale, Illinois, owns all of the issued and outstanding
capital stock of Liberty Federal Bank, a federally chartered
savings bank ("Liberty Federal"), with principal offices in
Hinsdale, Illinois.
WHEREAS, SWB, a non-diversified, unitary savings and loan
holding company, with principal offices in Hometown, Illinois,
owns all of the issued and outstanding capital stock of Southwest
Federal Savings and Loan Association of Chicago, a federally
chartered savings and loan association ("Southwest Federal"),
with principal offices in Hometown, Illinois.
WHEREAS, the Boards of Directors of the respective parties
hereto deem it advisable and in the best interests of the
respective stockholders to consummate the business combination
transaction contemplated herein in which SWB, subject to the
terms and conditions set forth herein, shall be merged with and
into Alliance Bancorp (the "Company Merger"), with Alliance
Bancorp being the surviving corporation, in a tax-free, stock-
for-stock merger transaction so that the respective stockholders
of SWB will have a continuing equity ownership in Alliance
Bancorp; and
WHEREAS, upon execution and delivery of this Agreement,
Liberty Federal, and Southwest Federal will enter into a Plan of
Merger (the "Bank Merger Agreement") providing for the merger
(the "Bank Merger") of Southwest Federal with and into Liberty
Federal, with Liberty Federal as the surviving institution, and
it is intended that the Bank Merger be consummated immediately
following consummation of the Company Merger; and
WHEREAS, in connection with the execution of this Agreement,
as an inducement to Alliance Bancorp to enter into this
Agreement, SWB and Alliance Bancorp have entered into a Stock
Option Agreement dated as of even date herewith pursuant to which
SWB will grant Alliance Bancorp the right to purchase certain
shares of SWB Common Stock; and
WHEREAS, the parties hereto desire to provide for certain
undertakings, conditions, representations, warranties and
covenants in connection with Company Merger, and the other
<PAGE>
transactions contemplated by this Agreement, the Plan of Merger
and the Stock Option Agreement (collectively, the "Merger
Documents").
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and covenants herein contained
and intending to be legally bound hereby, the parties hereto do
hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Definitions. Except as otherwise provided
herein, as used in this Agreement, the following terms shall have
the indicated meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person and, without limiting the generality of
the foregoing, includes any executive officer or director of such
Person and any Affiliate of such executive officer or director.
"Agreement" means this agreement, and any amendment or
supplement hereto.
"Alliance Bancorp Common Stock" has the meaning given
to that term in Section 4.02(a) of this Agreement.
"Alliance Bancorp Disclosure Schedules" means the
disclosure schedules delivered by Alliance Bancorp to SWB
pursuant to Article IV of this Agreement.
"Alliance Bancorp Financials" means (i) the audited
consolidated financial statements of Alliance Bancorp as of
September 30, 1995 and 1996 and for the three years ended
September 30, 1996, including the notes thereto, and (ii) the
unaudited interim consolidated financial statements of Alliance
Bancorp as of each calendar quarter thereafter included in
Securities Documents filed by Alliance Bancorp.
"Alliance Bancorp Market Value" shall mean the average
of the inside closing bid price of Alliance Bancorp Common Stock
on the Nasdaq National Market System (as reported by The Wall
Street Journal) for each of the twenty (20) consecutive trading
days ending on the fifth business day before the Closing Date.
"Alliance Bancorp Regulatory Reports" means the
Quarterly Thrift Financial Reports of Liberty Federal and
accompanying schedules, as filed with the OTS, for each calendar
quarter beginning with the quarter ended December 31, 1996,
through the Closing Date, and
<PAGE>
any Current or Annual Reports on Form H(b)-11 filed with the OTS
by Alliance Bancorp since December 31, 1995.
"Alliance Bancorp Option" means the option granted to
Alliance Bancorp to acquire shares of SWB Common Stock pursuant
to the Stock Option Agreement.
"Alliance Bancorp Subsidiary" means any corporation,
50% or more of the capital stock of which is owned, either
directly or indirectly, by Alliance Bancorp or Liberty Federal,
except any corporation the stock of which is held as security by
Liberty Federal in the ordinary course of its lending activities.
"Applications" means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
"Bank Merger" means the merger of Southwest Federal
with and into Liberty Federal, with Liberty Federal as the
surviving institution.
"Bank Merger Effective Date" shall mean the date on
which the articles of combination for the Bank Merger are
endorsed by the OTS pursuant to Section 552.12(k) of the OTS
Regulations.
"Closing Date" means the date determined by Alliance
Bancorp, in its sole discretion, upon five (5) days prior written
notice to SWB, but in no event later than thirty (30) days after
the last condition precedent pursuant to this Agreement has been
fulfilled or waived (including the expiration of any applicable
waiting period), or such other date as to which Alliance Bancorp
and SWB shall agree.
"Company Merger" means the merger of SWB with and into
Alliance Bancorp, with Alliance Bancorp being the surviving
corporation, in a tax-free, stock-for-stock merger transaction.
"Company Merger Effective Date" means that date upon
which the certificate of merger is filed with the Delaware
Secretary of State, or as otherwise stated in the certificate of
merger, in accordance with Section 251 of the DGCL.
"DGCL" means the Delaware General Corporation Law.
"Environmental Laws" means any Federal or state law,
statute, rule, regulation, code, order, judgement, decree,
injunction, common law or agreement with any Federal or state
governmental authority relating to (i) the protection,
preservation or restoration of the environment (including air,
water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other
natural resource), (ii) human health or safety, or (iii) exposure
to, or the use, storage, recycling, treatment, generation,
<PAGE>
transportation, processing, handling, labeling, production,
release or disposal of, hazardous substances, in each case as
amended and now in effect.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated from
time to time thereunder.
"Exchange Agent" means the entity selected by Alliance
Bancorp and agreed to by SWB, as provided in Section 2.01(b) of
this Agreement.
"Exchange Ratio" shall have the meaning given to such
term in the Section 2.02 of this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as
amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means generally accepted accounting principles
as in effect at the relevant date and consistently applied.
"IRC" means the Internal Revenue Code of 1986, as
amended.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" shall mean, with respect to
Alliance Bancorp or SWB, any adverse effect on its assets,
financial condition or results of operations which is material to
its assets, financial condition or results of operations on a
consolidated basis, except for any material adverse effect caused
by (i) any change in the value of the assets of Alliance Bancorp
or SWB resulting from a change in interest rates generally or
(ii) any individual or combination of changes occurring after the
date hereof in any federal or state law, rule or regulation or in
GAAP, which change(s) affect(s) financial institutions generally,
including any changes affecting the Bank Insurance Fund or the
Savings Association Insurance Fund. Any effect caused by any
judicial determination or other development relating to the
goodwill lawsuit initiated by Liberty Federal (its predecessor)
against the United States Government shall not be considered a
Material Adverse Effect as to Alliance Bancorp.
"Person" means any individual, corporation,
partnership, joint venture, association, trust or "group" (as
that term is defined under the Exchange Act).
"Plan of Merger" means the Plan of Merger by and
between Southwest Federal and Liberty Federal.
<PAGE>
"Prospectus/Proxy Statement" means the prospectus/proxy
statement, together with any supplements thereto, to be
transmitted to holders of SWB Common Stock and Alliance Bancorp
Common Stock in connection with the transactions contemplated by
this Agreement.
"Registration Statement" means the registration
statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed with
the SEC under the Securities Act with respect to the Alliance
Bancorp Common Stock to be issued in connection with the
transactions contemplated by this Agreement.
"Regulatory Agreement" has the meaning given to that
term in Section 3.11 of this Agreement.
"Regulatory Authority" means any agency or department
of any federal or state government, including without limitation
the OTS, the FDIC, the SEC or the respective staffs thereof.
"Rights" means warrants, options, rights, convertible
securities and other capital stock equivalents which obligate an
entity to issue its securities.
"SAIF" means the Savings Association Insurance Fund, as
administered by the FDIC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated from time to
time thereunder.
"Securities Documents" means all registration
statements, schedules, statements, forms, reports, proxy
material, and other documents required to be filed under the
Securities Laws.
"Securities Laws" means the Securities Act and the
Exchange Act and the rules and regulations promulgated from time
to time thereunder.
"Stock Option Agreement" means the Stock Option
Agreement dated as of even date herewith pursuant to which SWB
has granted Alliance Bancorp the right to purchase certain shares
of SWB Common Stock and which is attached to this Agreement as
Exhibit A thereto.
"Subsidiary" means any corporation, 50% or more of the
capital stock of which is owned, either directly or indirectly,
by another entity, except any corporation the stock of which is
held as security by either Alliance Bancorp Bank or SWB, as the
case may be, in the ordinary course of its lending activities.
<PAGE>
"SWB Common Stock" means the common stock of SWB
described in Section 3.02(a).
"SWB Disclosure Schedules" means the disclosure
schedules delivered by SWB to Alliance Bancorp pursuant to
Article III of this Agreement.
"SWB Financials" means (i) the audited consolidated
financial statements of SWB as of December 31, 1995 and1996 and
for the three years ended December 31, 1996, including the notes
thereto, and (ii) the unaudited interim consolidated financial
statements of SWB as of each calendar quarter thereafter included
in Securities Documents filed by SWB.
"SWB Regulatory Reports" means the Quarterly Thrift
Financial Reports of Southwest Federal and accompanying schedules
for each calendar quarter, beginning with the quarter ended
December 31, 1995, through the Closing Date, as filed with the
OTS, and any Current or Annual Reports on Form H(b)-11 filed with
the OTS by SWB since December 31, 1995.
"SWB Subsidiary" means any corporation, 50% or more of
the capital stock of which is owned, either directly or
indirectly, by SWB, except any corporation the stock of which is
held in the ordinary course of the lending activities of SWB.
ARTICLE II
THE MERGER AND EXCHANGE OF SHARES
Section 2.01 Conversion and Exchange of Shares.
(a) At the Company Merger Effective Date, by virtue of the
Company Merger and without any action on the part of Alliance
Bancorp or SWB or the holders of shares of Alliance Bancorp or
SWB Common Stock:
(i) Each outstanding share of SWB Common Stock issued
and outstanding at the Company Merger Effective Date, except as
provided in clause (a) (ii) of this Section and Section 2.05
hereof, shall cease to be outstanding, shall cease to exist and
shall be converted into and represent solely one share of
Alliance Bancorp Common Stock multiplied by the Exchange Ratio as
determined below (rounded to the nearest fourth decimal).
(ii) Any shares of SWB Common Stock which are owned or
held by either party hereto or any of their respective
Subsidiaries (other than in a fiduciary capacity or in connection
with debts previously contracted) at the Company Merger Effective
Date shall cease to exist, the certificates for such shares shall
as promptly as practicable be canceled, such shares shall not be
converted into or represent any shares of Alliance Bancorp Common
Stock, and no shares of capital stock of Alliance Bancorp shall
be issued or exchanged therefor.
<PAGE>
(iii) Each share of Alliance Bancorp Common Stock
issued and outstanding immediately before the Company Merger
Effective Date shall remain an outstanding share of Common Stock
of Alliance Bancorp as the surviving corporation.
(iv) The holders of certificates representing shares of
SWB Common Stock shall cease to have any rights as stockholders
of SWB, except such rights, if any, as they may have pursuant to
applicable law.
(b) Prior to the Company Merger Effective Date, Alliance
Bancorp shall appoint a bank, trust company or other stock
transfer agent selected by it and agreed to by SWB as the
Exchange Agent to effect the exchange of certificates evidencing
shares of SWB Common Stock (any such certificate being
hereinafter referred to as a "Certificate") for shares of
Alliance Bancorp Common Stock to be received in the share
exchange. On the Company Merger Effective Date, Alliance Bancorp
shall have granted the Exchange Agent the requisite power and
authority to effect for and on behalf of Alliance Bancorp the
issuance of the number of shares of Alliance Bancorp Common
Stock issuable in the share exchange. The Exchange Agent shall
accept such Certificates upon compliance with such reasonable
terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with customary exchange
practices.
(c) In connection with this Agreement, Liberty Federal and
Southwest Federal shall enter into the Plan of Merger.
Section 2.02 The Exchange Ratio
(a) For purposes of this Agreement, and subject to the
provisions of Section 7.01(c), the Exchange Ratio shall be:
(i) if the Alliance Bancorp Market Value is less than or
equal to $30.475 and greater than or equal to $22.525, then
1.1981 shares of Alliance Bancorp Common Stock;
(ii) if the Alliance Bancorp Market Value is greater than
$30.475 and less than or equal to $35.00, then that number of
shares of fully paid and nonassessable shares of Alliance Bancorp
Common Stock, determined by dividing $36.5125 by the Alliance
Bancorp Market Value;
(iii) if the Alliance Bancorp Market Value is greater
than $35.00, then 1.0432 shares of Alliance Bancorp Common Stock;
and
(iv) if the Alliance Bancorp Market Value is less than
$22.525, then that number of shares of fully paid and
nonassessable shares of Alliance Bancorp Common Stock, determined
by dividing $26.9875 by the Alliance Bancorp Market Value,
subject to the provisions of Section 7.01(c) of this Agreement.
<PAGE>
(b) In the event that, between the date hereof and prior to
the Company Merger Effective Date, the outstanding shares of
Alliance Bancorp Common Stock shall have been increased,
decreased or changed into or exchanged for a different number or
kind of shares or securities by reorganization, recapitalization,
reclassification, stock split or other like changes in the
capitalization of Alliance Bancorp, or if a stock dividend is
declared on Alliance Bancorp Common Stock with a record date (as
to a stock split, the pay date) within such period, then an
appropriate and proportionate adjustment shall be made in the
number and kind of shares of Alliance Bancorp Common Stock to be
thereafter delivered pursuant to this Agreement, and the Exchange
Ratio set forth herein, so that each shareholder of SWB shall be
entitled to receive such number of shares of Alliance Bancorp
Common Stock or other securities as such shareholder would have
received pursuant to such reorganization, recapitalization,
reclassification, stock split, exchange of shares or readjustment
or other like changes in the capitalization of Alliance Bancorp,
or as a result of a stock dividend on Alliance Bancorp Common
Stock, had the record (or pay) date therefor been immediately
following the Company Merger Effective Date.
Section. 2.03 Surviving Corporation in the Company Merger.
(a) Alliance Bancorp shall be the surviving corporation in
the Company Merger. The headquarters of the surviving
corporation shall be located in Hinsdale, Illinois.
(b) The Certificate of Incorporation of Alliance Bancorp as
in effect immediately prior to the Company Merger Effective Date,
except as to the amendment to increase the number of authorized
shares of Common Stock provided for in Section 5.08 hereof, shall
be the Certificate of Incorporation of Alliance Bancorp as the
surviving corporation until subsequently amended.
(c) At the Company Merger Effective Date, the Bylaws of
Alliance Bancorp, as then in effect shall be the Bylaws of
Alliance Bancorp as the surviving corporation, until subsequently
amended in accordance with the DGCL.
(d) The directors and executive officers of Alliance
Bancorp as the surviving corporation following the Company Merger
shall be the directors and executive officers as the surviving
corporation, except as otherwise provided in Section 5.11 of this
Agreement.
(e) From and after the Company Merger Effective Date:
(i) Alliance Bancorp as the surviving corporation
shall possess all assets and property of every description, and
every interest in the assets and property, wherever located, and
the rights, privileges, immunities, powers, franchises, and
authority, of a public as well as of a private nature, of each of
Alliance Bancorp and SWB, and all obligations belonging or due to
each of Alliance Bancorp and SWB, all of which shall vest in
Alliance Bancorp as the surviving corporation without further act
or deed. Title to any real estate or any interest in the real
estate vested in Alliance Bancorp or SWB shall not revert or in
any way be impaired by reason of the Company Merger.
<PAGE>
(ii) Alliance Bancorp as the surviving corporation will
be liable for all the obligations of each of Alliance Bancorp and
SWB. Any claim existing, or action or proceeding pending, by or
against Alliance Bancorp or SWB, may be prosecuted to judgement,
with right of appeal, as if the Company Merger had not taken
place, or Alliance Bancorp as the surviving corporation may be
substituted in its place.
