SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 15, 1997
PERPETUAL MIDWEST FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23368 42-1415490
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
700 First Avenue, N.E., Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 366-1851
N/A
(Former name or former address, if changed since last report.)
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Forward-Looking Statements
Statements contained in Exhibit 99 that are not historical facts may be
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Further,
such statements are subject to important factors that could cause actual results
to differ materially from those in Exhibit 99, including the following: regional
and national economic conditions; changes in levels of market interest rates;
credit risks of real estate, consumer and other lending activities; regulatory
factors (including regulatory approval of the acquisition); and the ability to
achieve synergies in the acquisition.
Item 5. Other Events.
On December 15, 1997, Perpetual Midwest Financial, Inc., a Delaware
corporation (the "Company"), and Commercial Federal Corporation, a Nebraska
corporation ("Commercial"), entered into a Reorganization and Merger Agreement,
dated as of December 15, 1997 (the "Merger Agreement"), by and among the
Company, Commercial, Perpetual Savings Bank, FSB ("Perpetual Savings") and
Commercial Federal Bank, A Federal Savings Bank ("Commercial Bank"). The Merger
Agreement provides for the merger of the Company with and into Commercial, with
Commercial as the surviving corporation (the "Merger"), and for the merger of
Perpetual Savings with and into Commercial Bank, with Commercial Bank as the
surviving institution.
Under the Merger Agreement, each share of the common stock, par value
$.01 per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the effective time of the Merger will be converted into the
right to receive 0.5757 of a share of the common stock, par value $0.01 per
share, of Commercial ("Commercial Common Stock") and associated rights, provided
that if the average price of Commercial Common Stock over a defined pricing
period prior to closing is below $30.167 per share on a post-split basis, the
Company can terminate the transaction unless Commercial agrees to increase the
exchange ratio to an indicated price per share (based on the average price per
share of Commercial Common Stock over the pricing period) to Company
shareholders of $26.05.
In connection with the execution of the Merger Agreement, the Company
and Commercial also executed a Stock Option Agreement (the "Commercial Stock
Option") under which Commercial was granted an irrevocable option to purchase,
under certain circumstances, up to 185,419 shares of Company Common Stock at a
price per share equal to the average of the last reported sale prices of Company
Common Stock on December 12, 1997. The number of shares and the purchase price
are subject to adjustment as provided in the Commercial Stock Option. Under
certain circumstances, the Company may be required to repurchase the Commercial
Stock Option or the shares acquired pursuant to the exercise thereof. The
Commercial Stock Option was granted by the Company as an inducement to
Commercial to enter into the Merger Agreement.
The Merger is intended to qualify as a tax-free reorganization under
the Internal Revenue Code of 1986, as amended.
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Consummation of the Merger is subject to various conditions, including:
(i) receipt of approval by the stockholders of the Company; (ii) the shares of
Commercial Common Stock to be issued to the Company stockholders upon
consummation of the Merger having been authorized for listing on the New York
Stock Exchange; (iii) receipt of requisite regulatory approvals; (iv) the
registration statement having been declared effective by the Securities and
Exchange Commission; (v) receipt by each of the Company and Commercial of an
opinion of counsel substantially to the effect that the Merger will be treated
as a tax-free reorganization; and (vi) satisfaction of certain other conditions.
The Merger Agreement and the press release issued on December 15, 1997
announcing the Merger are filed as exhibits hereto and are incorporated by
reference herein. The foregoing discussion does not purport to be complete and
is qualified in its entirety by reference to such exhibits.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Reorganization and Merger Agreement, dated as of December 15, 1997,
by and among Commercial Federal Corporation, Commercial Federal
Bank, A Federal Savings Bank, Perpetual Midwest Financial, Inc. and
Perpetual Savings Bank, FSB.
2.2 Stock Option Agreement, dated as of December 15, 1997, by and
between Commercial Federal Corporation and Perpetual Midwest
Financial, Inc.
99 Press Release of Perpetual Midwest Financial, Inc., dated December
15, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PERPETUAL MIDWEST FINANCIAL, INC.
Date: December 23, 1997 By: /s/ James L. Roberts
--------------------
James L. Roberts
President and Chief Executive Officer
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PERPETUAL MIDWEST FINANCIAL, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Reorganization and Merger Agreement, dated as of December 15, 1997,
by and among Commercial Federal Corporation, Commercial Federal
Bank, A Federal Savings Bank, Perpetual Midwest Financial, Inc. and
Perpetual Savings Bank, FSB.
2.2 Stock Option Agreement, dated as of December 15, 1997, by and
between Commercial Federal Corporation and Perpetual Midwest
Financial, Inc.
99 Press Release of Perpetual Midwest Financial, Inc., dated December
15, 1997.
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Exhibit 2.1
- --------------------------------------------------------------------------------
REORGANIZATION AND MERGER AGREEMENT
By and Among
COMMERCIAL FEDERAL CORPORATION
AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK
And
PERPETUAL MIDWEST FINANCIAL, INC.
AND
PERPETUAL SAVINGS BANK, FSB
Dated as of December 15, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
ARTICLE I THE MERGER AND RELATED MATTERS................................. 2
1.1 Merger: Surviving Institution.................................. 2
1.2 Effective Time of the Merger................................... 3
1.3 Conversion of Shares........................................... 3
1.4 Surviving Corporation in the Acquisition Merger................ 4
1.5 Authorization for Issuance of Commercial Common
Stock; Exchange of Certificates......................... 5
1.6 No Fractional Shares........................................... 7
1.7 Shareholders' Meeting.......................................... 7
1.8 Company Stock Options.......................................... 7
1.9 Registration Statement; Prospectus/Proxy Statement............. 8
1.10 Cooperation; Regulatory Approvals..............................10
1.11 Closing........................................................10
1.12 Closing of Transfer Books......................................10
1.13 Bank Merger....................................................10
1.14 Option Agreement...............................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY
AND SAVINGS.............................................11
2.1 Organization, Good Standing, Authority,
Insurance, Etc..........................................11
2.2 Capitalization.................................................12
2.3 Ownership of Subsidiaries......................................12
2.4 Financial Statements and Reports...............................13
2.5 Absence of Changes.............................................14
2.6 Prospectus/Proxy Statement.....................................14
2.7 No Broker's or Finder's Fees...................................15
2.8 Litigation and Other Proceedings...............................15
2.9 Compliance with Law............................................15
2.10 Corporate Actions..............................................16
2.11 Authority......................................................16
2.12 Employment Arrangements........................................17
2.13 Employee Benefits..............................................17
2.14 Information Furnished..........................................19
2.15 Property and Assets............................................19
2.16 Agreements and Instruments.....................................19
2.17 Material Contract Defaults.....................................20
2.18 Tax Matters....................................................20
2.19 Environmental Matters..........................................21
2.20 Loan Portfolio: Portfolio Management..........................21
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2.21 Real Estate Loans and Investments..............................22
2.22 Derivatives Contracts..........................................22
2.23 Insurance......................................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMMERCIAL
AND THE BANK............................................23
3.1 Organization, Good Standing, Authority,
Insurance, Etc..........................................23
3.2 Capitalization.................................................23
3.3 Ownership of Subsidiaries......................................23
3.4 Financial Statements and Reports...............................24
3.5 Absence of Changes.............................................25
3.6 Prospectus/Proxy Statement.....................................25
3.7 No Broker's or Finder's Fees...................................25
3.8 Compliance With Law............................................26
3.9 Corporate Actions..............................................26
3.10 Authority......................................................26
3.11 Information Furnished..........................................27
3.12 Litigation and Other Proceedings...............................27
3.13 Agreements and Instruments.....................................27
3.14 Tax Matters....................................................27
3.15 Property and Assets............................................27
3.16 Derivatives Contracts..........................................28
3.17 Insurance......................................................28
ARTICLE IV COVENANTS......................................................28
4.1 Investigations; Access and Copies..............................28
4.2 Conduct of Business of the Company and the Company
Subsidiaries............................................29
4.3 No Solicitation................................................30
4.4 Shareholder Approval...........................................31
4.5 Filing of Holding Company and Merger Applications..............31
4.6 Consents.......................................................31
4.7 Resale Letter Agreements.......................................31
4.8 Publicity......................................................32
4.9 Cooperation Generally..........................................32
4.10 Additional Financial Statements and Reports....................32
4.11 Stock Listing..................................................32
4.12 Allowance for Loan and Real Estate Owned Losses................33
4.13 D&O Indemnification and Insurance..............................33
4.14 Tax Treatment..................................................34
4.15 Update Disclosure..............................................34
4.16 Company's Employee Plans and Benefit Arrangements..............34
4.17 Amendment of Savings' Federal Stock Charter....................36
4.18 Commercial Goodwill Claim......................................36
4.19 Environmental Reports..........................................36
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ARTICLE V CONDITIONS TO THE MERGER; TERMINATION
OF AGREEMENT............................................37
5.1 General Conditions.............................................37
5.2 Conditions to Obligations of Commercial and Bank...............37
5.3 Conditions to Obligations of Company and Savings...............40
5.4 Termination of Agreement and Abandonment of Merger.............40
ARTICLE VI TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES................42
6.1 Termination; Lack of Survival of Representations
and Warranties..........................................42
6.2 Payment of Expenses............................................42
ARTICLE VII CERTAIN POST-MERGER AGREEMENTS..........................42
7.1 Reports to the SEC.............................................42
7.2 Employees......................................................43
ARTICLE VIII GENERAL.................................................43
8.1 Amendments.....................................................43
8.2 Confidentiality................................................44
8.3 Governing Law..................................................44
8.4 Notices........................................................44
8.5 No Assignment..................................................45
8.6 Headings.......................................................45
8.7 Counterparts...................................................45
8.8 Construction and Interpretation................................45
8.9 Entire Agreement...............................................45
8.10 Severability...................................................45
8.11 No Third Party Beneficiaries...................................46
8.12 Enforcement of Agreement.......................................46
Schedules:
Schedule I Disclosure Schedule for the Company and Savings
(schedules excluded).........................................
Schedule II Disclosure Schedule for Commercial and the Bank..................
Schedule 4.2 .................................................................
Schedule 4.7 .................................................................
Schedule 4.16 .................................................................
Exhibits:
Exhibit 1.1(a) Acquisition Plan of Merger (excluded)..........................
Exhibit 1.1(b) Bank Plan of Merger (excluded).................................
Exhibit 1.14 Option Agreement (see Exhibit 2.1).............................
Exhibit 5.2(a) Form of Opinion of Counsel for the Company (excluded)..........
Exhibit 5.3(a) Form of Opinion of Counsel for Commercial (excluded)...........
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REORGANIZATION AND MERGER AGREEMENT
================================================================================
THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is dated as of
December 15, 1997, by and among COMMERCIAL FEDERAL CORPORATION, a Nebraska
corporation ("Commercial"), and COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK,
a Federally chartered savings bank and wholly-owned subsidiary of Commercial
("Bank"); and PERPETUAL MIDWEST FINANCIAL, INC., a Delaware corporation
("Company"), and Perpetual Savings Bank, FSB, a Federally chartered savings bank
and wholly-owned subsidiary of Company ("Savings").
WHEREAS, Commercial, a non-diversified, unitary savings and loan
holding company, with principal offices in Omaha, Nebraska, owns all of the
issued and outstanding capital stock of Bank, with its principal offices in
Omaha, Nebraska.
WHEREAS, the Company, a non-diversified, unitary savings and loan
holding company, with principal offices in Cedar Rapids, Iowa, owns all of the
issued and outstanding capital stock of Savings, with principal offices in Cedar
Rapids, Iowa;
WHEREAS, Commercial and the Company desire to combine their respective
holding companies through a tax-free exchange so that the respective
shareholders of both Commercial and the Company will have an equity ownership in
the combined holding company;
WHEREAS, following the combination of Commercial and the Company, it is
intended that Bank and Savings will be merged such that the resulting holding
company will retain the advantage of a unitary savings and loan holding company
status and that the resulting savings institution will achieve certain economies
of scale and efficiencies as a result of such subsequent merger;
WHEREAS, it is intended that to accomplish this result, the Company
will be acquired by means of a merger (the "Acquisition Merger") of the Company
with and into Commercial, followed by the merger of Savings with and into the
Bank (the "Bank Merger"). The Acquisition Merger and the Bank Merger are
collectively referred to as the "Merger";
WHEREAS, it is intended that for federal income tax purposes, the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code") and this Agreement
shall constitute a plan of reorganization pursuant to Section 368 of the Code;
WHEREAS, as an inducement to and condition of Commercial's willingness
to enter into this Agreement, the Company will grant to Commercial an option
pursuant to the Stock Option Agreement, the form of which is attached hereto as
Exhibit 1.14 (the "Option Agreement"); and
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WHEREAS, the Boards of Directors of Commercial and the Company have
determined that this Agreement and the transactions contemplated hereby are in
the best interests of Commercial and the Company, respectively, and their
respective stockholders and have approved this Agreement and the Option
Agreement. Consummation of the Merger is subject to the prior approval of the
Office of Thrift Supervision ("OTS") and the approval of this Agreement by the
stockholders of the Company, among other conditions specified herein.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger: Surviving Institution. Subject to the terms and conditions
of this Agreement, and pursuant to the provisions of the Nebraska Business
Corporation Act ("NBCA"), the Delaware General Corporation Law ("DGCL"), the
Home Owners Loan Act, as amended ("HOLA"), and the rules and regulations
promulgated thereunder (the "Thrift Regulations"), (a) at the Acquisition Merger
Effective Time (as hereinafter defined), the Company shall be merged with and
into Commercial pursuant to the terms and conditions set forth herein and in the
Plan of Merger to be set forth as Exhibit 1.1(a) attached hereto (the
"Acquisition Plan of Merger"), (b) the separate corporate existence of the
Company shall cease and Commercial shall continue as the surviving corporation
(sometimes referred to herein as the "Surviving Corporation"), and (c)
thereafter, at the Bank Merger Effective Time (as hereinafter defined) Savings
shall be merged with and into the Bank pursuant to the terms and conditions set
forth herein and in a plan of merger set forth in Exhibit 1.1(b) (the "Bank Plan
of Merger"). The Acquisition Merger shall have the effects specified in the NBCA
and the DGCL, Section 1.4(e) hereof and the Acquisition Plan of Merger. Upon
consummation of the Bank Merger, the separate existence of Savings shall cease
and the Bank shall continue as the surviving institution of the Bank Merger. The
name of the Bank, as the surviving institution of the Bank Merger, shall remain
"Commercial Federal Bank, a Federal Savings Bank". From and after the Bank
Merger Effective Time, the Bank, as the surviving institution of the Bank
Merger, shall possess all of the properties and rights and be subject to all of
the liabilities and obligations of the Bank and Savings, all as more fully
described in the Thrift Regulations, Section 1.13 hereof and the Bank Plan of
Merger. Commercial may at any time change the method of effecting the Merger if
and to the extent it deems such change to be desirable, provided, however, that
no such change shall (A) alter or change the amount or kind of consideration to
be issued to holders of Company common stock as provided for in this Agreement,
(B) adversely affect the tax treatment to Company shareholders as a result of
receiving the consideration described in Section 1.3 herein or (C) materially
impede or delay receipt of any approval referred to in Section 5.1 hereof or the
consummation of the transactions contemplated by this Agreement.