(iii) All the rights of creditors of each of
Alliance Bancorp and SWB will be preserved unimpaired, and all
liens upon the property of Alliance Bancorp and SWB will be
preserved unimpaired only on the property affected by such liens
immediately before the Company Merger Effective Date.
Section 2.04 Authorization for Issuance of Alliance Bancorp
Common Stock; Exchange of Certificates.
(a) Alliance Bancorp shall reserve for issuance a
sufficient number of shares of its common stock for the purpose
of issuing its shares to SWB's stockholders in accordance with
this Article II.
(b) After the Company Merger Effective Date, holders of
certificates theretofore representing outstanding shares of SWB
Common Stock (other than as provided in Section 2.01 (a) (ii)
hereof), upon surrender of such certificates to the Exchange
Agent, shall be entitled to receive (i) certificates for the
number of whole shares of Alliance Bancorp Common Stock into
which shares of SWB Common Stock theretofore evidenced by the
certificates so surrendered shall have been converted, as
provided in Section 2.01 hereof, and (ii) cash payments in lieu
of fractional shares, if any, as provided in Section 2.05 hereof.
As soon as practicable after the Company Merger Effective Date,
and in no event more than five business days thereafter, the
Exchange Agent will send a notice and transmittal form to each
SWB stockholder of record at the Company Merger Effective Date
whose SWB Common Stock shall have been converted into Alliance
Bancorp Common Stock advising such stockholder of the
effectiveness of the Company Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates
formerly representing SWB Common Stock in exchange for new
certificates for Alliance Bancorp Common Stock. Upon surrender,
each certificate representing SWB Common Stock shall be canceled.
(c) Until surrendered as provided in this Section 2.04,
each outstanding certificate which, before the Company Merger
Effective Date, represented SWB Common Stock (other than shares
canceled at the Company Merger Effective Date pursuant to Section
2.01 (a) (ii) hereof) will be deemed for all corporate purposes
to represent the number of whole shares of Alliance Bancorp
Common Stock into which the shares of SWB Common Stock formerly
represented thereby were converted and the right to receive cash
in lieu of fractional shares. However, until such outstanding
certificates formerly representing SWB Common Stock are so
surrendered, no dividend or distribution payable to holders of
record of Alliance Bancorp Common Stock shall be paid to any
holder of such outstanding certificates, but upon surrender of
such outstanding certificates by such holder there shall be paid
to such holder the amount of any dividends or distributions,
without
<PAGE>
interest, theretofore paid with respect to such whole shares of
Alliance Bancorp Common Stock, but not paid to such holder, and
which dividends or distribution had a record date occurring on or
after the Company Merger Effective Date and the amount of any
cash, without interest, payable to such holder in lieu of
fractional shares pursuant to Section 2.05 hereof. After the
Company Merger Effective Date, there shall be no further
registration of transfers on the records of SWB of outstanding
certificates formerly representing shares of SWB Common Stock
and, if a certificate formerly representing such shares is
presented to Alliance Bancorp, it shall be forwarded to the
Exchange Agent for cancellation and exchange for a certificate
representing shares of Alliance Bancorp Common Stock and cash for
fractional shares (if any), as herein provided. Following one
year after the Company Merger Effective Date, the Exchange Agent
shall return to Alliance Bancorp as the surviving corporation any
certificates for Alliance Bancorp Common Stock and cash remaining
in the possession of the Exchange Agent (together with any
dividends in respect thereof) and thereafter shareholders of SWB
shall look exclusively to Alliance Bancorp for shares of the
Alliance Bancorp Common Stock and cash to which they are entitled
hereunder.
(d) All shares of Alliance Bancorp Common Stock and cash in
lieu of any fractional share issued and paid upon the conversion
of SWB Common Stock in accordance with the above terms and
conditions shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such SWB Common Stock.
(e) If any new certificate for Alliance Bancorp Common
Stock is to be issued in a name other than that in which the
certificate surrendered in exchange thereof is registered, it
shall be a condition of the issuance therefor that the
certificate surrendered in exchange shall be properly endorsed
and otherwise in proper form for transfer and that the person
requesting such transfer pay to the Exchange Agent any transfer
or other taxes required by reason of the issuance of a new
certificate representing shares of Alliance Bancorp Common Stock
in any name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(f) Certificates surrendered for exchange by any person who
is an "affiliate" of SWB for purposes of Rule 145(c) under the
Securities Act of 1933, as amended, shall not be exchanged for
Certificates representing shares of Alliance Common Stock until
Alliance Bancorp has received the written agreement of such
person contemplated by Section 5.13 of the Agreement.
(g) In the event any certificate representing SWB Common
Stock shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed
certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of Alliance Bancorp Common Stock and
cash for fractional shares, if any, as may be required pursuant
hereto; provided, however, that Alliance Bancorp or the Exchange
Agent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as is
reasonably necessary as indemnity against any claim that may be
made against Alliance Bancorp, Alliance Bancorp, SWB, the
Exchange Agent or any other party with respect to the certificate
alleged to have been lost, stolen or destroyed.
<PAGE>
Section 2.05 No Fractional Shares. Notwithstanding any
term or provision hereof, no fractional shares of Alliance
Bancorp Common Stock, and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued upon the
conversion of or in exchange for any shares of SWB Common Stock;
no dividend or distribution with respect to Alliance Bancorp
Common Stock shall be payable on or with respect to any
fractional share interest; and no such fractional share interest
shall entitle the owner thereof to vote or to any other rights of
a stockholder of Alliance Bancorp as the Surviving Corporation.
In lieu of such fractional share interest, any holder of SWB
Common Stock who would otherwise be entitled to a fractional
share of Alliance Bancorp Common Stock will, promptly following
surrender of his certificate or certificates representing SWB
Common Stock outstanding immediately before the Company Merger
Effective Date, be paid the applicable cash value of such
fractional share interest, which shall be equal to the product of
the fraction of the share to which such holder would otherwise
have been entitled and the Alliance Bancorp Market Value. For
the purposes of determining any such fractional share interests,
all shares of SWB Common Stock owned by a SWB stockholder shall
be combined so as to calculate the maximum number of whole shares
of Alliance Bancorp Common Stock issuable to such SWB
stockholder.
Section 2.06 Stock Options.
(a) At the Company Merger Effective Date, each option
granted by SWB (a "SWB Option") to purchase shares of SWB Common
Stock which is outstanding and unexercised immediately prior
thereto shall, except as otherwise provided in this Section
2.06(c) hereof, be converted automatically into an option to
purchase shares of Alliance Bancorp Common Stock in an amount and
at an exercise price determined as provided below (and otherwise
subject to the terms of the SWB's Stock Option Plan for Outside
Directors and the Incentive Stock Option Plan (collectively, the
"SWB Option Plans")):
(1) The number of shares of Alliance Bancorp Common
Stock to be subject to the new option shall be equal to the
product of the number of shares of SWB Common Stock subject to
the original option and the Exchange Ratio, provided that any
fractional share of Alliance Bancorp Common Stock resulting from
such multiplication shall be rounded down to the nearest share;
and
(2) The exercise price per share of Alliance Bancorp
Common Stock under the new option shall be equal to the exercise
price per share of SWB Common Stock under the original option
divided by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options
which are "incentive stock options" (as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")) shall
be and is intended to be effected in a manner which is consistent
with Section 424(a) of the Code. The duration and other terms of
the new option shall be the same as the original option, except
that all references to the SWB shall be deemed to be references
to Alliance Bancorp.
<PAGE>
(b) Prior to the Company Merger Effective Date, Alliance
Bancorp shall reserve for issuance, the number of shares of
Alliance Bancorp Common Stock necessary to satisfy Alliance
Bancorp's obligations under this Section 2.06. Within thirty
days after the Company Merger Effective Date, Alliance Bancorp
shall file with the Securities and Exchange Commission (the
"SEC") a registration statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Alliance Bancorp Common Stock subject to
options to acquire Alliance Bancorp Common Stock issued pursuant
to Section 2.06(a) hereof, and shall use its reasonable best
efforts to maintain the current status of the prospectus
contained therein, as well as comply with applicable state
securities or "blue sky" laws, for so long as such options remain
outstanding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SWB
SWB represents and warrants to Alliance Bancorp that the
statements contained in this Article III are correct and complete
as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the SWB
Disclosure Schedules delivered by SWB to Alliance Bancorp on the
date hereof. SWB has made a good faith effort to ensure that the
disclosure on each schedule of the SWB Disclosure Schedules
corresponds to the section reference herein. However, for
purposes of the SWB Disclosure Schedules, any item disclosed on
any schedule therein is deemed to be fully disclosed with respect
to all schedules under which such item may be relevant.
Section 3.01 Organization.
(a) SWB is a corporation duly organized ,validly existing
and in good standing under the laws of the State of Delaware,
with full corporate power and authority to carry on its business
as now conducted and is duly licensed or qualified to do business
in the states of the United States and foreign jurisdictions
where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to
be so licensed or qualified would not have a Material Adverse
Effect on SWB.
(b) Southwest Federal is a stock savings and loan
association duly organized and validly existing under the laws of
the United States. Except as set forth in SWB Disclosure
Schedule 3.01(b), Southwest Federal is the only SWB Subsidiary.
The deposits of Southwest Federal are insured by the FDIC through
the SAIF to the fullest extent permitted by law, and all premiums
and assessments required to be paid in connection therewith have
been paid when due by Southwest Federal. Each other SWB
Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation or organization.
<PAGE>
(c) Southwest Federal is a member in good standing of the
Federal Home Loan Bank of Chicago and owns the requisite amount
of stock therein.
(d) Except as disclosed in SWB Disclosure Schedule 3.01(d),
the respective minute books of SWB and each SWB Subsidiary
accurately record, in all material respects, all material
corporate actions of their respective shareholders and boards of
directors (including committees) through the date of this
Agreement.
(e) Prior to the date of this Agreement, SWB has delivered
to Alliance Bancorp true and correct copies of the of certificate
of incorporation and bylaws of SWB.
Section 3.02 Capitalization.
(a) The authorized capital stock of SWB consists of (a)
5,000,000 shares of common stock, $0.01 par value ("SWB Common
Stock"), of which 2,707,295 shares are outstanding, validly
issued, fully paid and nonassessable and free of preemptive
rights, and 1,756,063 shares are held by SWB as treasury stock
(including 401,921 shares of treasury stock re-acquired by SWB
during the two year period preceding the date of this Agreement)
and (b) 1,000,000 shares of preferred stock, $0.01 par value,
none of which are issued or outstanding. Neither SWB nor any SWB
Subsidiary has or is bound by any Right of any character relating
to the purchase, sale or issuance or voting of, or right to
receive dividends or other distributions on any shares of SWB
Common Stock, SWB preferred stock or any other security of SWB or
any securities representing the right to vote, purchase or
otherwise receive any shares of SWB Common Stock, SWB preferred
stock or any other security of SWB, other than shares issuable
under the Alliance Bancorp Option and other than as set forth in
reasonable detail in the SWB Disclosure Schedule 3.02. SWB
Disclosure Schedule 3.02(a) sets forth the name of each holder of
options to purchase SWB Common Stock, the number of shares each
such individual may acquire pursuant to the exercise of such
options, and the exercise price relating to the options held.
SWB Disclosure Schedule 3.02(a) also sets forth the names of the
holders of any unvested awards of SWB Common Stock under the SWB
Recognition and Retention Plan for Outside Directors and the SWB
Recognition and Retention Plan for Officers and Employees, the
number of shares underlying such awards, and the vesting periods
relating thereto.
(b) SWB owns all of the capital stock of Southwest Federal,
free and clear of any lien or encumbrance. Except for the SWB
Subsidiaries, SWB does not possess, directly or indirectly, any
material equity interest in any corporation, except for equity
interests held in the investment portfolios of SWB Subsidiaries,
equity interests held by SWB Subsidiaries in a fiduciary
capacity, and equity interests held in connection with the
lending activities of SWB Subsidiaries.
(c) To SWB's knowledge, no Person or "group" (as that term
is used in Section 13(d)(3) of the Exchange Act), is the
beneficial owner (as defined in Section 13(d) of the Exchange
Act) of 5% or more of the outstanding shares of SWB Common Stock,
except as disclosed in the SWB Disclosure Schedule 3.02.
<PAGE>
Section 3.03 Authority; No Violation.
(a) SWB has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. Southwest Federal has full corporate power
and authority to execute and deliver the Plan of Merger and to
consummate the Bank Merger. The execution and delivery of this
Agreement by SWB and the completion by SWB of the transactions
contemplated hereby have been duly and validly approved by the
Board of Directors of SWB and, except for approval of the
shareholders of SWB, no other corporate proceedings on the part
of SWB are necessary to complete the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by SWB and, subject to approval by the shareholders of
SWB and receipt of the required approvals of Regulatory
Authorities described in Section 4.04 hereof, constitutes the
valid and binding obligation of SWB and Southwest Federal,
enforceable against SWB and Southwest Federal in accordance with
its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and as to
Southwest Federal, the conservatorship or receivership provisions
of the FDIA, and subject, as to enforceability, to general
principles of equity. The Plan of Merger, upon its execution and
delivery by Southwest Federal concurrently with the execution and
delivery of this Agreement, will constitute the valid and binding
obligation of Southwest Federal, enforceable against Southwest
Federal in accordance with its terms, subject to applicable
conservatorship and receivership provisions of the FDIA, or
insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of
equity.
(b) (A) The execution and delivery of this Agreement by
SWB, (B) the execution and delivery of the Plan of Merger by
Southwest Federal, (C) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 4.04 hereof and
SWB's and Alliance Bancorp's compliance with any conditions
contained therein, the consummation of the transactions
contemplated hereby, and (D) compliance by SWB or Southwest
Federal with any of the terms or provisions hereof or of the Plan
of Merger will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or bylaws of SWB or
any SWB Subsidiary or the charter and bylaws of Southwest
Federal; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to SWB or any SWB Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would
constitute a default), under, result in the termination of,
accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties
or assets of SWB or Southwest Federal under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other investment or
obligation to which SWB or Southwest Federal is a party, or by
which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts,
breaches or defaults under clause (ii) or (iii) hereof which,
either individually or in the aggregate, will not have a Material
Adverse Effect on SWB.
<PAGE>
Section 3.04 Consents. Except for the consents, waivers,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 4.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the requisite vote of the shareholders of SWB, no
consents, waivers or approvals of, or filings or registrations
with, any governmental authority are necessary, and, to SWB's
knowledge, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in
connection with (a) the execution and delivery of this Agreement
by SWB, and (b) the completion by Southwest Federal of the
transactions contemplated hereby or by the Plan of Merger. SWB
has no reason to believe that (i) any required consents or
approvals will not be received, or that (ii) any public body or
authority, the consent or approval of which is not required or
any filing with which is not required, will object to the
completion of the transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) SWB has previously delivered to Alliance Bancorp the
SWB Regulatory Reports. The SWB Regulatory Reports have been, or
will be, prepared in all material respects in accordance with
applicable regulatory accounting principles and practices
throughout the periods covered by such statements, and fairly
present, or will fairly present in all material respects, the
consolidated financial position, results of operations and
changes in shareholders' equity of SWB as of and for the periods
ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) SWB has previously delivered to Alliance Bancorp the
SWB Financials. The SWB Financials have been, or will be,
prepared in accordance with GAAP, and (including the related
notes where applicable) fairly present, or will fairly present,
in each case in all material respects (subject in the case of the
unaudited interim statements to normal year-end adjustments), the
consolidated financial position, results of operations and cash
flows of SWB and the SWB Subsidiaries as of and for the
respective periods ending on the dates thereof, in accordance
with GAAP applied on a consistent basis during the periods
involved, except as indicated in the notes thereto, or in the
case of unaudited statements, as permitted by Form 10-Q.
(c) At the date of each balance sheet included in the SWB
Financials or the SWB Regulatory Reports, SWB did not have, or
will not have any liabilities, obligations or loss contingencies
of any nature (whether absolute, accrued, contingent or
otherwise) of a type required to be reflected in such SWB
Financials or SWB Regulatory Reports or in the footnotes thereto
which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities,
obligations and loss contingencies which are not material
individually or in the aggregate and which are incurred in the
ordinary course of business, consistent with past practice and
except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and
warranty herein and subject, in the case of any unaudited
statements, to normal, recurring audit adjustments and the
absence of footnotes.