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1.2 Effective Time of the Merger. As soon as practicable after each of
the conditions set forth in Article V hereof have been satisfied or waived,
Commercial and the Company will file, or cause to be filed, a certificate or
articles of merger with appropriate authorities of Nebraska and Delaware for the
Acquisition Merger and articles of combination with the OTS for the Bank Merger,
which certificate, articles of merger and articles of combination shall in each
case be in the form required by and executed in accordance with applicable
provisions of law and the Thrift Regulations, respectively. The Acquisition
Merger shall become effective at the latest to occur of the time (i) the
Nebraska articles of merger are filed with the appropriate authorities of
Nebraska or (ii) the certificate of merger is filed with the appropriate
authorities of Delaware (the "Acquisition Merger Effective Time"), which shall
be immediately following the Closing (as defined in Section 1.11 herein) and on
the same day as the Closing if practicable. The Bank Merger shall become
effective at the time the articles of combination for such merger are endorsed
by the OTS pursuant to Section 552.13(k) of the Thrift Regulations (the "Bank
Merger Effective Time"). The parties shall cause the Acquisition Merger to
become effective prior to the Bank Merger.
1.3 Conversion of Shares.
(a)(i) At the Acquisition Merger Effective Time, by virtue of the
Acquisition Merger and without any action on the part of Commercial or the
Company or the holders of shares of Commercial or Company common stock, each
outstanding share of Company common stock issued and outstanding immediately
prior to the Acquisition Merger Effective Time shall be converted into and
represent solely the right to receive without any action by the holder, 0.5757
of a share of common stock, $.01 par value, of Commercial (the "Commercial
Common Stock") (the "Exchange Ratio"), subject to adjustment as provided in
clause (a)(iv) of this Section and Section 5.4(c)(the "Merger Consideration").
(ii) Any shares of Company common stock which are owned or
held by the Company or any of its subsidiaries (except shares held in any
qualified plan of the Company or any of its subsidiaries or otherwise held in a
fiduciary capacity or in satisfaction of a debt previously contracted) or by
Commercial or any of Commercial's subsidiaries (other than in a fiduciary
capacity) at the Acquisition Merger Effective Time shall cease to exist, and the
certificates for such shares shall as promptly as practicable be canceled and no
shares of capital stock of Commercial shall be issued or exchanged therefor.
(iii) At the Acquisition Merger Effective Time, the holders of
certificates representing shares of the Company's common stock (the "Company
Common Stock") shall cease to have any rights as stockholders of the Company,
except the right to receive the Merger Consideration as provided herein.
(iv) If the holders of Commercial Common Stock shall have
received or shall have become entitled to receive, without payment therefor,
during the period commencing within five days prior to the date hereof and
ending with the Acquisition Merger Effective Time, additional shares of common
stock or other securities for their stock by way of a stock split, stock
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dividend, reclassification, combination of shares, spinoff or similar corporate
rearrangement or Commercial shall exchange Commercial Common Stock for a
different number or kind of shares or securities ("Stock Adjustment"), then the
amount of Commercial Common Stock to be exchanged at the Acquisition Merger
Effective Time for Company Common Stock shall be proportionately adjusted to
take into account such Stock Adjustment. In addition, the Average NYSE Closing
Price, as defined below, shall be proportionately adjusted to compensate for any
such Stock Adjustment.
(b) The term "NYSE Closing Price" shall mean the closing price per
share (carried to four decimal places and rounded down) of the Commercial Common
Stock on the New York Stock Exchange. The term "Average NYSE Closing Price"
shall mean the arithmetic mean of the NYSE Closing Prices of the Commercial
Common Stock for the 25th through the sixth trading day, inclusive, immediately
preceding the business day prior to the later of (A) the date on which all
requisite federal and state regulatory approvals required to consummate the
transactions contemplated by this Agreement are obtained (and Commercial shall
notify the Company of the date when all such approvals are obtained), including
for this purpose the period of any requisite waiting periods in respect thereof,
(B) the date of the Company's meeting of shareholders to be held pursuant to
Section 1.7 herein or (C) the 25th day of the month immediately preceding the
month in which the parties have scheduled in writing the Closing to occur, or
the next succeeding business day (the "Determination Period").
(c) Each share of Commercial Common Stock to be issued to the
Company's shareholders pursuant to this Section 1.3 shall include the
corresponding number of rights associated with the Commercial Common Stock
pursuant to the Rights Agreement dated as of December 19, 1988 by and between
Commercial and Manufacturers Hanover Trust Company, as Rights Agent ("Commercial
Rights Agreement").
1.4 Surviving Corporation in the Acquisition Merger.
(a) The name of the Surviving Corporation shall be Commercial
Federal Corporation.
(b) The Articles of Incorporation of Commercial as in effect
immediately prior to the Acquisition Merger Effective Time shall be the Articles
of Incorporation of the Surviving Corporation, until amended as provided therein
or by law.
(c) The bylaws of Commercial as in effect immediately prior to the
Acquisition Merger Effective Time, shall thereafter be the bylaws of the
Surviving Corporation, until amended as provided therein or by law.
(d) The directors and officers of Commercial immediately prior to
the Acquisition Merger Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation following the Acquisition Merger,
until their successors shall be duly elected and qualified or otherwise duly
selected.
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(e) From and after the Acquisition Merger Effective Time:
(i) 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 Commercial
and the Company, and all obligations belonging or due to each of Commercial and
Company, all of which are vested in the Surviving Corporation without further
act or deed. Title to any real estate or any interest in the real estate vested
in Commercial or the Company shall not revert or in any way be impaired by
reason of the Acquisition Merger.
(ii) The Surviving Corporation shall be liable for all the
obligations of each of Commercial and the Company. Any claim existing, or action
or proceeding pending, by or against the Company or Commercial, may be
prosecuted to judgement, with right of appeal, as if the Acquisition Merger had
not taken place, or the Surviving Corporation may be substituted in its place.
(iii) All the rights of creditors of each of the Company and
Commercial are preserved unimpaired, and all liens upon the property of the
Company and Commercial are preserved unimpaired, on only the property affected
by such liens immediately prior to the Acquisition Merger Effective Time.
1.5 Authorization for Issuance of Commercial Common Stock; Exchange of
Certificates.
(a) Commercial shall reserve or will at Closing have available for
issuance a sufficient number of shares of the Commercial Common Stock for the
purpose of issuing its shares of Commercial Common Stock to the Company's
shareholders in accordance with this Article I, including Section 1.8.
Immediately prior to the Acquisition Merger Effective Time, Commercial shall
make available for exchange or conversion, by transferring to an exchange agent
appointed by Commercial (the "Exchange Agent") for the benefit of the holders of
Company Common Stock: (i) such number of whole shares of Commercial Common Stock
as shall be issuable in connection with the payment of the aggregate Merger
Consideration, and (ii) such funds as may be payable in lieu of fractional
shares of Commercial Common Stock.
(b) After the Acquisition Merger Effective Time, holders of
certificates theretofore evidencing outstanding shares of Company Common Stock
(other than as provided in Section 1.3(a)(ii)), upon surrender of such
certificates to the Exchange Agent, shall be entitled to receive certificates
representing the number of whole shares of Commercial Common Stock into which
shares of Company Common Stock theretofore represented by the certificates so
surrendered shall have been converted, as provided in Section 1.3 hereof and
cash payments in lieu of fractional shares as provided in Section 1.6 hereof. As
soon as practicable after the Acquisition Merger Effective Time but not later
than ten (10) business days thereafter, the Exchange Agent will send a notice
and transmittal form to each Company shareholder of record at the Acquisition
Merger Effective Time whose Company Common Stock shall have been
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converted into Commercial Common Stock advising such shareholder of the
effectiveness of the Acquisition Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Company Common
Stock in exchange for new certificates for Commercial Common Stock and for cash
in lieu of any fractional interest. Upon surrender, each certificate evidencing
Company common stock shall be canceled.
(c) Until surrendered as provided in this Section 1.5, each
outstanding certificate which, prior to the Acquisition Merger Effective Time,
represented Company Common Stock (other than shares canceled at the Acquisition
Merger Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed for
all purposes to evidence ownership of the number of shares of Commercial Common
Stock into which the shares of Company common stock formerly represented thereby
were converted and the right to receive cash in lieu of any fractional interest.
However, until such outstanding certificates formerly representing Company
common stock are so surrendered, no dividend or distribution payable to holders
of record of Commercial Common Stock shall be paid to any holder of such
outstanding certificates, but upon surrender of such outstanding certificates by
such holder there shall be paid to such holder the amount of any dividends or
distribution, without interest, theretofore paid with respect to such whole
shares of Commercial Common Stock, but not paid to such holder, and which
dividends or distribution had a record date occurring on or subsequent to the
Acquisition Merger Effective Time and the amount of any cash, without interest,
payable to such holder in lieu of fractional shares pursuant to Section 1.6
hereof. After the Acquisition Merger Effective Time, there shall be no further
registration of transfers on the records of the Company of outstanding
certificates formerly representing shares of Company common stock and, if a
certificate formerly representing such shares is presented to Commercial, it
shall be forwarded to the Exchange Agent for cancellation and exchanged for
certificates representing shares of Commercial Common Stock as herein provided.
(d) All shares of Commercial Common Stock and cash in lieu of any
fractional shares issued and paid upon the surrender for exchange of Company
common stock in accordance with the above terms and conditions shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company common stock.
(e) If any new certificate for Commercial Common Stock is to be
issued in the 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, if any, required
by reason of the issuance of a new certificate for shares of Commercial Common
Stock in any name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(f) In the event any certificate for Company 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 Commercial Common Stock and cash
in lieu of fractional shares, if any, as may be required
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pursuant hereto; provided, however, that Commercial 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 it may
reasonably direct as indemnity against any claim that may be made against
Commercial, the Company, the Exchange Agent or any other party with respect to
the certificate alleged to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof,
no fractional shares of Commercial Common Stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in exchange for
any shares of Company common stock; no dividend or distribution with respect to
Commercial Common Stock shall be payable on or with respect to any fractional
share interests; and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a shareholder of Commercial. In lieu
of such fractional share interest, any holder of Company common stock who would
otherwise be entitled to a fractional share of Commercial Common Stock will,
upon surrender of his certificate or certificates representing Company common
stock outstanding immediately prior to the Acquisition Merger Effective Time, be
paid the applicable cash value of such fractional share interest, which shall be
equal to the product of the fraction multiplied by the Average NYSE Closing
Price. For the purposes of determining any such fractional share interests, all
shares of Company common stock owned by a Company shareholder shall be combined
so as to calculate the maximum number of whole shares of Commercial Common Stock
issuable to such Company shareholder in the Acquisition Merger.
1.7 Shareholders' Meeting. The Company shall, at the earliest
practicable date after the effectiveness of the Registration Statement (as
hereinafter defined), hold a meeting of its shareholders (the "Company
Shareholders' Meeting") to submit for shareholder approval this Agreement and
the Acquisition Merger and all related matters necessary to the consummation of
the transactions contemplated hereby. The affirmative vote of the holders of at
least a majority of the issued and outstanding shares of Company Common Stock
entitled to vote at the Company Shareholders' Meeting shall be required for
approval of the Acquisition Merger and all such related matters.