<PAGE>
Section 3.06 Taxes. SWB and the SWB Subsidiaries are
members of the same affiliated group within the meaning of IRC
Section 1504(a). SWB has duly filed all federal, state and
material local tax returns required to be filed by or with
respect to SWB and all SWB Subsidiaries on or prior to the
Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will
make, provisions for the payment of all material federal, state
and local taxes which have been incurred by or are due or claimed
to be due from SWB and any SWB Subsidiary by any taxing authority
or pursuant to any written tax sharing agreement on or prior to
the Closing Date other than taxes or other charges which (i) are
not delinquent, (ii) are being contested in good faith, or (iii)
have not yet been fully determined.
Section 3.07. No Material Adverse Effect. SWB and the SWB
Subsidiaries, taken as a whole, have not suffered any Material
Adverse Effect since September 30, 1997.
Section 3.08. Contracts.
(a) Except as described in the footnotes to the SWB
Financials or in SWB Disclosure Schedule 3.08(a), neither SWB nor
any SWB Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or material
arrangement with any past or present officer, director or
employee of SWB or any SWB Subsidiary, except for "at will"
arrangements; (ii) any plan, material arrangement or contract
providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing or similar material
arrangements for or with any past or present officers, directors
or employees of SWB or any SWB Subsidiary; (iii) any collective
bargaining agreement with any labor union relating to employees
of SWB or any SWB Subsidiary; (iv) any agreement which by its
terms limits the payment of dividends by SWB; (v) any instrument
evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which SWB or any SWB Subsidiary is an
obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers'
acceptances, Federal Home Loan Bank of Chicago advances, and
"treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due)
which would be applicable on or after the Closing Date to
Alliance Bancorp or any Alliance Bancorp Subsidiary; or (vi) any
contract (other than this Agreement) limiting the freedom, in any
material respect, of SWB or Southwest Federal to engage in any
type of banking or bank-related business which SWB is permitted
to engage in under applicable law as of the date of this
Agreement. The SWB Subsidiaries engaged in land acquisition and
real estate development projects, as described in Item 1 to the
SWB Annual Report on Form 10-K for the year ended December 31,
1996 under the caption "SUBSIDIARY ACTIVITIES," have conducted
their activities in all material respects in accordance with the
partnership and joint venture agreements entered into in
connection with such activities and projects.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 3.08(a), have
been provided to Alliance Bancorp on or before the date hereof,
are listed
<PAGE>
on SWB Disclosure Schedule 3.08(a) and are in full force and
effect on the date hereof and neither SWB nor any SWB Subsidiary
(nor, to the knowledge of SWB, any other party to any such
contract, plan, arrangement or instrument) has breached any
provision of, or is in default in any respect under any term of,
any such contract, plan, arrangement or instrument which breach
has resulted in or will result in a Material Adverse Effect with
respect to SWB. Except as set forth in the SWB Disclosure
Schedule 3.08(b), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or
all of the provisions of any such contract, plan, arrangement or
instrument as a result of the execution of, and the transactions
contemplated by, this Agreement. Except as set forth in SWB
Disclosure Schedule 3.08(b), none of the employees (including
officers) of SWB, possess the right to terminate their employment
as a result of the execution of this Agreement. Except as set
forth in SWB Disclosure Schedule 3.08(b), no plan, employment
agreement, termination agreement, or similar agreement or
arrangement to which SWB or any SWB Subsidiary is a party or
under which SWB or any SWB Subsidiary may be liable contains
provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue future benefits
thereunder. Except as set forth in SWB Disclosure Schedule
3.08(b), no such agreement, plan or arrangement (x) provides for
acceleration in the vesting of benefits or payments due
thereunder upon the occurrence of a change in ownership or
control of SWB or any SWB Subsidiary absent the occurrence of a
subsequent event; or (y) requires SWB or any SWB Subsidiary to
provide a benefit in the form of SWB Common Stock or determined
by reference to the value of SWB Common Stock. No such
agreement, plan or arrangement with respect to officers of SWB,
or to SWB's knowledge, to its employees, provides for benefits
which may cause the disallowance of a federal income tax
deduction under IRC Section 280G. No limited rights (as such
term is defined in the SWB stock option plans identified in
Disclosure Schedule 3.08(a)) have been granted with respect to
any employee or director stock option that is outstanding as of
the date of this Agreement.
Section 3.09 Ownership of Property; Insurance Coverage.
(a) Except as disclosed in SWB Disclosure Schedule 3.09,
SWB and the SWB Subsidiaries have good and, as to real property,
marketable title to all material assets and properties owned by
SWB or any SWB Subsidiary in the conduct of their businesses,
whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the
balance sheets contained in the SWB Regulatory Reports and in the
SWB Financials or acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of in
the ordinary course of business, since the date of such balance
sheets), subject to no material encumbrances, liens, mortgages,
security interests or pledges, except (i) those items which
secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to any Federal
Reserve Bank or any Federal Home Loan Bank, inter-bank credit
facilities, or any transaction by a SWB Subsidiary acting in a
fiduciary capacity, (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith, and (iii)
items permitted under Article IV. SWB and the SWB Subsidiaries,
as lessee, have the right under valid and subsisting leases of
real and personal properties used by SWB and its Subsidiaries in
the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them.
<PAGE>
Except as disclosed in SWB Disclosure Schedule 3.09, such
existing leases and commitments to lease constitute or will
constitute operating leases for both tax and financial accounting
purposes and the lease expense and minimum rental commitments
with respect to such leases and lease commitments are as
disclosed in the Notes to the SWB Financials.
(b) With respect to all material agreements pursuant to
which SWB or any SWB Subsidiary has purchased securities subject
to an agreement to resell, if any, SWB or such SWB Subsidiary, as
the case may be, has a lien or security interest (which to SWB's
knowledge is a valid, perfected first lien) in the securities or
other collateral securing the repurchase agreement, and the value
of such collateral equals or exceeds the amount of the debt
secured thereby.
(c) SWB and each SWB Subsidiary currently maintains
insurance considered by SWB to be reasonable for their respective
operations and similar in scope and coverage to that customarily
maintained by other businesses similarly engaged in a similar
location, in accordance with good business practice. SWB has not
received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. There are
presently no material claims pending under such policies of
insurance and no notices have been given by SWB under such
policies. All such insurance is valid and enforceable and in full
force and effect, and within the last three years SWB has
received each type of insurance coverage for which it has applied
and during such periods has not been denied indemnification for
any material claims submitted under any of its insurance
policies.
Section 3.10 Legal Proceedings. Except as disclosed in SWB
Disclosure Schedule 3.10, neither SWB nor any SWB Subsidiary is a
party to any, and there are no pending or, to the best of SWB's
knowledge, threatened legal, administrative, arbitration or other
proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature (i)
against SWB or any SWB Subsidiary, (ii) to which SWB or any SWB
Subsidiary's assets are or may be subject, (iii) challenging the
validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability
of SWB to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely
determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect on SWB and
the SWB Subsidiaries, taken as a whole.
Section 3.11 Compliance With Applicable Law.
(a) SWB and SWB Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of
their
<PAGE>
respective businesses under, and have complied in all material
respects with, applicable laws, statutes, orders, rules or
regulations of any federal, state or local governmental authority
relating to them, other than where such failure to hold or such
noncompliance will neither result in a limitation in any material
respect on the conduct of their respective businesses nor
otherwise have a Material Adverse Effect on SWB and the SWB
Subsidiaries, taken as a whole.
(b) Except as disclosed in SWB Disclosure Schedule 3.11,
neither SWB nor any SWB Subsidiary has received any notification
or communication from any Regulatory Authority (i) asserting that
SWB or any SWB Subsidiary is not in material compliance with any
of the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material
to SWB or any SWB Subsidiary; (iii) requiring or threatening to
require SWB or any SWB Subsidiary, or indicating that SWB or any
SWB Subsidiary may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other
agreement with any federal or state governmental agency or
authority which is charged with the supervision or regulation of
banks or engages in the insurance of bank deposits restricting or
limiting, or purporting to restrict or limit, in any material
respect the operations of SWB or any SWB Subsidiary, including
without limitation any restriction on the payment of dividends;
or (iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of SWB or
any SWB Subsidiary, including without limitation any restriction
on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither SWB
nor any SWB Subsidiary has consented to or entered into any
currently effective Regulatory Agreement, except as set forth in
SWB Disclosure Schedule 3.11.
Section 3.12 ERISA. SWB has previously delivered to Alliance
Bancorp true and complete copies of all employee pension benefit
plans within the meaning of ERISA Section 3(2), profit sharing
plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement
plans, employment agreements, annual or long term incentive
plans, settlement plans, policies and agreements, group insurance
plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick
leave, short-term disability, long-term disability, and medical
plans) and all other employee benefit plans, policies, agreements
and arrangements, all of which are set forth in SWB Disclosure
Schedule 3.12, maintained or contributed to for the benefit of
the employees or former employees (including retired employees)
and any beneficiaries thereof or directors or former directors of
SWB or any SWB Subsidiary, together with (i) each trust agreement
and group annuity contract, if any, relating to such benefit
plans, (ii) the most recent actuarial (if any) and financial
reports relating to those plans which constitute "qualified
plans" under IRC Section 401(a), (iii) the most recent annual
reports relating to such plans filed with any government agency,
and (iv) all rulings and determination letters which pertain to
any such plans. Neither SWB, any SWB subsidiary nor any pension
plan maintained by SWB or any SWB Subsidiary, has incurred
directly or indirectly, within the past six (6) years any
liability under Title IV of ERISA that has not been satisfied in
full, and no condition exists that presents a material risk of
incurring a liability under such Title, other than liability for
premiums due to the Pension Benefit Guaranty Corporation ("PBGC")
which payments have been made or will be made when due, nor has
any "reportable event" under ERISA Section 4043 occurred with
respect to such plan. With respect to each employee benefit plan
subject to Title IV of ERISA, the present value of accrued
benefits under such plan or plans, based upon the actuarial
assumptions used for
<PAGE>
funding purposes in the most recent actuarial report prepared by
such plan's actuary with respect to such plan, did not, as of its
latest valuation date, exceed the then current value of the
assets of such plan and SWB is not aware of any facts or
circumstances that would materially change the funded status of
any such ERISA plan. All contributions required to be made under
the terms of any ERISA plan have been timely made. No such ERISA
plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section
302 of ERISA.
To the best of SWB's knowledge, neither SWB nor any SWB
Subsidiary has incurred or is subject to any liability under
ERISA Section 4201 for a complete or partial withdrawal from a
multi-employer plan. All "employee benefit plans," as defined in
ERISA Section 3(3), comply and within the past six (6) years have
complied in all material respects with (i) relevant provisions of
ERISA and (ii) in the case of plans intended to qualify for
favorable income tax treatment, provisions of the IRC relevant to
such treatment. To the best of SWB's knowledge, no prohibited
transaction (which shall mean any transaction prohibited by ERISA
Section 406 and not exempt under ERISA Section 408 or any
transaction prohibited under IRC Section 4975) has occurred
within the past six (6) years with respect to any employee
benefit plan maintained by SWB or any SWB Subsidiary which would
result in the imposition, directly or indirectly, of an excise
tax under IRC 4975 or other penalty under ERISA or the IRC,
which, individually or in the aggregate, has resulted in or will
result in a Material Adverse Effect with respect to SWB. SWB and
the SWB Subsidiaries provide continuation coverage under group
health plans for separating employees and "qualified
beneficiaries" in accordance with the provisions of IRC Section
4980B(f). Such group health plans are in compliance in all
material respects with Section 1862(b)(1) of the Social Security
Act. With respect to the outstanding loan to SWB's employee stock
ownership plan, as of September 30, 1997, the principal amount
outstanding does not exceed $400,000.
Section 3.13 Brokers, Finders and Financial Advisors. Except
for SWB's engagement of Robert W. Baird & Co. Incorporated
("Baird") in connection with transactions contemplated by this
Agreement, neither SWB nor any SWB Subsidiary, nor any of their
respective officers, directors, employees or agents, has employed
any broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement or the Plan of
Merger, or, except for its commitments disclosed in SWB
Disclosure Schedule 3.13, incurred any liability or commitment
for any fees or commissions to any such person in connection with
the transactions contemplated by this Agreement or the Plan of
Merger, which has not been reflected in the SWB Financials.
Section 3.14. Environmental Matters. To the knowledge of
SWB, neither SWB nor any SWB Subsidiary, nor any properties owned
or operated by SWB or any SWB Subsidiary has been or is in
violation of or liable under any Environmental Law which
violation or liability, individually or in the aggregate, has
resulted, or will result, in a Material Adverse Effect with
respect to SWB and its Subsidiaries taken as a whole. There are
no actions, suits or proceedings, or demands, claims, notices or,
to SWB's knowledge, investigations (including without limitation
notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge
of SWB, threatened, relating to the liability of any property
owned or operated by SWB or any SWB Subsidiary under any
Environmental Law. SWB Disclosure Schedule 3.14 identifies
<PAGE>
all material reports, studies, sampling data, permits, and
governmental filings in the possession of or reasonably available
to SWB or any SWB Subsidiary concerning the Environmental Laws
and SWB or any SWB Subsidiary or any of their current or former
properties or operations.
Section 3.15. Loan Portfolio. The allowance for loan losses
reflected, and to be reflected, in the SWB Regulatory Reports,
and shown, and to be shown, on the balance sheets contained in
the SWB Financials have been, and will be, established in
accordance with the requirements of GAAP and all applicable
regulatory criteria. SWB Disclosure Schedule 3.15 sets forth all
loans that are classified by SWB or federal bank regulatory or
supervisory authority as "Special Mention," "Substandard,"
"Doubtful," "Loss" or "Classified," together with the aggregate
principal amount of and accrued and unpaid interest on such
loans, by category.
Section 3.16. Information to be Supplied. The information to
be supplied by SWB for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement) will not, at the time
the Registration Statement is declared effective pursuant to the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or
to be supplied, by SWB for inclusion in the Applications will, at
the time such documents are filed with any Regulatory Authority,
be accurate in all material aspects.
Section 3.17. Securities Documents. SWB has delivered to
Alliance Bancorp copies of its (i) annual reports on Form 10-K
for the years ended December 31, 1996, 1995 and 1994, (ii)
quarterly reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997 and (iii) proxy
materials used or for use in connection with its meetings of
shareholders held in 1997, 1996 and 1995. Such reports and such
proxy materials complied, at the time filed with the SEC, in all
material respects, with the Securities Laws.
Section 3.18. Related Party Transactions. Except as
disclosed in SWB Disclosure Schedule 3.18, or as described in
SWB's Proxy Statement distributed in connection with the 1997
annual meeting of shareholders (which has previously been
provided to Alliance Bancorp), SWB is not a party to any
transaction (including any loan or other credit accommodation)
with any Affiliate of SWB (except a SWB Subsidiary). Except as
disclosed in SWB Disclosure Schedule 3.18, all such transactions
(a) were made in the ordinary course of business, (b) were made
on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more
than the normal risk of collectability or present other
unfavorable features. Except as set forth on SWB Disclosure
Schedule 3.18, no loan or credit accommodation to any Affiliate
of SWB is presently in default or, during the three year period
prior to the date of this Agreement, has been in default or has
been restructured, modified or extended. SWB has not been
notified that principal and interest with respect to any such
loan or other credit accommodation will not be paid when due or
that the loan grade classification accorded such loan or credit
accommodation by SWB is inappropriate.
<PAGE>
Section 3.19. Schedule of Termination Benefits. SWB
Disclosure Schedule 3.19 includes a schedule of all termination
benefits and related payments that would be payable to the
individuals identified thereon, excluding any options to acquire
SWB Common Stock granted to such individuals, under any and all
employment agreements, special termination agreements,
supplemental executive retirement plans, deferred bonus plans,
deferred compensation plans, salary continuation plans, or any
compensation arrangement, or other pension benefit or welfare
benefit plan maintained by SWB solely for the benefit of officers
or directors of SWB or SWB Subsidiaries (the "Benefits
Schedule"), assuming their employment or service is terminated as
of December 31, 1997 and the Closing Date occurs prior to such
termination. No other individuals are entitled to benefits under
any such plans. Notwithstanding the foregoing, Alliance Bancorp
acknowledges that additional payments may be required to be made
by Southwest Federal, SWB, or Alliance Bancorp to the Southwest
Federal Savings and Loan Association of Chicago Supplemental
Executive Retirement Plan in order to satisfy the obligations to
the beneficiaries of such plan.