1.8 Company Stock Options. At the Acquisition Merger Effective Time,
each option outstanding under the Company's 1993 Stock Option and Incentive Plan
(the "Company Option Plan"), whether or not then exercisable, shall continue
outstanding as an option to purchase, in place of the purchase of each share of
Company common stock, the number of shares (rounded to the nearest whole share)
of Commercial Common Stock that would have been received by the optionee in the
Merger had the option been exercised in full (without regard to any limitations
contained therein on exercise) for shares of Company common stock immediately
prior to the Acquisition Merger upon the same terms and conditions under the
relevant option as were applicable immediately prior to the Acquisition Merger
Effective Time, except for appropriate pro rata adjustments as to the relevant
option price for shares of Commercial Common Stock substituted therefor so that
the aggregate option exercise price of shares subject to an option immediately
following the assumption and substitution shall be the same as the aggregate
option exercise price for such shares immediately prior to such assumption and
substitution. Commercial
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shall assume at the Acquisition Merger Effective Time each such option and the
Company Option Plan It is intended that the foregoing assumption shall be
undertaken consistent with and in a manner that will not constitute a
"modification" under Section 424 of the Code as to any stock option which is an
"incentive stock option." Commercial and Company agree to take such actions as
shall be necessary to give effect to the foregoing. The Compensation Committee
of the Company shall not authorize the payment of cash pursuant to Section 13 of
the Company Option Plan.
At all times after the Acquisition Merger Effective Time, Commercial
shall reserve for issuance such number of shares of Commercial Common Stock as
are necessary so as to permit the exercise of options granted under the Company
Option Plan in the manner contemplated by this Agreement and the instruments
pursuant to which such options were granted. Commercial shall make all filings
required under federal and state securities laws so as to permit the exercise of
such options and the sale of the shares received by the option holder upon such
exercise.
1.9 Registration Statement; Prospectus/Proxy Statement.
(a) For the purposes (i) of registering the Commercial Common Stock
to be issued to holders of Company common stock in connection with the Merger
and the shares issuable under the Company Option Plan pursuant to Section 1.8
hereof with the Securities and Exchange Commission ("SEC") and with applicable
state securities authorities, and (ii) of holding the Company Shareholders'
Meeting, the parties hereto shall cooperate in the preparation of an appropriate
registration statement (such registration statement, together with all and any
amendments and supplements thereto, being herein referred to as the
"Registration Statement"), including the prospectus/proxy statement satisfying
all applicable requirements of applicable state laws, and of the Securities Act
of 1933, as amended (the "1933 Act") and the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the rules and regulations thereunder (such
prospectus/proxy statement, together with any and all amendments or supplements
thereto, being herein referred to as the "Prospectus/Proxy Statement"). At the
election of the Company, such Prospectus/Proxy Statement may also include
information necessary to conduct the annual meeting of shareholders of the
Company.
(b) Commercial shall furnish such information concerning Commercial
and the Commercial Subsidiaries (as defined in Section 3.1 hereof) as is
necessary in order to cause the Prospectus/Proxy Statement, insofar as it
relates to such corporations, to comply with Section 1.9(a) hereof. Commercial
agrees promptly to advise the Company if at any time prior to the Company
Shareholders' Meeting any information provided by Commercial in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy or
omission. Commercial shall promptly file such supplemental information as may be
necessary in order to cause such Prospectus/Proxy Statement, insofar as it
relates to Commercial and the Commercial Subsidiaries, to comply with Section
1.9(a).
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(c) The Company shall furnish Commercial with such information
concerning the Company and the Company Subsidiaries (as defined in Section 2.1
hereof) as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to such corporations, to comply with Section 1.9(a)
hereof. The Company agrees promptly to advise Commercial if at any time prior to
the Company Shareholders' Meeting any information provided by the Company in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide Commercial with the information needed to correct such
inaccuracy or omission. The Company shall furnish Commercial with such
supplemental information as may be necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to the Company and the Company
Subsidiaries, to comply with Section 1.9(a).
(d) Commercial shall promptly file the Registration Statement with
the SEC and applicable state securities agencies. Commercial shall use all
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and applicable state securities laws at the earliest practicable
date. The Company authorizes Commercial to utilize in the Registration Statement
the information concerning the Company and the Company Subsidiaries provided to
Commercial for the purpose of inclusion in the Prospectus/Proxy Statement. The
Company shall have the right to review and approve the form of proxy statement
included in the Registration Statement prior to its filing with the SEC and
prior to its mailing to Company shareholders. Commercial shall advise the
Company promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Commercial shall furnish Company with
copies of all such documents. Prior to the Acquisition Merger Effective Time or
the termination of this Agreement, each party shall consult with the other with
respect to any material (including the Prospectus/Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the 1933
Act.
(e) The Company shall consult with Commercial in order to determine
whether any directors, officers or shareholders of the Company may be deemed to
be "affiliates" of the Company ("affiliated persons") within the meaning of Rule
145 of the SEC promulgated under the 1933 Act. Commercial and the Company shall
each take such action as may be necessary or appropriate to ensure that their
respective affiliated persons are aware of and comply with the guidelines of the
SEC with respect to the sale by affiliates of stock of companies engaging in a
business combination transaction to be accounted for as a pooling of interests
as set forth in Topic 2-E of the SEC staff accounting bulletin series. All
shares of Commercial common stock issued to such Company affiliated persons (i)
in connection with the Merger or (ii) upon exercise of options received pursuant
to Section 1.8 hereof subsequent to the Acquisition Merger Effective Time, shall
bear a legend upon the face thereof stating that transfer of the securities is
or may be restricted by the provisions of the 1933 Act and pooling of interests
accounting requirements, and notice shall be given to Commercial's transfer
agent of such restriction. Such legend shall be removed by delivery of a
substitute certificate without such legend if (i) such Company affiliated person
shall have delivered to Commercial upon request an affidavit in form and
substance satisfactory to Commercial necessary to enable counsel to Commercial
to furnish a legal opinion or other document requested by the transfer agent, to
the effect that such legend is not required for purposes of the 1933 Act, (ii)
after the expiration of one year from the Acquisition Merger
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Effective Time if such person did not become an "affiliate" of Commercial within
the meaning of Rule 145 upon the Merger and Commercial has filed with the SEC
all of the reports it is required to file under the 1934 Act during such one
year period, or (iii) after the expiration of two years from the Acquisition
Merger Effective Time unless, in the opinion of the counsel for Commercial, such
person was an "affiliate" of Commercial within the meaning of Rule 145 within
three months prior to the expiration of such two year period. Commercial shall
use its best efforts to provide the transfer agent in a timely manner with any
required legal opinion or other documentation necessary for the sale or transfer
of any Commercial Common Stock received in the Merger. So long as shares of such
Commercial common stock bear such legend, no transfer of such Commercial Common
Stock shall be allowed unless and until the transfer agent is provided with such
information as may reasonably be requested by counsel for Commercial to assure
that such transfer will not violate applicable provisions of the 1933 Act, or
rules, regulations or policies of the SEC.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate and
use reasonable best efforts to complete the transactions contemplated hereunder
as soon as practicable. Each party shall cause each of their affiliates and
subsidiaries to cooperate in the preparation and submission by them, as promptly
as reasonably practicable, of such applications, petitions, and other documents
and materials as any of them may reasonably deem necessary or desirable to the
OTS, Federal Trade Commission ("FTC"), Department of Justice ("DOJ"), SEC,
applicable Secretary of State, other regulatory authorities, holders of the
voting shares of Company Common Stock, and any other persons for the purpose of
obtaining any approvals or consents necessary to consummate the transactions
contemplated by this Agreement. At the date hereof, none of the parties is aware
of any reason that the regulatory approvals required to be obtained by it would
not be obtained.
1.11 Closing. If (i) this Agreement and the Acquisition Merger have
been duly approved by the shareholders of the Company, and (ii) all relevant
conditions of this Agreement have been satisfied or waived, a closing (the
"Closing") shall take place as promptly as practicable thereafter at the
principal office of Commercial, or at such other place as Commercial and the
Company shall agree, at which the parties hereto will exchange certificates,
opinions, letters and other documents as required hereby and will make the
filings described in Section 1.2 hereof. Such Closing will take place as soon as
practicable as agreed by the parties, provided, however, that the Closing shall
be no more than 30 days after the satisfaction or waiver of all conditions
and/or obligations contained in Article V of this Agreement.
1.12 Closing of Transfer Books. At the Acquisition Merger Effective
Time, the transfer books for Company common stock shall be closed, and no
transfer of shares of Company common stock shall thereafter be made on such
books.
1.13 Bank Merger.
(a) At the Bank Merger Effective Time, each share of common stock of
Savings ("Savings Common Stock") issued and outstanding immediately prior
thereto shall, by virtue of
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the Bank Merger, be canceled. No new shares of the capital stock or other
securities or obligations of the Bank shall be issued or be deemed issued with
respect to or in exchange for such canceled shares, and such canceled shares of
Savings Common Stock shall not be converted into any shares or other securities
or obligations of the Bank.
(b) The charter and bylaws of the Bank as in effect immediately
prior to the Bank Merger Effective Time shall be the charter and bylaws of the
Bank, as the surviving institution of the Bank Merger, until amended as provided
therein or by law.
(c) Except as otherwise provided herein, the directors and officers
of the Bank immediately prior to the Bank Merger Effective Time shall be the
directors and officers of the Bank, as the surviving institution of the Bank
Merger, until their successors shall be duly elected and qualified or otherwise
duly selected.
(d) The liquidation account established by Savings pursuant to the
plan of conversion adopted in connection with its conversion from mutual to
stock form shall continue to be maintained by the Bank after the Bank Merger
Effective Time for the benefit of those persons and entities who were savings
account holders of Savings on the eligibility record date for such conversion
and who continue from time to time to have rights therein. If required by the
rules and regulations of the OTS, the Bank shall amend its charter to
specifically provide for the continuation of the liquidation account established
by Savings.
1.14 Option Agreement. In connection with the execution of this
Agreement by the parties, Commercial and the Company intend to execute the
Option Agreement in the form of Exhibit 1.14.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SAVINGS
The Company and Savings represent and warrant to Commercial and the
Bank that, except as disclosed in Schedule I attached hereto and except that
Savings makes no representations or warranties regarding the Company:
2.1 Organization, Good Standing, Authority, Insurance, Etc. The Company
is a corporation duly organized, validly existing and, in the case of any
Company Subsidiary which is a corporation, in good standing under the laws of
the State of Delaware. Section 2.1 of Schedule I lists each "subsidiary" of the
Company and Savings within the meaning of Section 10(a)(1)(G) of HOLA
(individually a "Company Subsidiary" and collectively the "Company
Subsidiaries") (unless otherwise noted herein all references to a "Company
Subsidiary" or to the "Company Subsidiaries" shall include Savings). Each of the
Company Subsidiaries is duly organized, validly existing, and in good standing
under the laws of the respective jurisdiction under which it is organized, as
set forth in Section 2.1 of Schedule I. The Company and each Company Subsidiary
has all requisite power and authority and is duly qualified and licensed to own,
lease and operate its properties and conduct its business as it is now being
conducted. The
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Company has delivered to Commercial a true, complete and correct copy of the
certificate of incorporation, charter, or other organizing document and of the
bylaws, as in effect on the date of this Agreement, of Company and each Company
Subsidiary. To the Company's best knowledge, the Company and each Company
Subsidiary is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is necessary under
applicable law, except to the extent that any failures to so qualify would not,
in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole. Savings is a member in good standing of the Federal Home Loan
Bank of Des Moines and all eligible accounts issued by Savings are insured by
the Savings Association Insurance Fund ("SAIF") to the maximum extent permitted
under applicable law. Savings is a "domestic building and loan association" as
defined in Section 7701(a)(19) of the Code and is a "qualified thrift lender" as
defined in Section 10(m) of the HOLA and the Thrift Regulations. The Company is
registered as a savings and loan holding company under the HOLA.
The minute books of the Company and the Company's Subsidiaries contain
complete and accurate records of all meetings and other corporate actions held
or taken by their respective shareholders and Boards of Directors (including the
committees of such Boards) other than the meeting of the Board of Directors held
on December 14, 1997.
2.2 Capitalization. The authorized capital stock of the Company
consists of (i) 6,000,000 shares of common stock, par value $.01 per share, of
which 1,872,925 shares were issued and outstanding as of the date of this
Agreement, and (ii) 3,000,000 shares of preferred stock, $.01 par value, of
which no shares were outstanding as of the date of this Agreement. All
outstanding shares of Company common stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except for outstanding
options to purchase 171,152 shares of Company common stock under the Company
Option Plan and the option to be granted pursuant to the Option Agreement, as of
the date of this Agreement, there are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase or acquire any
of the Company's capital stock from the Company and no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any kind
(collectively, "Stock Contract") to which the Company or any of its affiliates
is subject with respect to the issuance, voting or sale of issued or unissued
shares of the Company's capital stock. A true and complete copy of the Company
Option Plan, as in effect on the date of this Agreement, is attached as Section
2.2 of Schedule I. Except as disclosed at Schedule 2.2, neither the Company nor
Savings is aware of any event or circumstance (excluding actions or events by
Commercial) which could disqualify the Merger from being accounted for as a
pooling of interests.
2.3 Ownership of Subsidiaries. Except as set forth in Section 2.3 of
Schedule I, all the outstanding shares of the capital stock of the Company
Subsidiaries are validly issued, fully paid, nonassessable and owned
beneficially and of record by the Company or a Company Subsidiary free and clear
of any lien, claim, charge, restriction or encumbrance (collectively,
"Encumbrance"). Except as set forth in Section 2.3 of Schedule I, all of the
outstanding capital stock or other ownership interests in all of the Company
Subsidiaries is owned either by the
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Company or Savings. Except as set forth in Section 2.3 of Schedule I, there are
no options, convertible securities, warrants, or other rights (preemptive or
otherwise) to purchase or acquire any capital stock of any Company Subsidiary
and no contracts to which the Company or any of its affiliates is subject with
respect to the issuance, voting or sale of issued or unissued shares of the
capital stock of any of the Company Subsidiaries. Neither the Company nor any
Company Subsidiary owns any material investment of the capital stock or other
equity securities (including securities convertible or exchangeable into such
securities) of or profit participations in any "company" (other than Company
Subsidiaries) (as defined in Section 10(a)(1)(C) of the HOLA) other than the
Federal Home Loan Bank of Des Moines or except as set forth in Section 2.3 of
Schedule I.