Section 3.20. Loans. Each loan reflected as an asset in the
SWB Financial Statements (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and
correct in all material respects, (ii) to the extent secured, to
SWB's knowledge has been secured by valid liens and security
interests which have to SWB's knowledge been perfected, and (iii)
is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of
general applicability relating to or affecting creditors' rights
and to general equity principles, in each case other than loans
as to which the failure to satisfy the foregoing standards would
not have a Material Adverse Effect on SWB and the SWB
Subsidiaries taken as a whole.
Section 3.21. Antitakeover Provisions Inapplicable. Except
as set forth on SWB Disclosure Schedule 3.21, the transactions
contemplated by this Agreement are not subject to any applicable
state takeover law.
Section 3.22. Fairness Opinion. SWB has received a written
opinion from Baird to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date
thereof, the consideration to be received by the stockholders of
SWB pursuant to this Agreement is fair to such stockholders from
a financial point of view. Such opinion has not been amended or
rescinded as of the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALLIANCE BANCORP
Alliance Bancorp represents and warrants to SWB that the
statements contained in this Article IV are correct and complete
as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Article IV), except as set forth in the Alliance
Bancorp Disclosure Schedules delivered by Alliance Bancorp to SWB
on the date hereof. Alliance Bancorp has made a good faith
effort to ensure that the disclosure on each schedule of the
Alliance Bancorp
<PAGE>
Disclosure Schedules corresponds to the section reference herein.
However, for purposes of the Alliance Bancorp Disclosure
Schedules, any item disclosed on any schedule therein is deemed
to be fully disclosed with respect to all schedules under which
such item may be relevant.
Section 4.01. Organization.
(a) Alliance Bancorp is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware, with full corporate power and authority to carry on
its business as now conducted and is duly licensed or qualified
to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the
conduct of its business requires such qualification, except where
the failure to be so licensed or qualified would not have a
Material Adverse Effect on Alliance Bancorp.
(b) Liberty Federal is a stock savings bank duly
organized, validly existing and in good standing under the laws
of the United States. Except as set forth in Alliance Bancorp
Disclosure Schedule 4.01(b), Liberty Federal is the only Alliance
Bancorp Subsidiary. The deposits of Liberty Federal are insured
by the FDIC through the SAIF to the fullest extent permitted by
law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by Liberty Federal.
Each other Alliance Bancorp Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization.
(c) Liberty Federal is a member in good standing of the
Federal Home Loan Bank of Chicago and owns the requisite amount
of stock therein.
(d) Except as disclosed in Alliance Bancorp Disclosure
Schedule 4.01(d), the respective minute books of Alliance Bancorp
and each Alliance Bancorp Subsidiary accurately record, in all
material respects, all material corporate actions of their
respective shareholders and boards of directors (including
committees) through the date of this Agreement.
(e) Prior to the date of this Agreement, Alliance Bancorp
has delivered to SWB true and correct copies of the of
certificate of incorporation and bylaws of Alliance Bancorp.
Section 4.02 Capitalization.
(a) The authorized capital stock of Alliance Bancorp
consists of (a) 11,000,000 shares of common stock, par value
$0.01 per share (the "Alliance Bancorp Common Stock"), of which,
at the date of this Agreement, 8,175,885 shares are validly
issued, fully paid and nonassessable and 154,087 shares are held
by Alliance Bancorp as treasury stock, and (b) 1,500,000 shares
of preferred stock, par value $0.01 per share, of which, at the
date of this Agreement, no shares of were issued and outstanding.
No shares of Alliance Bancorp Common Stock were issued in
violation of any preemptive rights. Alliance Bancorp has no
Rights authorized, issued or outstanding, other than options to
acquire 1,003,920 shares of Alliance Bancorp Common Stock under
Alliance Bancorp's employee benefit plans and stock option plans.
<PAGE>
(b) To Alliance Bancorp's knowledge, and except as set
forth in the Alliance Bancorp Disclosure Schedule 4.02(b), no
Person or "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding
shares of Alliance Bancorp Common Stock.
(c) Alliance Bancorp owns all of the capital stock of
Liberty Federal, free and clear of any lien or encumbrance.
Except for the Alliance Bancorp Subsidiaries, Alliance Bancorp
does not possess, directly or indirectly, any material equity
interest in any corporation, except for equity interests held in
the investment portfolios of Alliance Bancorp Subsidiaries,
equity interests held by Alliance Bancorp Subsidiaries in a
fiduciary capacity, and equity interests held in connection with
the lending activities of Alliance Bancorp Subsidiaries.
Section 4.03 Authority; No Violation.
(a) Alliance Bancorp has full corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Liberty Federal has full
corporate power and authority to execute and deliver the Plan of
Merger and to consummate the Bank Merger. The execution and
delivery of this Agreement by Alliance Bancorp and the completion
by Alliance Bancorp of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of
Alliance Bancorp and, except for approval of the shareholders of
Alliance Bancorp, no other corporate proceedings on the part of
Alliance Bancorp are necessary to complete the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Alliance Bancorp and, subject to
approval by the shareholders of Alliance Bancorp and receipt of
the required approvals of Regulatory Authorities described in
Section 4.04 hereof, constitutes the valid and binding obligation
of Alliance Bancorp and Liberty Federal, enforceable against
Alliance Bancorp and Liberty Federal in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and as to Liberty
Federal, the conservatorship or receivership provisions of the
FDIA, and subject, as to enforceability, to general principles of
equity. The Plan of Merger, upon its execution and delivery by
Liberty Federal concurrently with the execution and delivery of
this Agreement, will constitute the valid and binding obligation
of Liberty Federal, enforceable against Liberty Federal in
accordance with its terms, subject to applicable conservatorship
and receivership provisions of the FDIA, or insolvency and
similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this Agreement by
Alliance Bancorp, (B) the execution and delivery of the Plan of
Merger by Liberty Federal, (C) subject to receipt of approvals
from the Regulatory Authorities referred to in Section 4.04
hereof and SWB's and Alliance Bancorp's compliance with any
conditions contained therein, the consummation of the
transactions contemplated hereby, and (D) compliance by Alliance
Bancorp or Liberty Federal with any of the terms or provisions
hereof or of the Plan of Merger will not (i) conflict with or
result in a breach of any provision of the certificate of
incorporation or bylaws of Alliance Bancorp or any Alliance
Bancorp Subsidiary or the charter and bylaws of Liberty Federal;
(ii) violate any statute, code,
<PAGE>
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Alliance Bancorp or any Alliance Bancorp
Subsidiary or any of their respective properties or assets; or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Alliance
Bancorp or Liberty Federal under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to
which Alliance Bancorp or Liberty Federal is a party, or by which
they or any of their respective properties or assets may be bound
or affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material
Adverse Effect on Alliance Bancorp.
Section 4.04. Consents. Except for consents, approvals,
filings and registrations from or with the OTS and SEC, and state
"blue sky" authorities, and compliance with any conditions
contained therein, and the approval of this Agreement by the
shareholders of Alliance Bancorp in accordance with Nasdaq
requirements applicable to it, and the approval of the Plan of
Merger by Alliance Bancorp as sole shareholder of Liberty
Federal, and by the Liberty Federal Board of Directors, the
filing of a certificate of merger with the Secretary of State of
the State of Delaware pursuant to the DGCL, and the articles of
combination with the OTS, no consents or approvals of, or filings
or registrations with, any public body or authority are
necessary, and no consents or approvals of any third parties are
necessary, or will be, in connection with (a) the execution and
delivery of this Agreement by Alliance Bancorp or the Plan of
Merger by Liberty Federal, and (b) the completion by Alliance
Bancorp of the transactions contemplated hereby or by Liberty
Federal of the Bank Merger. Alliance Bancorp has no reason to
believe that (i) any required consents or approvals will not be
received or will be received with conditions, limitations or
restrictions unacceptable to it or which would adversely impact
Alliance Bancorp's ability to complete the transactions
contemplated by this Agreement or that (ii) any public body or
authority, the consent or approval of which is not required or
any filing with which is not required, will object to the
completion of the transactions contemplated by this Agreement.
Section 4.05. Financial Statements.
(a) Alliance Bancorp has previously delivered, or will
deliver, to SWB the Alliance Bancorp Regulatory Reports. The
Alliance Bancorp Regulatory Reports have been, or will be,
prepared in accordance with applicable regulatory accounting
principles and practices and fairly present, or will fairly
present, the consolidated financial position, results of
operations and changes in shareholders' equity of Alliance
Bancorp as of and for the periods ending on the dates thereof, in
accordance with applicable regulatory accounting principles.
Alliance Bancorp will make the Alliance Bancorp Regulatory
Reports available to SWB for inspection.
(b) Alliance Bancorp has previously delivered to SWB the
Alliance Bancorp Financials. The Alliance Bancorp Financials have
been, or will be, prepared in accordance with GAAP and
<PAGE>
practices applied on a consistent basis throughout the periods
covered by such statements, and (including the related notes
where applicable) fairly present, or will fairly present (subject
in the case of the unaudited interim statements to normal year-
end adjustments), the consolidated financial position, results of
operations and cash flows of Alliance Bancorp and the Alliance
Bancorp Subsidiaries as of and for the respective periods ending
on the dates thereof, in accordance with GAAP applied on a
consistent basis during the periods involved, except as indicated
in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-Q.
(c) At the date of each balance sheet included in the
Alliance Bancorp Financials, Alliance Bancorp did not have any
liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such Alliance Bancorp Financials or
in the footnotes thereto which are not fully reflected or
reserved against therein or disclosed in a footnote thereto,
except for liabilities, obligations or loss contingencies which
are not material in the aggregate and which are incurred in the
ordinary course of business, consistent with past practice, and
except for liabilities, obligations or loss contingencies which
are within the subject matter of a specific representation and
warranty herein and subject, in the case of any unaudited
statements, to normal recurring audit adjustments and the absence
of footnotes.
Section 4.06. Taxes. Alliance Bancorp and the Alliance
Bancorp Subsidiaries are members of the same affiliated group
within the meaning of IRC Section 1504(a). Alliance Bancorp has
duly filed, and will file, all federal, state and local tax
returns required to be filed by or with respect to Alliance
Bancorp and all Alliance Bancorp Subsidiaries on or prior to the
Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will
make, provisions for the payment of all federal, state and local
taxes which have been incurred by or are due or claimed to be due
from Alliance Bancorp and any Alliance Bancorp Subsidiary by any
taxing authority or pursuant to any tax sharing agreement or
arrangement (written or oral) on or prior to the Closing Date
other than taxes which (i) are not delinquent or (ii) are being
contested in good faith.
Section 4.07. No Material Adverse Effect. Alliance Bancorp
and the Alliance Bancorp Subsidiaries, taken as a whole, have
not suffered any Material Adverse Effect since September 30,
1997.
Section 4.08. Ownership of Property; Insurance Coverage;
Contracts.
(a) Except as set forth in Alliance Bancorp Disclosure
Schedule 4.08(a), Alliance Bancorp and the Alliance Bancorp
Subsidiaries have good and, as to real property, marketable title
to all material assets and properties owned by Alliance Bancorp
or any of its Subsidiaries in the conduct of their businesses,
whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the
balance sheets contained in the Alliance Bancorp Financials or
acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of for fair value, in
the ordinary course of business, since the date of
<PAGE>
such balance sheets), subject to no material encumbrances, liens,
mortgages, security interests or pledges, except (i) those items
that secure liabilities for borrowed money and that are described
in the Alliance Bancorp Disclosure Schedule 4.08(a) or described
in Section 5.01(v) of Article V hereof, and (ii) statutory liens
for amounts not yet delinquent or which are being contested in
good faith. Alliance Bancorp and the Alliance Bancorp
Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by
Alliance Bancorp and its Subsidiaries in the conduct of their
businesses to occupy and use all such properties as presently
occupied and used by each of them.
(b) Alliance Bancorp and the Alliance Bancorp Subsidiaries
currently maintain insurance in amounts considered by Alliance
Bancorp to be reasonable for their respective operations, and
such insurance is similar in scope and coverage to that
maintained by other businesses similarly engaged. Neither
Alliance Bancorp nor any Alliance Bancorp Subsidiary has received
notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or
eliminated or (ii) premium costs with respect to such insurance
will be substantially increased.
(c) Neither Alliance Bancorp nor any Alliance Bancorp
Subsidiary is a party to or subject to: (i) any collective
bargaining agreement with any labor union relating to employees
of Alliance Bancorp or any Alliance Bancorp Subsidiary; (ii) any
agreement which by its terms limits the payment of dividends by
Alliance Bancorp; or (iii) any instrument evidencing or related
to material indebtedness for borrowed money whether directly or
indirectly, by way of purchase money obligation, conditional
sale, lease purchase, guaranty or otherwise, in respect of which
Alliance Bancorp or any Alliance Bancorp Subsidiary is an obligor
to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers'
acceptances, Federal Home Loan Bank of Chicago advances, and
"treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due)
which would be applicable on or after the Closing Date to
Alliance Bancorp or any Alliance Bancorp Subsidiary; or (iv) any
contract (other than this Agreement) limiting the freedom, in any
material respect, of Alliance Bancorp or Liberty Federal to
engage in any type of banking or bank-related business which
Alliance Bancorp or Liberty Federal is permitted to engage in
under applicable law as of the date of this Agreement.
Section 4.09. Legal Proceedings. Neither Alliance Bancorp
nor any Alliance Bancorp Subsidiary is a party to any, and there
are no pending or, to the best of Alliance Bancorp's knowledge,
threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations or
inquiries of any nature (i) against Alliance Bancorp or any
Alliance Bancorp Subsidiary, (ii) to which Alliance Bancorp's or
any Alliance Bancorp Subsidiary's assets are or may be subject,
(iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of Alliance Bancorp to perform under
this Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii)
which, individually or in the aggregate, could not be
<PAGE>
reasonably expected to have a Material Adverse Effect on Alliance
Bancorp and the Alliance Bancorp Subsidiaries taken as a whole.
Section 4.10. Compliance With Applicable Law.
(a) Alliance Bancorp and the Alliance Bancorp Subsidiaries
hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their businesses under, and
have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or
local governmental authority relating to them, other than where
such failure to hold or such noncompliance will neither result in
a limitation in any material respect on the conduct of their
businesses nor otherwise have a Material Adverse Effect on
Alliance Bancorp and its Subsidiaries taken as a whole.
(b) Neither Alliance Bancorp nor any Alliance Bancorp
Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that Alliance Bancorp or
any Alliance Bancorp Subsidiary is not in compliance with any of
the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material
to Alliance Bancorp or any Alliance Bancorp Subsidiary; (iii)
requiring or threatening to require Alliance Bancorp or any
Alliance Bancorp Subsidiary, or indicating that Alliance Bancorp
or any Alliance Bancorp Subsidiary 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 restrict or limit, in any manner the operations of
Alliance Bancorp or any Alliance Bancorp Subsidiary, including
without limitation any restriction on the payment of dividends;
or (iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any manner the operations of
Alliance Bancorp or any Alliance Bancorp Subsidiary, including
without limitation any restriction on the payment of dividends
(any such notice, communication, memorandum, agreement or order
described in this sentence is hereinafter referred to as a
"Regulatory Agreement"). Neither Alliance Bancorp nor any
Alliance Bancorp Subsidiary is a party to, nor has consented to
any Regulatory Agreement.
Section 4.11. Information to be Supplied. The information to
be supplied by Alliance Bancorp for inclusion in the Registration
Statement (including the Prospectus/Proxy Statement) will not, at
the time the Registration Statement is declared effective
pursuant to the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The
information supplied, or to be supplied, by Alliance Bancorp for
inclusion in the Applications will, at the time such documents
are filed with any Regulatory Authority, be accurate in all
material aspects.