2.4 Financial Statements and Reports.
(a) No registration statement, proxy statement, schedule or report
filed by the Company or any Company Subsidiary with the SEC or the OTS under the
1933 Act or the 1934 Act ("SEC Reports"), on the date of effectiveness in the
case of such registration statements, or on the date of filing in the case of
such reports or schedules, or on the date of mailing in the case of such proxy
statements, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company and the Company Subsidiaries have timely filed all
reports and documents required to be filed by them with the SEC, the OTS, or the
Federal Deposit Insurance Corporation (the "FDIC") under various securities and
banking laws and regulations for the last five years (or such shorter period as
they may have been subject to such filing requirements), except to the extent
that all failures to so file, in the aggregate, would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and the Company Subsidiaries, taken as a whole. All such documents,
as finally amended, complied in all material respects with applicable
requirements of law and, as of their respective date or the date as amended and,
with respect to the SEC Reports, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and, with respect to reports and documents
filed with banking regulatory agencies, were accurate in all material respects.
Except to the extent stated therein, all financial statements and schedules
included in the documents referred to in the preceding sentences (or to be
included in similar documents to be filed after the date hereof) (i) are or will
be (with respect to financial statements in respect of periods ending after June
30, 1997) in accordance with the Company's books and records and those of any of
the Company Subsidiaries, and (ii) present (and in the case of financial
statements in respect of periods ending after June 30, 1997, will present)
fairly the consolidated statement of financial condition and the consolidated
statements of income, changes in stockholders' equity and cash flows of the
Company and the Company Subsidiaries as of the dates and for the periods
indicated in accordance with generally accepted accounting principles (except
for the omission of notes to unaudited statements, year end adjustments to
interim results and changes to generally accepted accounting principles). The
audited consolidated financial statements of the Company at June 30, 1997 and
for the three years then ended and the consolidated financial statements for all
periods thereafter up to the
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Closing reflect or will reflect, to the extent required by generally accepted
accounting principles, as the case may be, all liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due
and regardless of when asserted), as of their respective dates, of the Company
and the Company Subsidiaries required to be reflected in such financial
statements according to generally accepted accounting principles and contain or
will contain, in the opinion of management, adequate reserves for losses on
loans and properties acquired in settlement of loans, taxes and all other
material accrued liabilities and for all reasonably anticipated material losses,
if any as of such date. There exists no set of circumstances that could
reasonably be expected to result in any liability or obligation material to the
Company or the Company Subsidiaries, taken as a whole, except as disclosed in
the audited consolidated financial statements at June 30, 1997 or for
transactions effected, actions occurring or omitted to be taken, or claims made
after June 30, 1997 (i) in the ordinary course of business, or (ii) as permitted
by this Agreement.
(b) The Company has delivered to Commercial each SEC Report filed,
used or circulated by it with respect to periods since June 30, 1994 through the
date of this Agreement and will promptly deliver each such SEC Report filed,
used or circulated after the date hereof, each in the form (including exhibits
and any amendments thereto) filed with the SEC or the OTS (or, if not so filed,
in the form used or circulated), including, without limitation, its Annual
Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
2.5 Absence of Changes.
(a) Since June 30, 1997 there have been no material adverse changes
in the business, properties, financial condition, operations or assets of the
Company or any Company Subsidiary other than changes attributable to or
resulting from any change in law, regulation or generally accepted accounting
principles or regulatory accounting principles, which impair both the Company
and other comparably sized thrift institutions in a substantially similar manner
and other than changes attributable to or resulting from changes in economic
conditions applicable to depository institutions generally or in general levels
of interest rates affecting both the Company and other comparably sized thrift
institutions to a similar extent and in a similar manner. Since June 30, 1997 to
the date hereof, there has been no occurrence, event or development of any
nature existing, or to the knowledge of the Company, threatened, which is
reasonably expected to result in such a change.
(b) Since June 30, 1997, each of the Company and the Company
Subsidiaries has owned and operated their respective assets, properties and
businesses in the ordinary course of business and consistent with past practice.
2.6 Prospectus/Proxy Statement. At the time the Prospectus/ Proxy
Statement is mailed to the shareholders of the Company for the solicitation of
proxies for the approvals referred to in Section 1.7 hereof and at all times
subsequent to such mailings up to and including the times of such approval, such
Prospectus/Proxy Statement (including any supplements thereto), with respect to
all information set forth therein relating to the Company (including the Company
Subsidiaries),
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its shareholders and representatives, Company common stock and all other
transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions of
the 1934 Act and the rules and regulations under such Act; and
(b) Not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
2.7 No Broker's or Finder's Fees. Except as set forth at Section 2.7 of
Schedule I, no agent, broker, investment banker, person or firm acting on behalf
or under authority of the Company or any of the Company Subsidiaries is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee directly or indirectly in connection with the Merger or any other
transaction contemplated hereby, except the Company has engaged Edelman & Co.,
Ltd to provide financial advisory services and to deliver an opinion to the
effect that the consideration to be received by the Company shareholders in the
Merger is fair to the Company shareholders from a financial point of view. A
copy of the engagement agreement with Edelman & Co., Ltd is attached to Section
2.7 of Schedule I.
2.8 Litigation and Other Proceedings. Except as set forth in Section
2.8 of Schedule I and except for matters which would not have a material adverse
effect on the business, financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole, neither the Company nor
any Company Subsidiary is a defendant in, nor is any of its property subject to,
any pending, or, to the best knowledge of the management of the Company,
threatened, claim, action, suit, investigation, or proceeding, or subject to any
judicial order, judgment or decree.
2.9 Compliance with Law.
(a) The Company and the Company Subsidiaries are in compliance in
all material respects with all material laws and regulations applicable to their
respective business or operations or with respect to which compliance is a
condition of engaging in the business thereof, and neither the Company nor any
Company Subsidiary has received notice from any federal, state or local
government or governmental agency of any material violation of, and does not
know of any material violations of, any of the above.
(b) The Company and each of its Subsidiaries have all material
permits, licenses, certificates of authority, orders and approvals of, and have
made all material filings, applications and registrations with, all federal,
state, local and foreign governmental or regulatory bodies that are required in
order to permit them to carry on their respective business as they are presently
conducted.
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2.10 Corporate Actions.