Section 4.12. ERISA and Employment Arrangements. Alliance
Bancorp has previously made available to SWB true and complete
copies of the employee pension benefit plans within the meaning
of ERISA Section 3(2), profit sharing plans, stock purchase
plans, deferred compensation and supplemental income plans,
supplemental executive retirement plans, employment and special
termination agreements, annual incentive plans, group insurance
plans, and all other employee
<PAGE>
welfare benefit plans within the meaning of ERISA Section 3(1)
(including vacation pay, sick leave, short-term disability,
long-term disability, and medical plans), and all other employee
benefit plans, policies, agreements and arrangements, all of
which are set forth on the Alliance Bancorp Disclosure Schedule,
maintained or contributed to for the benefit of the employees or
former employees (including retired employees) and any
beneficiaries thereof or directors or former directors of
Alliance Bancorp or any Alliance Bancorp Subsidiary, together
with (i) the most recent actuarial (if any) and financial reports
relating to those plans which constitute "qualified plans" under
IRC Section 401(a), (ii) the most recent annual reports relating
to such plans filed by them, respectively, with any government
agency, and (iii) all rulings and determination letters which
pertain to any such plans. Neither Alliance Bancorp nor any
Alliance Bancorp Subsidiary, and no pension plan maintained by
Alliance Bancorp or any Alliance Bancorp Subsidiary, has
incurred, directly or indirectly, within the past six (6) years
any liability under Title IV of ERISA (including to the Pension
Benefit Guaranty Corporation) or to the IRS with respect to any
pension plan qualified under IRC Section 401(a) which liability
has resulted in or will result in a Material Adverse Effect with
respect to Alliance Bancorp, except liabilities to the Pension
Benefit Guaranty Corporation pursuant to ERISA Section 4007, all
of which have been fully paid, nor has any reportable event under
ERISA Section 4043 occurred with respect to any such pension
plan. With respect to each of such plans that is subject to Title
IV of ERISA, the present value of the accrued benefits under such
plan, based upon the actuarial assumptions used for funding
purposes in the plan's most recent actuarial report did not, as
of its latest valuation date, exceed the then current value of
the assets of such plan allocable to such accrued benefits.
Neither Alliance Bancorp nor any Alliance Bancorp Subsidiary has
incurred any liability under ERISA Section 4201 for a complete or
partial withdrawal from a multi-employer plan. All "employee
benefit plans," as defined in ERISA Section 3(3), comply and in
the past six (6) years have complied in all material respects
with (i) relevant provisions of ERISA, and (ii) in the case of
plans intended to qualify for favorable income tax treatment,
provisions of the IRC relevant to such treatment. No prohibited
transaction (which shall mean any transaction prohibited by ERISA
Section 406 and not exempt under ERISA Section 408 or any
transaction prohibited under IRC Section 4975) has occurred
within the past six (6) years with respect to any employee
benefit plan maintained by Alliance Bancorp or any Alliance
Bancorp Subsidiary that would result in the imposition, directly
or indirectly, of an excise tax under IRC Section 4975 or other
penalty under ERISA or the IRC, which individually or in the
aggregate, has resulted in or will result in a Material Adverse
Effect with respect to Alliance Bancorp. Alliance Bancorp and the
Alliance Bancorp Subsidiaries provide continuation coverage under
group health plans for separating employees in accordance with
the provisions of IRC Section 4980B(f). Such group health plans
are in compliance with Section 1862(b)(1) of the Social Security
Act.
Section 4.13. Securities Documents. Alliance Bancorp has
delivered, or will deliver, to SWB copies of its (i) annual
reports on SEC Form 10-K for the years ended September 30, 1996,
1995, and 1994, (ii) quarterly reports on SEC Form 10-Q for the
quarters ended December 31, 1996, March 31, 1997, June 30, 1997
and September 30, 1997, and (iii) proxy statement dated May 1,
1997 used in connection with its annual meeting of shareholders
held in May 1997. Such reports and such proxy materials complied,
at the time filed with the SEC, in all material respects, with
the Exchange Act and the applicable rules and regulations of the
SEC.
<PAGE>
Section 4.14. Environmental Matters. To the knowledge of
Alliance Bancorp, neither Alliance Bancorp nor any Alliance
Bancorp Subsidiary, nor any properties owned or operated by
Alliance Bancorp or any Alliance Bancorp Subsidiary has been or
is in violation of or liable under any Environmental Law which
violation or liability, individually or in the aggregate, has
resulted, or will result, in a Material Adverse Effect with
respect to Alliance Bancorp and its Subsidiaries taken as a
whole. There are no actions, suits or proceedings, or demands,
claims, notices or, to Alliance Bancorp's knowledge,
investigations (including without limitation notices, demand
letters or requests for information from any environmental
agency) instituted or pending, or to the knowledge of Alliance
Bancorp, threatened, relating to the liability of any property
owned or operated by Alliance Bancorp or any Alliance Bancorp
Subsidiary under any Environmental Law.
Section 4.15. Loan Portfolio. The allowance for loan losses
reflected, and to be reflected, in the Alliance Bancorp
Regulatory Reports, and shown, and to be shown, on the balance
sheets contained in the Alliance Bancorp Financials have been,
and will be, established in accordance with the requirements of
GAAP and all applicable regulatory criteria. Alliance Bancorp
Disclosure Schedule 4.15 sets forth all loans that are classified
by Alliance Bancorp or federal bank regulatory or supervisory
authority as "Special Mention," "Substandard," "Doubtful," "Loss"
or "Classified," together with the aggregate principal amount of
and accrued and unpaid interest on such loans, by category.
Section 4.16. Brokers, Finders and Financial Advisors.
Except for Alliance Bancorp's engagement of Friedman, Billings,
Ramsey & Co. Inc. ("FBR") in connection with transactions
contemplated by this Agreement, neither Alliance Bancorp nor any
Alliance Bancorp Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any
broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement or the Plan of
Merger, or, except for its commitments disclosed in Alliance
Bancorp Disclosure Schedule 4.16, incurred any liability or
commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement
or the Plan of Merger, which has not been reflected in the
Alliance Bancorp Financials.
Section 4.17. Loans. Each loan reflected as an asset in the
Alliance Bancorp Financial Statements (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true,
genuine and correct (ii) to the extent secured, has been secured
by valid liens and security interests which have been perfected,
and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, in each case
other than loans as to which the failure to satisfy the foregoing
standards would not have a Material Adverse Effect on Alliance
Bancorp. All loan transactions with Affiliates (a) were made in
the ordinary course of business, (b) were made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
Persons, and (c) did not involve more than the normal risk of
collectability or present other unfavorable features.
<PAGE>
Section 4.18. Antitakeover Provisions Inapplicable. Except
as set forth on Alliance Bancorp Disclosure Schedule 4.18, the
transactions contemplated by this Agreement are not subject to
any applicable state takeover law.
Section 4.19. Fairness Opinion. Alliance Bancorp has
received a written opinion from FBR to the effect that, subject
to the terms, conditions and qualifications set forth therein, as
of the date thereof, the Exchange Ratio is fair to Alliance
Bancorp stockholders from a financial point of view. Such
opinion has not been amended or rescinded as of the date of this
Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01. Conduct of SWB's Business.
(a) From the date of this Agreement to the Closing Date,
SWB and Southwest Federal will conduct their business and engage
in transactions, including extensions of credit, only in the
ordinary course and consistent with past practice and policies,
except as otherwise required or contemplated by this Agreement or
with the written consent of Alliance Bancorp. SWB and Southwest
Federal will use its reasonable good faith efforts, to (i)
preserve their business organizations intact, (ii) maintain good
relationships with employees, and (iii) preserve for themselves
the good will of their customers and others with whom business
relationships exist. From the date hereof to the Closing Date,
except as otherwise consented to or approved by Alliance Bancorp
in writing or as contemplated or required by this Agreement, SWB
will not, and SWB will not permit any SWB Subsidiary to:
(i) amend or change any provision of its certificate of
incorporation, charter, or bylaws;
(ii) change the number of authorized or issued shares of its
capital stock or issue or grant any Right or agreement of any
character relating to its authorized or issued capital stock or
any securities convertible into shares of such stock, or split,
combine or reclassify any shares of capital stock, or declare,
set aside or pay any dividend or other distribution in respect of
capital stock, other than the quarterly cash dividend of $0.20
per share, or redeem or otherwise acquire any shares of capital
stock, except that (A) SWB may issue shares of SWB Common Stock
upon the valid exercise, in accordance with the information set
forth in SWB Disclosure Schedule 3.02, of presently outstanding
options to acquire SWB Common Stock under the SWB Stock Option
Plans. After the dividend paid by SWB in the first calendar
quarter in 1998, if requested by Alliance Bancorp, the Board of
Directors of SWB shall promptly cause its regular quarterly
dividend record dates and payment dates to be the same as
Alliance Bancorp's regular quarterly dividend record dates and
payment dates for Alliance Bancorp Common Stock, and SWB shall
not change its regular dividend payment dates and record dates
without the prior written consent of Alliance Bancorp. Nothing
contained in this Section 5.01(ii) or in any other Section of
this Agreement shall be construed to permit SWB stockholders to
receive two cash dividends in any quarter;
<PAGE>
(iii) except pursuant to the arrangements set forth in
SWB Disclosure Schedule 5.01, grant any severance or termination
pay (other than pursuant to written policies or written
agreements of SWB in effect on the date hereof and provided to
Alliance Bancorp prior to the date hereof) to, or enter into any
new or amend any existing employment agreement with, or increase
the compensation of (except for normal increases in the ordinary
course of business consistent in timing and amount with past
practice), any employee, officer or director of SWB or any SWB
Subsidiary;
(iv) merge or consolidate SWB or any SWB Subsidiary with any
other corporation; sell or lease all or any substantial portion
of the assets or business of SWB or any SWB Subsidiary; make any
acquisition of all or any substantial portion of the business or
assets of any other person, firm, association, corporation or
business organization other than in connection with foreclosures,
settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit
arrangement between SWB, or any SWB Subsidiary, and any other
person; enter into a purchase and assumption transaction with
respect to deposits and liabilities; permit the revocation or
surrender by any SWB Subsidiary of its certificate of authority
to maintain, or file an application for the relocation of, any
existing branch office, or file an application for a certificate
of authority to establish a new branch office;
(v) sell or otherwise dispose of the capital stock of SWB
or sell or otherwise dispose of any asset of SWB or of any SWB
Subsidiary other than in the ordinary course of business
consistent with past practice; subject any asset of SWB or of any
SWB Subsidiary to a lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase
agreements, SWB acceptances, advances from the Federal Home Loan
Bank of Chicago, "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal
funds" and the satisfaction of legal requirements in the exercise
of trust powers) other than in the ordinary course of business
consistent with past practice; incur any indebtedness for
borrowed money (or guarantee any indebtedness for borrowed
money), except in the ordinary course of business consistent with
past practice;
(vi) take any action which would result in any of the
representations and warranties of SWB set forth in this Agreement
becoming untrue as of any date after the date hereof or in any of
the conditions set forth in Article VI hereof not being
satisfied, except in each case as may be required by applicable
law;
(vii) change any method, practice or principle of
accounting, except as may be required from time to time by GAAP
(without regard to any optional early adoption date) or any
Regulatory Authority responsible for regulating SWB or Southwest
Federal;
(viii) waive, release, grant or transfer any material
rights of value or modify or change in any material respect any
existing material agreement or indebtedness to which SWB or any
SWB Subsidiary is a party, other than in the ordinary course of
business, consistent with past practice;
<PAGE>
(ix) implement any pension, retirement, profit sharing,
bonus, welfare benefit or similar plan or arrangement that was
not in effect on the date of this Agreement, or materially amend
any existing plan or arrangement except to the extent such
amendments do not result in an increase in cost; contribute to
any pension, retirement, profit sharing, bonus, welfare benefit
or similar plan or arrangement other than in amounts and in a
manner consistent with past practice;
(x) purchase any security for its investment portfolio not
rated "A" or higher by either Standard & Poor's Corporation or
Moody's Investor Services, Inc.;
(xi) fail to review with a representative of Alliance
Bancorp on a regular basis proposed loans or other credit
facility commitments (including without limitation, lines of
credit and letters of credit, but excluding loans to be secured
by mortgages on one- to four-family residential real estate) to
any borrower or group of affiliated borrowers in excess of
$1,000,000, or any increase, compromise, extension, renewal or
modification of any existing loan or commitment outstanding in
excess of $1,000,000;
(xii) except as set forth on the SWB Disclosure Schedule
5.01(a)(xii), enter into, renew, extend or modify any other
transaction with any Affiliate;
(xiii) enter into any interest rate swap or similar
commitment, agreement or arrangement;
(xiv) except for the execution of this Agreement, take
any action that would give rise to a right of payment to any
individual under any employment agreement;
(xv) intentionally and knowingly take any action that would
preclude satisfaction of the condition to closing contained in
Section 6.02(k) relating to financial accounting treatment of the
Merger;
(xvi) change its lending, investment, asset/liability
management or other material banking policies in any material
respect except as may be required by changes in applicable law or
regulations or in response to examination comments by a
Regulatory Authority;
(xvii) enter into any new joint venture or partnership
agreement or any new land acquisition or real estate development
project, or increase the amount of credit that SWB or any SWB
Subsidiary is committed to extend to any joint venture or
partnership in connection with land acquisition or real estate
development activities; or
(xviii) agree to do any of the foregoing.
For purposes of this Section 5.01, unless provided for in a
business plan, budget or similar document delivered to Alliance
Bancorp prior to the date of this Agreement, it shall not be
considered in the ordinary course of business for SWB or any SWB
Subsidiary to do any of the following: (i) make any capital
expenditure of $50,000 or more not disclosed on SWB Disclosure
<PAGE>
Schedule 5.01, without the prior written consent of Alliance
Bancorp; (ii) except as set forth in SWB Disclosure Schedule
5.01, make any sale, assignment, transfer, pledge, hypothecation
or other disposition of any assets having a book or market value,
whichever is greater, in the aggregate in excess of $1,000,000,
other than pledges of assets to secure government deposits, to
exercise trust powers, sales of assets received in satisfaction
of debts previously contracted in the normal course of business,
issuance of loans, sales of previously purchased government
guaranteed loans, or transactions in the investment securities
portfolio by SWB or a SWB Subsidiary or repurchase agreements
made, in each case, in the ordinary course of business; or (iii)
undertake or enter any lease, contract or other commitment for
its account, other than in the normal course of providing credit
to customers as part of its banking business, involving a payment
by SWB or any SWB Subsidiary of more than $50,000 annually, or
containing a material financial commitment and extending beyond
12 months from the date hereof.
Section 5.02. Access; Confidentiality.
(a) From the date of this Agreement through the Closing
Date, SWB or Alliance Bancorp, as the case may be, shall afford
to, and shall cause each SWB Subsidiary or Alliance Bancorp
Subsidiary to afford to, the other party and its authorized
agents and representatives, access to their respective
properties, assets, books and records and personnel, during
normal business hours and after reasonable notice; and the
officers of SWB and Alliance Bancorp will furnish any person
making such investigation on behalf of the other party with such
financial and operating data and other information with respect
to the businesses, properties, assets, books and records and
personnel as the person making such investigation shall from time
to time reasonably request. None of the parties or their
respective subsidiaries shall be required to provide access to or
to disclose information where such access or disclosure would
violate or prejudice the rights of their respective customers,
jeopardize the attorney-client privilege of the institution or
company in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply. The parties
will hold all such information delivered in confidence to the
extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated December 4, 1997, among SWB and
Alliance Bancorp (the "Confidentiality Agreement").
(b) SWB and Alliance Bancorp each agree to conduct such
investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and
employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a)
above, from the date of this Agreement through the Closing Date,
SWB shall permit employees of Alliance Bancorp reasonable access
to information relating to problem loans, loan restructurings and
loan work-outs of SWB.
<PAGE>
(d) If the transactions contemplated by this Agreement
shall not be consummated, SWB and Alliance Bancorp will each
destroy or return all documents and records obtained from the
other party or its representatives, during the course of its
investigation and will cause all information with respect to the
other party obtained pursuant to this Agreement or preliminarily
thereto to be kept confidential, except to the extent such
information becomes public through no fault of the party to whom
the information was provided or any of its representatives or
agents and except to the extent disclosure of any such
information is legally required. SWB and Alliance Bancorp shall
each give prompt written notice to the other party of any
contemplated disclosure where such disclosure is so legally
required.
Section 5.03. Regulatory Matters and Consents.
(a) Alliance Bancorp and Liberty Federal will prepare all
Applications and make all filings for, and use their best efforts
to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and
authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this
Agreement.
(b) SWB will furnish Alliance Bancorp with all information
concerning SWB and SWB Subsidiaries as may be necessary or
advisable in connection with any Application or filing made by or
on behalf of Alliance Bancorp to any Regulatory Authority in
connection with the transactions contemplated by this Agreement.
(c) Alliance Bancorp and SWB will promptly furnish each
other with copies of all material written communications to, or
received by them from any Regulatory Authority in respect of the
transactions contemplated hereby, except information which is
filed by either party which is designated as confidential.
(d) The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and
Regulatory Authorities. Alliance Bancorp will furnish SWB with
(i) copies of all Applications prior to filing with any
Regulatory Authority and provide SWB a reasonable opportunity to
provide changes to such Applications,, (ii) copies of all
Applications filed by Alliance Bancorp and (iii) copies of all
documents filed by Alliance Bancorp under the Securities Exchange
Act of 1934, as amended.
(e) SWB will cooperate with Alliance Bancorp in the
foregoing matters and will furnish Alliance Bancorp with all
information concerning SWB and SWB Subsidiaries as may be
necessary or advisable in connection with any Application or
filing (including the Registration Statement and any report filed
with the SEC) made by or on behalf of Alliance Bancorp to any
Regulatory Authority in connection with the transactions
contemplated by this Agreement, and such information will be
accurate and complete in all material respects. In connection
therewith, SWB will provide certificates and other documents
reasonably requested by Alliance Bancorp.
<PAGE>
Section 5.04. Taking of Necessary Action.
(a) Alliance Bancorp and SWB shall each use its best
efforts in good faith, and each of them shall cause its
Subsidiaries to use their best efforts in good faith, to (i)
furnish such information as may be required in connection with
the preparation of the documents referred to in Section 5.03 of
this Agreement, and (ii) take or cause to be taken all action
necessary or desirable on its part using its best efforts so as
to permit completion of the Merger including, without limitation,
(A) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or
professional entity whose consent or approval is required or
desirable for consummation of the transactions contemplated
hereby (including assignment of leases without any change in
terms), provided that neither SWB nor any SWB Subsidiary shall
agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of
Alliance Bancorp, and (B) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take, or cause, or to the best of
its ability permit to be taken, any action that would
substantially impair the prospects of completing the Merger
pursuant to this Agreement and the Plan of Merger; provided that
nothing herein contained shall preclude Alliance Bancorp or SWB
from exercising its rights under this Agreement or the Option
Agreement.
(b) Alliance Bancorp shall prepare, subject to the review
and consent of SWB with respect to matters relating to SWB and
the transactions contemplated by this Agreement, a
Prospectus/Proxy Statement on Form S-4 to be filed by Alliance
Bancorp with the SEC and to be mailed to the shareholders of SWB
and Alliance Bancorp in connection with the meetings of their
respective shareholders and transactions contemplated hereby,
which Prospectus/Proxy statement shall conform to all applicable
legal requirements. The parties shall cooperate with each other
with respect to the preparation of the Prospectus/Proxy
Statement. Alliance Bancorp shall, as promptly as practicable
following the preparation thereof, file the Registration
Statement with the SEC and SWB and Alliance Bancorp shall use all
reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable
after such filing. Alliance Bancorp will advise SWB, promptly
after Alliance Bancorp receives notice thereof, of the time when
the Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop order or
the suspension of the qualification of the shares of capital
stock issuable pursuant to the Registration Statement, or the
initiation or threat of any proceeding for any such purpose, or
of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. Alliance
Bancorp shall use its best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities laws or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
Alliance Bancorp will provide SWB with as many copies of such
Registration Statement and all amendments thereto promptly upon
the filing thereof as SWB may reasonably request.
<PAGE>
Section 5.05. Certain Agreements.
(a) From and after the Company Merger Effective Date
through the sixth anniversary thereof, Alliance Bancorp agrees to
indemnify, defend and hold harmless each present and former
director and officer of SWB and its Subsidiaries determined as of
the Closing Date (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including reasonable attorneys'
fees and expenses), liabilities, judgments or amounts paid in
settlement (with the approval of Alliance Bancorp, which approval
shall not be unreasonably withheld) or in connection with any
claim, action, suit, proceeding or investigation arising out of
matters existing or occurring at or prior to the Company Merger
Effective Date (a "Claim") in which an Indemnified Party is, or
is threatened to be made, a party or a witness based in whole or
in part on, or arising in whole or in part out of, the fact that
such person is or was a director or officer of SWB or any of its
subsidiaries, regardless of whether such Claim is asserted or
claimed prior to, at or after the Closing Date, to the fullest
extent to which directors and officers of SWB are entitled under
the DGCL, SWB's certificate of incorporation and bylaws, or other
applicable law as in effect on the date hereof (and Alliance
Bancorp shall pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the
extent permissible to a Delaware corporation under the DGCL and
SWB's certificate of incorporation and bylaws as in effect on the
date hereof; provided, that the person to whom expenses are
advanced provides an undertaking to repay such expenses if it is
ultimately determined that such person is not entitled to
indemnification). All rights to indemnification in respect of a
Claim asserted or made within the period described in the
preceding sentence shall continue until the final disposition of
such Claim.
(b) Any Indemnified Party wishing to claim indemnification
under Section 5.05(a), upon learning of any Claim, shall promptly
notify Alliance Bancorp, but the failure to so notify shall not
relieve Alliance Bancorp of any liability it may have to such
Indemnified Party except to the extent that such failure
materially prejudices Alliance Bancorp. In the event of any
Claim, (1) Alliance Bancorp shall have the right to assume the
defense thereof (with counsel reasonably satisfactory to the
Indemnified Party) and shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that, if Alliance
Bancorp elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise
conflicts of interest between Alliance Bancorp and the
Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Alliance Bancorp shall pay all
reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received, provided
further that Alliance Bancorp shall in all cases be obligated
pursuant to this paragraph to pay for only one firm of counsel
for all Indemnified Parties, (2) the Indemnified Parties will
cooperate in the defense of any such Claim and (3) Alliance
Bancorp shall not be liable for any settlement effected without
its prior written consent (which consent shall not unreasonably
be withheld).
(c) Alliance Bancorp shall use its best efforts to cause
the persons serving as officers and directors of SWB immediately
prior to the Company Merger Effective Date to be covered for a
period of six years from the Company Merger Effective Date by the
directors' and officers' liability
<PAGE>
insurance policy maintained by SWB (provided that Alliance
Bancorp may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are
not less advantageous than such policy) with respect to acts or
omissions occurring prior to the Company Merger Effective Date
which were committed by such officers and directors in their
capacity as such.
(d) In the event Alliance Bancorp or any of is successors
or assigns (1) consolidates with or merges into any other Person
and shall not continue or survive such consolidation or merger,
or (2) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case,
to the extent necessary, proper provision shall be made so that
the successors and assigns of Alliance Bancorp assume the
obligations set forth in this Section 5.05.
(e) The provisions of this Section 5.05 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives.
(f) Alliance Bancorp agrees to honor and Alliance Bancorp
agrees to cause Liberty Federal to honor all terms and conditions
of the existing employment agreement disclosed in the SWB
Disclosure Schedules. Except as otherwise provided herein, and
unless otherwise agreed to in writing by the affected officer and
employee, Alliance Bancorp agrees for itself and the Alliance
Bancorp Subsidiaries that the consummation of the transactions
contemplated hereby is a "Change in Control" as defined in the
employment agreement entered into by SWB.
Section 5.06. No Other Bids and Related Matters. SWB will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal (as
hereinafter defined), will enforce any confidentiality agreements
and will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence of this
Section 5.06 of the obligations undertaken in this Section 5.06.
SWB agrees that neither SWB nor any of its Subsidiaries shall,
and that SWB and its Subsidiaries shall direct and use all
reasonable efforts to cause their respective directors, officers,
employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer with
respect to a merger, acquisition, consolidation or similar trans-
action involving, or any purchase of all or any substantial part
of the assets or any equity securities of, SWB or any of its
Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any
discussions or negotiations with, or provide any confidential
information or data to, any Person relating to an Acquisition
Proposal. Nothing contained in this Section 5.06 shall be
deemed to prohibit SWB from taking or disclosing to shareholders
any position necessary in order to comply with the filing and
disclosure requirements of Section 14(d) of the Exchange Act and
the related rules and regulations of the SEC.
Section 5.07. Duty to Advise; Duty to Update SWB's
Disclosure Schedule. SWB shall promptly advise Alliance Bancorp
of any change or event having a Material Adverse Effect on it or
on any SWB Subsidiary or which it believes would or would be
reasonably likely to cause or
<PAGE>
constitute a material breach of any of its representations,
warranties or covenants set forth herein. SWB shall update SWB's
Disclosure Schedule as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had
occurred prior to the date of this Agreement, would have been
disclosed in the SWB Disclosure Schedule. The delivery of such
updated Schedule shall not relieve SWB from any breach or
violation of this Agreement and shall not have any effect for the
purposes of determining the satisfaction of the condition set
forth in Sections 6.02(c) hereof.
Section 5.08. Conduct of Alliance Bancorp's Business.
(a) From the date of this Agreement to the Closing Date,
Alliance Bancorp will use its best efforts to (x) preserve its
business organizations intact, (y) maintain good relationships
with employees, and (z) preserve for itself the goodwill of
customers of Liberty Federal. From the date of this Agreement to
the Closing Date, neither Alliance Bancorp nor Liberty Federal
will (i) amend its certificate of incorporation, charter or
bylaws in any manner inconsistent with the prompt and timely
consummation of the transactions contemplated by this Agreement,
(ii) issue any equity securities except in connection with the
exercise of any employee or director stock options, (iii) take
any action which would result in any of the representations and
warranties of Alliance Bancorp or Liberty Federal set forth in
this Agreement becoming untrue as of any date after the date
hereof or in any of the conditions set forth in Article VI hereof
not being satisfied, except in each case as may be required by
applicable law, (iv) intentionally and knowingly take any action
that would preclude satisfaction of the condition to closing
contained in Section 6.01(n) and 6.02(k) relating to financial
accounting treatment of the Merger; or (v) agree to do any of the
foregoing. At the Alliance Bancorp Stockholders' Meeting to be
held to obtain stockholder approval of this Agreement, Alliance
Bancorp shall also submit for stockholder approval an amendment
to its certificate of incorporation increasing the number of
authorized shares of all classes of stock to no less than 16.5
million shares and the number of authorized shares of common
stock to no less than 15 million shares.
(b) From the date of this Agreement through the Closing
Date, Alliance Bancorp will not, nor will it permit Liberty
Federal to, make or undertake any acquisition of any company or
business that could jeopardize the receipt of the approval of any
Regulatory Authority or materially delay the consummation of the
Merger or the Subsidiary Merger, unless the prior written consent
of SWB is obtained.
Section 5.09. Board and Committee Minutes. Alliance Bancorp
and SWB shall each provide to the other, within thirty (30) days
after any meeting of their respective Board of Directors, or any
committee thereof, or any senior management committee, a copy of
the minutes of such meeting, except that with respect to any
meeting held within thirty (30) days of the Closing Date, such
minutes shall be provided to each party prior to the Closing
Date.
Section 5.10. Undertakings by Alliance Bancorp and SWB.
(a) From and after the date of this Agreement:
<PAGE>
(i) Voting by Directors. Alliance Bancorp and SWB
shall recommend to all members of their respective Board of
Directors to vote all shares of SWB Common Stock, or Alliance
Bancorp Common Stock, as the case may be, beneficially owned by
each such director in favor of this Agreement. As promptly as
practicable following execution of this Agreement, Alliance
Bancorp's Directors shall enter into the agreement set forth as
Exhibit B to this Agreement;
(ii) Proxy Solicitor. Alliance Bancorp and SWB shall
each retain a proxy solicitor in connection with the solicitation
of shareholder approval of this Agreement;
(iii) Timely Review. If requested by Alliance
Bancorp at Alliance Bancorp's sole expense, SWB shall cause its
independent certified public accountants to perform a review of
its unaudited consolidated financial statements as of the end of
any calendar quarter, in accordance with Statement of Auditing
Standards No. 36, and to issue their report on such financial
statements as soon as is practicable thereafter;
(iv) Outside Service Bureau Contracts. If requested to
do so by Alliance Bancorp, SWB shall use its best efforts to
obtain an extension of any contract with an outside service
bureau or other vendor of services to SWB, on terms and
conditions mutually acceptable to SWB and Alliance Bancorp;
(v) Board Meetings. SWB shall respond reasonably and
in good faith to any request of Alliance Bancorp to permit a
representative of Alliance Bancorp, who is reasonably acceptable
to SWB, to attend any meeting of SWB's Board of Directors or the
Executive Committee thereof;
(vi) List of Nonperforming Assets. SWB and Alliance
Bancorp shall provide the other, within ten (10) days of the end
of each calendar month, a written list of nonperforming assets
(the term "nonperforming assets," for purposes of this
subsection, means (i) loans that are "troubled debt
restructuring" as defined in Statement of Financial Accounting
Standards No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring," (ii) loans on nonaccrual,
(iii) real estate owned, (iv) all loans ninety (90) days or more
past due) as of the end of such month and (iv) and impaired
loans; and
(vii) Reserves and Merger-Related Costs. On or
before the Effective Date, SWB shall establish such additional
accruals and reserves as may be necessary to conform the
accounting reserve practices and methods (including credit loss
practices and methods) of SWB to those of Alliance Bancorp (as
such practices and methods are to be applied to SWB from and
after the Closing Date) and Alliance Bancorp's plans with respect
to the conduct of the business of SWB following the Merger and
otherwise to reflect Merger-related expenses and costs incurred
by SWB, provided, however, that SWB shall not be required to take
such action unless Alliance Bancorp agrees in writing that all
conditions to closing set forth in Section 6.02 have been
satisfied or waived (except for the expiration of any applicable
waiting periods); prior to the delivery by Alliance Bancorp of
the writing referred to in the preceding clause, SWB shall
provide Alliance Bancorp a
<PAGE>
written statement, certified without personal liability by the
chief executive officer of SWB and dated the date of such
writing, that the representation made in Section 3.15 hereof is
true as of such date or, alternatively, setting forth in detail
the circumstances that prevent such representation from being
true as of such date; and no accrual or reserve made by SWB or
any SWB Subsidiary pursuant to this subsection, or any litigation
or regulatory proceeding arising out of any such accrual or
reserve, shall constitute or be deemed to be a breach or
violation of any representation, warranty, covenant, condition or
other provision of this Agreement or to constitute a termination
event within the meaning of Section 7.01(b) hereof.
(b) From and after the date of this Agreement, Alliance
Bancorp and SWB shall each:
(i) Shareholders Meetings. Submit this Agreement to
its shareholders for approval at a meeting to be held as soon as
practicable, and have their Boards of Director recommend approval
of this Agreement to their respective shareholders;
(ii) Filings and Approvals. Cooperate with the other in
the preparation and filing, as soon as practicable, of (A) the
Applications, (B) the Registration Statement and related filings
under state securities laws covering the Alliance Bancorp Common
Stock to be issued pursuant to the Merger, (C) all other
documents necessary to obtain any other approvals and consents
required to effect the completion of the Merger, and (D) all
other documents contemplated by this Agreement;
(iii) Identification of SWB's Affiliates. Cooperate
with the other and use its best efforts to identify those persons
who may be deemed to be Affiliates of SWB;
(iv) Public Announcements. Cooperate and cause its
respective officers, directors, employees and agents to cooperate
in good faith, consistent with their respective legal
obligations, in the preparation and distribution of, and agree
upon the form and substance of, any press release related to this
Agreement and the transactions contemplated hereby, and any other
public disclosures related thereto, including without limitation
communications to SWB shareholders, SWB's internal announcements
and customer disclosures, but nothing contained herein shall
prohibit either party from making any disclosure which its
counsel deems necessary, provided that the disclosing party
notifies the other party reasonably in advance of the timing and
contents of such disclosure;
(v) Maintenance of Insurance. Maintain, and cause
their respective Subsidiaries to maintain, insurance in such
amounts as are reasonable to cover such risks as are customary in
relation to the character and location of its properties and the
nature of its business;
(vi) Maintenance of Books and Records. Maintain, and
cause their respective Subsidiaries to maintain, books of account
and records in accordance with generally accepted accounting
principles applied on a basis consistent with those principles
used in preparing the financial statements heretofore delivered;
<PAGE>
(vii) Delivery of Securities Documents. Deliver to
the other, copies of all Securities Documents simultaneously with
the filing thereof;
(viii) Taxes. File all federal, state, and local tax
returns required to be filed by them or their respective
Subsidiaries on or before the date such returns are due
(including any extensions) and pay all taxes shown to be due on
such returns on or before the date such payment is due; or
(ix) Pooling of Interest. Prior to the Company Merger
Effective Date, Alliance Bancorp and SWB will use their best
efforts to cure any action previously taken that would prevent
Alliance Bancorp from accounting for the Company Merger as a
"pooling of interest," including cooperating in a private
placement, to take place immediately prior to Closing, of shares
of SWB Common Stock.
Section 5.11. Employee and Termination Benefits; Directors
and Management.
(a) Employee Benefits. On and after the Company Merger
Effective Date, the employee pension and welfare benefit plans of
Alliance Bancorp and SWB may, at Alliance Bancorp's election and
subject to the requirements of the IRC, continue to be maintained
separately or consolidated, or terminated; provided, however,
that Alliance Bancorp may not terminate the Southwest Federal
Supplemental Executive Retirement Plan in any matter by which the
participant of such plan would not be permitted to continue to
receive payments thereunder on a monthly basis, without the
consent of any affected individual. In the event of a
consolidation of any or all of such plans or in the event of
termination of the SWB benefit plans, SWB and SWB employees shall
receive credit for service with SWB under any Alliance Bancorp
benefit plan, or new Alliance Bancorp benefit plan in which such
employees would be eligible to enroll for purposes of eligibility
and vesting determination (but not for benefit accrual purposes).
Alliance Bancorp and/or Liberty Federal shall make available to
SWB employees who become employed by Alliance Bancorp or an
Alliance Bancorp subsidiary, employer-provided health coverage on
the same basis as it provides such coverage to Alliance Bancorp
or Liberty Federal employees. In the event of any termination of
or consolidation of any SWB health plan with any Alliance Bancorp
health plan, all employees of SWB who become full-time employees
of Alliance Bancorp or Liberty Federal, who were eligible for
continued coverage under the terminated or consolidated plan
shall have immediate coverage of any pre-existing condition. In
the event of a termination or consolidation of any SWB health
plan, terminated SWB employees and qualified beneficiaries or
retained SWB employees who do not satisfy the Alliance Bancorp
conditions for employer-provided coverage, will have the right to
continue coverage under group health plans of Alliance Bancorp
and/or Alliance Bancorp subsidiaries in accordance with IRC
Section 4980B(f).
(b) After the Company Merger Effective Date, any former
employees of SWB or any SWB Subsidiary whose employment is
terminated, other than for cause, shall be provided with
severance benefits in accordance with the Liberty Federal
severance plan in effect on the date hereof, a copy of which plan
has been provided to SWB.
<PAGE>
(c) Alliance Bancorp shall cause its Board of Directors to
be expanded by one member and shall appoint Richard E. Webber
(such person, and any substitute person as provided in the last
sentence of this paragraph, the "Nominee") to Alliance Bancorp's
Board of Directors immediately following the Company Merger
Effective Date. Mr. Webber shall be elected to a class of
directors which provides for no less than a two-year term
following the Company Merger Effective Date. Alliance Bancorp
shall include the Nominee on the list of nominees for directors
presented by the Board of Directors of Alliance Bancorp and for
which said Board shall solicit proxies at the annual meeting of
shareholders of Alliance Bancorp following the Company Merger
Effective Date at which directors of Alliance Bancorp are elected
for such class. In the event that the Nominee is unable to serve
as a director of Alliance Bancorp as a result of illness, death,
resignation or any other reason, such Nominee (or in the event of
the death of nominee, the other Nominee) shall select a
substitute nominee to serve as a member of the Board of Directors
of Alliance Bancorp, subject to the approval of Alliance Bancorp,
which shall not be unreasonably withheld and in accordance with
the Alliance Bancorp's By-laws. The provisions of this Section
5.11(c) are intended to be for the benefit of, and shall be
enforceable by, the Nominee.
(d) At the Company Merger Effective Date, Liberty Federal
shall establish an advisory board of directors, which shall be
comprised of those members of the Southwest Federal's Board of
Directors set forth in Section 5.11(d) of the Company Disclosure
Schedule. Such advisory board shall meet at such times (not less
than quarterly) and at such places as Liberty Federal shall
determine. Each advisory board member shall receive an annual
retainer of $4,500 payable quarterly or monthly, and a fee of
$375 per monthly meeting (the Chairman of the Advisory Board
shall receive a fee of $575 per meeting). The provisions of this
Section 5.11(d) are intended to be for the benefit of, and shall
be enforceable by, each member of such advisory board.
(e) At the Company Merger Effective Date, Alliance Bancorp
shall enter into a consultation agreement in the form attached
hereto as Exhibit 5.11.
Section 5.12. Duty to Advise; Duty to Update Alliance
Bancorp's Disclosure Schedule. Alliance Bancorp shall promptly
advise SWB of any change or event having a Material Adverse
Effect on it or on any Alliance Bancorp Subsidiary or which it
believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations,
warranties or covenants set forth herein. Alliance Bancorp shall
update Alliance Bancorp's Disclosure Schedules as promptly as
practicable after the occurrence of an event or fact which, if
such event or fact had occurred prior to the date of this
Agreement, would have been disclosed in the Alliance Bancorp
Disclosure Schedule. The delivery of such updated Schedule shall
not relieve Alliance Bancorp from any breach or violation of this
Agreement and shall not have any effect for the purposes of
determining the satisfaction of the condition set forth in
Sections 5.01(c) hereof.
Section 5.13. Affiliate Letter. No later than five days
after the date of this Agreement, SWB shall use its best efforts
to cause to be delivered to Alliance Bancorp the Letter Agreement
attached hereto as Exhibit 1, executed by each director and
executive officer of SWB.
<PAGE>
ARTICLE VI
CONDITIONS
Section 6.01. Conditions to SWB's Obligations under this
Agreement. The obligations of SWB hereunder shall be subject to
satisfaction at or prior to the Closing Date of each of the
following conditions, unless waived by SWB pursuant to Section
7.03 hereof:
(a) Corporate Proceedings. All action required to be taken
by, or on the part of, Alliance Bancorp and Liberty Federal to
authorize the execution, delivery and performance of this
Agreement and the Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement
and the Plan of Merger, shall have been duly and validly taken by
Alliance Bancorp and Liberty Federal; and SWB shall have received
certified copies of the resolutions evidencing such
authorizations;
(b) Covenants. The obligations and covenants of Alliance
Bancorp required by this Agreement to be performed by Alliance
Bancorp at or prior to the Closing Date shall have been duly
performed and complied with in all respects, except where the
failure to perform or comply with any obligation or covenant
would not, either individually or in the aggregate, result in a
Material Adverse Effect with respect to Alliance Bancorp;
(c) Representations and Warranties. The representations and
warranties of Alliance Bancorp set forth in this Agreement shall
be true and correct, as of the date of this Agreement, and as of
the Closing Date as though made on and as of the Closing Date,
except as to any representation or warranty (i) which
specifically relates to an earlier date or (ii) where the breach
of the representation or warranty would not, either individually
or in the aggregate, constitute a Material Adverse Effect with
respect to Alliance Bancorp and Liberty Federal;
(d) Approvals of Regulatory Authorities. Alliance Bancorp
shall have received all required approvals of Regulatory
Authorities of the Merger (without the imposition of any
conditions that are in Alliance Bancorp's reasonable judgement
unduly burdensome) and delivered copies thereof to SWB; and all
notice and waiting periods required thereunder shall have expired
or been terminated;
(e) No Injunction. There shall not be in effect any order,
decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997,
there shall not have occurred any Material Adverse Effect with
respect to Alliance Bancorp;
(g) Officer's Certificate. Alliance Bancorp shall have
delivered to SWB a certificate, dated the Closing Date and
signed, without personal liability, by its chairman of the board
or
<PAGE>
president, to the effect that the conditions set forth in
subsections (a) through (f) of this Section 6.01 and Section
6.02(m) have been satisfied, to the best knowledge of the officer
executing the same;
(h) Opinion of Alliance Bancorp's Counsel. SWB shall have
received an opinion of Luse Lehman Gorman Pomerenk & Schick,
P.C., counsel to Alliance Bancorp, dated the Closing Date, in
form and substance reasonably satisfactory to SWB and its counsel
to the effect set forth on Exhibit 6.1 attached hereto;
(i) Registration Statement. The Registration Statement
shall be effective under the Securities Act and no proceedings
shall be pending or threatened by the SEC to suspend the
effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained;
(j) Tax Opinion. SWB shall have received an opinion of Luse
Lehman Gorman Pomerenk & Schick, P.C. substantially to the effect
set forth on Exhibit 6.2 attached hereto;
(k) Approval of SWB's Shareholders. This Agreement shall
have been approved by the shareholders of SWB by such vote as is
required under applicable Delaware law, SWB's certificate of
incorporation and bylaws, and under Nasdaq requirements
applicable to it;
(l) Investment Banking Opinion. SWB shall have received the
written opinion from Baird on or before the date of this
Agreement and updated in writing as of a date within five (5)
days of mailing the Prospectus/Proxy Statement, to the effect
that the Exchange Ratio is fair, from a financial point of view,
to such shareholders;
(m) Stock Exchange Listing. The shares of Alliance Bancorp
Common Stock which shall be issued to the shareholders of SWB
upon consummation of the Merger shall have been authorized for
listing on the Nasdaq National Market System, subject to official
notice of issuance; and
(n) Pooling Letter. Alliance Bancorp shall have received
an opinion from KPMG Peat Marwick LLP to the effect that the
Company Merger will be treated as a "pooling of interest," as
defined by GAAP, for financial accounting purposes.
Section 6.02. Conditions to Alliance Bancorp's Obligations
under this Agreement. The obligations of Alliance Bancorp
hereunder shall be subject to satisfaction at or prior to the
Closing Date of each of the following conditions, unless waived
by Alliance Bancorp pursuant to Section 8.03 hereof:
(a) Corporate Proceedings. All action required to be taken
by, or on the part of, SWB and Southwest Federal to authorize
the execution, delivery and performance of this Agreement and the
Plan of Merger, respectively, and the consummation of the
transactions contemplated by this Agreement and the Plan of
Merger, shall have been duly and validly taken by SWB and
Southwest
<PAGE>
Federal; and Alliance Bancorp shall have received certified
copies of the resolutions evidencing such authorizations;
(b) Covenants. The obligations and covenants of SWB,
required by this Agreement to be performed by it at or prior to
the Closing Date shall have been duly performed and complied with
in all respects, except where the failure to perform or comply
with any obligation or covenant would not, either individually or
in the aggregate, result in a Material Adverse Effect with
respect to SWB;
(c) Representations and Warranties. The representations and
warranties of SWB set forth in this Agreement shall be true and
correct as of the date of this Agreement, and as of the Closing
Date as though made on and as of the Closing Date, except as to
any representation or warranty (i) which specifically relates to
an earlier date or (ii) where the breach of the representation or
warranty would not, either individually or in the aggregate,
result in a Material Adverse Effect with respect to SWB;
(d) Approvals of Regulatory Authorities. Alliance Bancorp
shall have received all required approvals of Regulatory
Authorities of the Merger (without the imposition of any
conditions that are in Alliance Bancorp's reasonable judgement
unduly burdensome) and delivered copies thereof to SWB; and all
notice and waiting periods required thereunder shall have expired
or been terminated;
(e) No Injunction. There shall not be in effect any order,
decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(f) No Material Adverse Effect. Since September 30, 1997,
there shall not have occurred any Material Adverse Effect with
respect to SWB;
(g) Officer's Certificate. SWB shall have delivered to
Alliance Bancorp a certificate, dated the Closing Date and
signed, without personal liability, by its chairman of the board
or president, to the effect that the conditions set forth in
subsections (a) through (f) of this Section 6.02 and Section
6.01(k) have been satisfied, to the best knowledge of the officer
executing the same;
(h) Opinions of SWB's Counsel. Alliance Bancorp shall have
received an opinion of Muldoon, Murphy & Faucette, counsel to
SWB, dated the Closing Date, in form and substance reasonably
satisfactory to Alliance Bancorp and its counsel to the effect
set forth on Exhibit 6.3 attached hereto;
(i) Registration Statement. The Registration Statement
shall be effective under the Securities Act and no proceedings
shall be pending or threatened by the SEC to suspend the
effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained;
<PAGE>
(j) Tax Opinion. Alliance Bancorp shall have received an
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C., its
counsel, substantially to the effect set forth on Exhibit 6.3
attached hereto;
(k) Pooling Letter. Alliance Bancorp shall have received
(i) an opinion from KPMG Peat Marwick LLP to the effect that
the Company Merger will be treated as a "pooling of interest," as
defined by GAAP, for financial accounting purposes and (ii) a
letter, in a form satisfactory to KPMG Peat Marwick, LLP, from
SWB's independent auditor representing that they are not aware of
any transactions or of any events or circumstances that would
preclude the Merger from being treated as a "pooling of interest"
for financial accounting purposes;
(l) Liquidation Account. Neither the Merger or consummation
of the Plan of Merger shall require Alliance Bancorp or SWB to
distribute to depositors the liquidation account established by
Southwest Federal in connection with its conversion from mutual
to stock form;
(m) Approval of Alliance Bancorp's Shareholders. This
Agreement shall have been approved by the shareholders of
Alliance Bancorp by such vote as is required under applicable
Delaware law, Alliance Bancorp's certificate of incorporation and
bylaws and under Nasdaq requirements applicable to it; and
(n) Investment Banking Opinion. Alliance Bancorp shall have
received the written opinion from FBR on or before the date of
this Agreement and updated in writing as of a date within five
(5) days of mailing the Prospectus/Proxy Statement to the effect
that the Merger is fair to Alliance Bancorp.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.01 Termination. This Agreement may be terminated
on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties hereto;
(b) By Alliance Bancorp or SWB:
(i) if there shall have been any breach of any
representation, warranty, covenant or other obligation of
Alliance Bancorp which results in a Material Adverse Effect with
respect to Alliance Bancorp, on the one hand, or of SWB which
results in a Material Adverse Effect with respect to SWB, on the
other hand, and such breach cannot be, or shall not have been,
remedied within 30 days after receipt by such other party of
notice in writing specifying the nature of such breach and
requesting that it be remedied;
<PAGE>
(ii) if the Closing Date shall not have occurred on or
before September 30, 1998, unless the failure of such occurrence
shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe its agreements set forth in
this Agreement required to be performed or observed by such party
on or before the Closing Date; or
(iii) if either party has been informed in writing
by a Regulatory Authority whose approval or consent has been
requested that such approval or consent is unlikely to be
granted, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein required to be
performed or observed by such party on or before the Closing
Date; or
(iv) by either Alliance Bancorp or SWB if any approval
of the shareholders of Alliance Bancorp or SWB required for the
consummation of the Merger shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting
of shareholders or at any adjournment or postponement thereof.
(c) By Alliance Bancorp by written notice to SWB within
four days of the Closing Date if the Alliance Bancorp Market
Value shall be less than $19.875, provided that Alliance
Bancorp's determination to terminate this Agreement shall be
nullified if SWB provides written notice, within three days of
the receipt of notice provided to it by Alliance Bancorp, stating
that it wants to proceed with the Company Merger, in which event
the Exchange Ratio shall be 1.3579.
Section 7.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 7.01 hereof, this Agreement shall
forthwith become void (other than Section 6.02(d), Section
6.10(b)(iii) and Section 8.01 hereof, which shall remain in full
force and effect), and there shall be no further liability on the
part of Alliance Bancorp or SWB to the other, except that no
party shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of
this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Expenses. (a) Except for the cost of printing
and mailing the Proxy Statement/Prospectus which shall be shared
equally, and except as provided herein, each party hereto shall
bear and pay all costs and expenses incurred by it in connection
with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and
counsel.
(b) In the event of any termination of this Agreement by a
party pursuant to Section 7.01(b)(i) hereof based on a breach of
a representation or warranty, or the breach of a covenant, by the
other party hereto, the breaching party shall pay to the non-
breaching party all out-of-pocket costs and expenses, including,
without limitation, reasonable legal, accounting and investment
banking fees and expenses, incurred by the non-breaching party in
connection with entering into this
<PAGE>
Agreement and carrying out of any and all acts contemplated
hereunder, plus a sum equal to $500,000; provided, however, that
this clause shall not be construed to relieve or release a
breaching party from any additional liabilities or damages
arising out of its willful breach of any provision of this
Agreement.
Section 8.02. Non-Survival of Representations and
Warranties. All representations, warranties and, except to the
extent specifically provided otherwise herein, agreements and
covenants, other than those covenants set forth in Sections 6.05,
and 6.11(a), (c), (d) and (e) which will survive the Merger,
shall terminate on the Closing Date.
Section 8.03. Amendment, Extension and Waiver. Subject to
applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may (a)
amend this Agreement, (b) extend the time for the performance of
any of the obligations or other acts of either party hereto, (c)
waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions
contained in Articles V and VI hereof or otherwise. This
Agreement may not be amended except by an instrument in writing
authorized by the respective Boards of Directors and signed, by
duly authorized officers, on behalf of the parties hereto. Any
agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such
party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 8.04. Entire Agreement. This Agreement, including
the documents and other writings referred to herein or delivered
pursuant hereto, contains the entire agreement and understanding
of the parties with respect to its subject matter. This Agreement
supersedes all prior arrangements and understandings between the
parties, both written or oral with respect to its subject matter.
This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors; provided,
however, that nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto
and their respective successors, any rights, remedies,
obligations or liabilities other than pursuant to Sections 2.04,
2.05(g), 5.05, and 5.11(a), (c) and (d), with respect to
indemnification, employee benefits and certain other matters, and
provided, further, that any such rights, remedies, obligations or
liabilities conferred pursuant to Sections 5.11(b) and (d) shall
terminate and expire one (1) year from the Effective Date.
Section 8.05. No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 8.06. Notices. All notices or other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, mailed by prepaid registered or certified
mail (return receipt requested), or sent by telecopy, addressed
as follows:
<PAGE>
(a) If to Alliance Bancorp, to:
Alliance Bancorp
One Grant Square
Hinsdale, Illinois 60522
Attention: Mr. Fredric G. Novy
Chairman of the Board
with a copy to: Luse Lehman Gorman Pomerenk & Schick, PC
5335 Wisconsin Avenue, NW
Washington, D.C. 20015
Attention: John J. Gorman, Esq.
Robert Lipsher, Esq.
(b) If to SWB, to:
Southwest Bancshares, Inc.
4062 Southwest Highway
Hometown, Illinois 60456
Attn: Richard E. Webber
President and Chief Financial Officer
with a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attn: Mary M. Sjoquist, Esq.
Section 8.07. Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
Section 8.08. Counterparts. This Agreement may be executed
in any number of counterparts, and each such counterpart shall be
deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
Section 8.09. Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
<PAGE>
Section 8.10. Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (including the law of conflicts of law) of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the day
and year first above written.
ALLIANCE BANCORP
By: /s/ Fredric G. Novy
------------------------------
Fredric G. Novy
Chairman of the Board
SOUTHWEST BANCSHARES, INC.
By: /s/ Richard E. Webber
------------------------------
Richard E. Webber
President and Chief Financial
Officer
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated December 16, 1997, between
Alliance Bancorp, a Delaware corporation ("Grantee") and
Southwest Bancshares, Inc. ("Issuer"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger dated December 16, 1997 (the "Merger
Agreement"), which agreement has been executed by the parties
hereto prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has agreed
to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE. in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 297,471 fully paid and nonassessable shares
of its common stock, par value $0.01 per share ("Common Stock"),
at a price of $25.50 per share (such price, as adjusted if
applicable, the "Option Price"); provided, however, that in the
event Issuer issues or agrees to issue any shares of Common Stock
(other than as permitted under the Merger Agreement) at a price
less than $25.50 per share, such Option Price shall be equal to
such lesser price. The number of shares of Common Stock that may
be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement), the number of
shares of Common Stock subject to the Option shall be increased
so that, after such issuance, it equals 9.9% of the number of
shares of Common Stock then issued and outstanding, giving effect
to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The holder or holders of the Option (including
Grantee or any subsequent transferee(s)) (the "Holder") may
exercise the Option, in whole or part, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 180 days following the
first such Subsequent Triggering Event. Each of the following
shall be an Exercise Termination Event: (i) the Company Merger
Effective Time (as defined in the Merger Agreement); (ii)
termination of the Merger Agreement in
<PAGE>
accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event; or (iii)
the passage of twelve months after termination of the Merger
Agreement if such termination follows or occurs at the same time
as the occurrence of an Initial Triggering Event.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, and the rules and regulations
thereunder (the "1934 Act")) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary"). For purposes of this
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of Regulation
S-X promulgated by the SEC) of Issuer, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of
Issuer or any Significant Subsidiary of Issuer, or (z) a purchase
or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of beneficial ownership of
securities representing 25% or more of the voting power of Issuer
or any Significant Subsidiary of Issuer, provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii) (A) Any person other than Grantee, or any Grantee
Subsidiary, or any Issuer Subsidiary acting in a fiduciary
capacity (collectively, "Excluded Persons"), alone or together
with such person's affiliates and associates (as such terms are
defined in Rule 12b-2 under the 1934 Act) shall have acquired
beneficial ownership or the right to acquire beneficial ownership
of 25% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement
having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder) or (B) any group
(as such term is defined in Section 13(d)(3) of the 1934 Act),
other than a group of which only Excluded Persons are members,
shall have been formed that beneficially owns 25% or more of the
shares of Common Stock then outstanding;
(iii) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
shareholders by public announcement or written communication that
is or becomes the subject of public disclosure to (A) engage in
an Acquisition Transaction or (B) commence a tender or exchange
offer the consummation of which would result in such person
acquiring beneficial ownership of securities representing 25% or
more of Issuer's voting power;
<PAGE>
(iv) The Board of Directors of Issuer shall have failed
to recommend to its stockholders the adoption of the Merger
Agreement or shall have withdrawn, modified or changed its
recommendation in a manner adverse to Grantee;
(v) After a proposal is made by a third party (other
than an Excluded Person) to Issuer to engage in an Acquisition
Transaction, Issuer shall have intentionally and knowingly
breached any representation, warranty, covenant or agreement
contained in the Merger Agreement and such breach (x) would
entitle Grantee to terminate the Merger Agreement pursuant to
Section 7.01(b) therein (without regard to any grace period
provided for therein) and (y) shall not have been cured prior to
the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Office of Thrift Supervision
("OTS") or other federal or state bank regulatory authority, for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after
the date hereof:
(i) The acquisition by any person other than an
Excluded Person of beneficial ownership of 25% or more of the
then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in subparagraph (i) of subsection (b) of this Section
2.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be
a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which is herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided that if prior notification to or approval of the
OTS or any other regulatory agency is required in connection with
such purchase, the Holder shall promptly file the required notice
or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or
such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option
shall be deemed to occur on the Notice Date relating thereto.
<PAGE>
(f) At each closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase
price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an agreement
between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request
therefor. "
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933 ("1933 Act") in the
above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel, in form and substance satisfactory to
Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection
(e) of this Section 2 and the tender of the applicable purchase
price in immediately available funds, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
<PAGE>
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the
event, under the Home Owners' Loan Act, as amended ("HOLA"), or
the Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the OTS, or to any
state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the OTS
or such state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement if mutilated, Issuer
will execute and deliver a new Agreement of like tenor and date.
Any such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares
of Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, in the event of any
change in Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions, or the like, the
type and number, and/or the price, of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted,
and proper provision shall be made in the agreements governing
such transaction so that the Holder shall receive, upon exercise
of the Option, the number and class of shares or other securities
or property that Holder would have received in respect of the
Common Stock if the Option had been exercised immediately prior
to such event, or the record date therefor, as applicable.
<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer
(including any successor thereto) shall, at the request of the
Holder delivered at the time of and together with a written
notice of exercise in accordance with Section 2(e) hereof
(whether on its own behalf or on behalf of any subsequent holder
of this Option (or part thereof) or any of the shares of Common
Stock issued pursuant hereto), promptly prepare, file and keep
current a shelf registration statement under the 1933 Act
covering any shares issued or issuable pursuant to this Option
and shall use its best efforts to cause such registration
statement to become effective and remain current in order to
permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition
requested by the Holder. Issuer will 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 or such shorter time as may be reasonably necessary to
effect such sales or other dispositions. The Holder shall have
the right to demand not more than two such registrations under
this Agreement and all other agreements, for which this agreement
may be exchanged pursuant to Section 4 hereof; provided, however,
that Issuer shall be required to bear the expenses related only
to the first such registration, and the Holder shall bear such
expenses to the extent related to the second. The foregoing
notwithstanding, if, at the time of any request by the Holder for
registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion
of the Holder's Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced;
and provided, however, that if such reduction occurs, then the
Issuer shall file a registration statement for the balance as
promptly as practical and no reduction shall thereafter occur.
Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement
to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to
any underwriting agreement relating to the sale of such shares,
but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person
known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to
receive such copies.
7. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding shares and share
<PAGE>
equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person,
other than Grantee or one of its Subsidiaries, then, and in each
such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation
of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any
person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest
voting power with respect of the election of directors (or other
persons similarly responsible for direction of the business and
affairs) of the issuer of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share
of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, or (iii) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder,
divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm selected by the Holder.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the six
months immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of Common Stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms and
conditions as the Option, provided, that if any term or condition
of the Substitute Option cannot, for legal reasons, be the same
as the Option, such term or condition shall be as similar as
possible and in no event less advantageous to the Holder. The
issuer of the Substitute Option shall also enter into an
agreement
<PAGE>
with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to (i)
the product of (A) the Assigned Value and (B) the number of
shares of Common Stock for which the Option is then exercisable,
divided by (ii) the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then
be equal to the Option Price multiplied by a fraction the
numerator of which shall be the number of shares of Common Stock
for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 7 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
8. The 180-day period for exercise of certain rights under
Sections 2 and 6 shall be extended: (i) to the extent necessary
to obtain all regulatory approvals for the exercise of such
rights, and for the expiration of all statutory waiting periods;
and (ii) to the extent necessary to avoid liability under Section
16(b) of the 1934 Act by reason of such exercise.
9. Repurchase at the Option of Holder. (a) At the
request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 9(d)) and
ending 12 months immediately thereafter, Issuer shall repurchase
from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the
"Request Date". Such repurchase shall be at an aggregate price
(the "Section 9 Repurchase Consideration") equal to the sum of:
(i) the aggregate Option Price paid by Holder
for any shares of Issuer Common Stock acquired pursuant to the
Option with respect to which Holder then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Common Stock over (y)
the Option Price (subject to adjustment pursuant to Sections 1
and 5), multiplied by the number of shares of Common Stock with
respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable
Price over the Option Price (subject to adjustment pursuant to
Sections 1 and 5) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the Closing
Date has not occurred, payable) by Holder for each
<PAGE>
share of Common Stock with respect to which the Option has been
exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section
9, Issuer shall, within 10 business days after the Request Date,
pay the Section 9 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such
payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Common Stock purchased
thereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then
free and clear of all liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any federal
or state regulatory authority is required in connection with the
payment of all or any portion of the Section 9 Repurchase
Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 9, in whole or in
part, or to require that Issuer deliver from time to time that
portion of the Section 9 Repurchase Consideration that it is not
then so prohibited from paying and promptly file the required
notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing
of any such notice or application and the obtaining of any such
approval). If any federal or state regulatory authority
disapproves of any part of Issuer's proposed repurchase pursuant
to this Section 9, Issuer shall promptly give notice of such fact
to Holder. If any federal or state regulatory authority
prohibits the repurchase in part but not in whole, then Holder
shall have the right (i) to revoke the repurchase request or (ii)
to the extent permitted by such regulatory authority, determine
whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon
have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section
9(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within
five (5) business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 9 shall terminate on the date
of termination of this Option pursuant to Section 2(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Common Stock paid for any such share by the person or groups
described in Section 9(d)(i), (ii) the price per share of Common
Stock received by holders of Common Stock in connection with any
merger or other business combination transaction described in
Section 7(a)(i), 7(a)(ii) or 7(a)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on
the Nasdaq National Market System (or if Issuer Common Stock is
not quoted on the Nasdaq National Market System, the highest bid
price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported
by a recognized source chosen by Holder) during the 40 business
days preceding the Request Date; provided, however, that in the
event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale
for such assets and the current market value of the
<PAGE>
remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by Holder, divided by
the number of shares of Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized
investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for
all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the
right to acquire beneficial ownership of, or any "group" (as such
term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of
Issuer Common Stock, or (ii) any of the transactions described in
Section 7(a)(i), 7(a)(ii) or 7(a)(iii) shall be consummated.
10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer. This Agreement is the valid and legally binding
obligation of Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests
and not subject to any preemptive rights.
(c) Issuer has taken all necessary action to exempt this
Agreement, and the transactions contemplated hereby and thereby
from, and this Agreement and the transactions contemplated hereby
and thereby are exempt from, (i) any applicable state takeover
laws, (ii) any state laws limiting or restricting the voting
rights of stockholders and (iii) any provision in its or any of
its subsidiaries' articles of incorporation, certificate of
incorporation, charter or bylaws restricting or limiting stock
ownership or the voting rights of stockholders.
<PAGE>
(d) The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of
any of the transactions contemplated hereby will not, constitute
or result in (i) a breach or violation of, or a default under,
its certificate of incorporation or bylaws, or the comparable
governing instruments of any of its subsidiaries, or (ii) a
breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the
giving of notice, the lapse of time or both) or under any law,
rule, ordinance or regulation or judgment, decree, order, award
or governmental or nongovernmental permit or license to which it
or any of its subsidiaries is subject, that would, in any case
referred to in this clause (ii), give any other person the
ability to prevent or enjoin Issuer's performance under this
Agreement in any material respect.
11. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has full corporate power and authority to enter
into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) This Option is not being acquired with a view to the
public distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under
applicable federal and state securities laws and regulations.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except (i) to any wholly-
owned Subsidiary or (ii) that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations
hereunder to one or more transferees.
13. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement.
14. Notwithstanding anything to the contrary herein, in the
event that the Holder or any Related Person thereof is a person
making an offer or proposal to engage in an Acquisition
Transaction (other than the transactions contemplated by the
Merger Agreement), then in the case of a Holder or any Related
Person thereof, the Option held by it shall immediately terminate
and be of no further force or effect. A Related Person of a
Holder means any Affiliate (as defined in Rule 12b-2 of the rules
and regulations under the 1934 Act) of the Holder and any person
that is the beneficial owner of 20% or more of the voting power
of the Holder.
<PAGE>
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
16. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow
the Holder to acquire such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set
forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel. Notwithstanding anything to the contrary contained
herein or in the Merger Agreement, in the event a Subsequent
Triggering Event shall occur prior to an Exercise Termination
Event, Issuer shall pay to Grantee upon demand the amount of the
expenses incurred by Grantee in connection with this Agreement
and the Merger Agreement and the transactions contemplated hereby
and thereby.
21. Except as otherwise expressly provided herein, or in
the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and, as
permitted herein, assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as
expressly provided herein.
<PAGE>
22. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers, all as of
the date first above written.
ALLIANCE BANCORP
BY: /s/ Fredric G. Novy
------------------------------
Fredric G. Novy
Chairman of the Board
SOUTHWEST BANCSHARES, INC.
BY: /s/ Richard E. Webber
------------------------------
Richard E. Webber
President and Chief Financial
Officer