(a) The Boards of Directors of the Company and Savings have duly
authorized their respective officers to execute and deliver (as applicable) this
Agreement, the Acquisition Plan of Merger, the Bank Plan of Merger and the
Option Agreement and to take all action necessary to consummate the Merger and
the other transactions contemplated hereby. The Board of Directors of the
Company has authorized and directed the submission for shareholders' approval of
this Agreement, together with the Merger and any other action requiring such
approvals. All corporate authorization by the Board of Directors of the Company
and Savings required for the consummation of the Merger has been obtained or
will be given when required by applicable law.
(b) The Company's Board of Directors has taken all necessary action
to exempt this Agreement, the Acquisition Plan of Merger, the Bank Plan of
Merger, the Option Agreement and the transactions contemplated hereby and
thereby from, (i) any applicable state takeover laws, (ii) any Delaware laws
limiting or restricting the voting rights of shareholders, (iii) any Delaware
laws requiring a shareholder approval vote in excess of the vote normally
required in transactions of similar type not involving a "related person,"
"interested shareholder" or person or entity of similar type, and (iv) any
provision in its or any of the Company Subsidiaries' articles/certificate of
incorporation, charter or bylaws requiring a shareholder approval vote in excess
of the vote normally required in transactions of similar type not involving a
"related person," interested shareholder" or person or entity of similar type.
2.11 Authority. The execution, delivery and performance by the Company
and Savings of their obligations under this Agreement and by the Company of its
obligations under the Option Agreement does not violate any of the provisions
of, or constitute a default under or give any person the right to terminate or
accelerate payment or performance under (i) subject to the effectiveness of the
amendment to Savings' Federal Stock Charter referred to in Section 4.17 hereof
(the "Charter Amendment"), the articles of incorporation or bylaws of the
Company, the articles of incorporation, charter or bylaws of any Company
Subsidiary, (ii) any regulatory restraint on the acquisition of the Company or
Savings or control thereof, (iii) any law, rule, ordinance, or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which it or any of the Company Subsidiaries is subject or (iv) except
as set forth in Section 2.4 of Schedule I, any other material agreement,
material lease, material contract, note, mortgage, indenture, arrangement or
other obligation or instrument ("Contract") to which the Company or any of the
Company Subsidiaries is a party or is subject or by which any of their
properties or assets is bound. The parties acknowledge that the consummation of
the Merger and the other transactions contemplated hereby is subject to various
regulatory approvals. Subject to the approval and effectiveness of the Charter
Amendment, the Company and Savings, as applicable, have all requisite corporate
power and authority to enter into this Agreement, the Acquisition Plan of Merger
and the Option Agreement and to perform their respective obligations hereunder
and thereunder, except, with respect to this Agreement, and the Acquisition
Merger, the approval of the Company's shareholders of this Agreement and the
Acquisition Merger required under applicable law and the effectiveness of the
Charter Amendment. Other than the receipt of Governmental Approvals (as defined
in Section 5.1(c)), the approval of shareholders of
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this Agreement and the Acquisition Merger, and the consents specified in Section
2.11 or 2.15 of Schedule I with respect to the Contracts, no consents or
approvals are required on behalf of Company or Savings in connection with the
consummation of the transactions contemplated by this Agreement and the
Acquisition Merger, the Acquisition Plan of Merger, the Bank Plan of Merger and
the Option Agreement. This Agreement, the Acquisition Plan of Merger, the Bank
Plan of Merger and the Option Agreement constitute the valid and binding
obligation of the Company and Savings, as applicable, and each is enforceable in
accordance with its terms, except as enforceability may be limited by applicable
laws relating to bankruptcy, insolvency or creditors rights generally and
general principles of equity.
2.12 Employment Arrangements. Except as disclosed in Section 2.12 of
Schedule I, there are no employment, severance or other agreements, plans or
arrangements with any current or former directors, officers or employees of
Company or any Company Subsidiary which may not be terminated without penalty
(including any augmentation or acceleration of benefits) on 30 days or less
notice to such person. No payments to directors, officers or employees of the
Company or the Company Subsidiaries resulting from the transactions contemplated
hereby will cause the imposition of excise taxes under Section 4999 of the Code
or the disallowance of a deduction to the Company or any Company Subsidiary
pursuant to Sections 162 or 280G of the Code. No later than 30 days prior to
consummation of the Merger, the Company shall furnish Commercial for its review
(i) a computation of the amounts expected to be payable under the employment and
severance agreements disclosed in Section 2.12 of Schedule I as a result of the
Merger, and (ii) a schedule reasonably satisfactory to Commercial demonstrating
that no "disqualified individual" within the meaning of Section 280G of the Code
will be receiving payments in contravention of the representation in the
preceding sentence.
2.13 Employee Benefits.
(a) Neither the Company nor any of the Company Subsidiaries
maintains any funded deferred compensation plans (including profit sharing,
pension, savings or stock bonus plans), unfunded deferred compensation
arrangements or employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), other
than any plans ("Employee Plans") set forth in Section 2.13 of Schedule I (true
and correct copies of which have been delivered to Commercial). None of Company
or any of the Company Subsidiaries has incurred or reasonably expects to incur
any liability to the Pension Benefit Guaranty Corporation except for required
premium payments which, to the extent due and payable, have been paid. The
Employee Plans intended to be qualified under Section 401(a) of the Code are so
qualified, and Company is not aware of any fact which would adversely affect the
qualified status of such plans. Except as set forth in Section 2.13 of Schedule
I, neither the Company nor any of the Company Subsidiaries (a) provides health,
medical, death or survivor benefits to any former employee or beneficiary
thereof, or (b) maintains any form of current (exclusive of base salary and base
wages) or deferred compensation, bonus, stock option, stock appreciation right,
benefit, severance pay, retirement, incentive, group or individual health
insurance, welfare or similar plan or arrangement for the benefit of any single
or class of directors, officers or employees, whether active or retired
(collectively "Benefit Arrangements").
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Neither the Company nor any Company Subsidiary is a sponsor of or contributes to
any qualified or non-qualified defined benefit plan for employees, officers or
directors. No payments are more than 30 days past due on any Employee Plan or
Benefit Arrangement. With respect to each Employee Plan and Benefit Arrangement
of the Company or any Company Subsidiary, the Company will within 30 days of the
date of this Agreement furnish to Commercial (i) the net fair market value of
the assets held in any Benefit arrangement, and (ii) the amount of any
contribution or other obligation paid, accrued, or payable, or reasonably
expected to be payable between the date of this Agreement and the Closing,
including contributions by Company to its Employee Stock Ownership and 401(k)
Profit Sharing Plan to repay its loan in accordance with past practices (pro
rated through the Closing), subject to applicable tax law limitations. Neither
the Company nor any Company Subsidiary will make any contribution, or undertake
any obligation to contribute any amount to any Employee Plan or Benefit
Arrangement other than the amounts which the Company shall furnish to Commercial
within 30 days hereof and other than immaterial amounts in the ordinary course
of business and in accordance with past practice.
(b) Except as set forth in Section 2.13 of Schedule I, all Employee
Plans and Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1997 and there has been no material amendment
thereof (other than amendments required to comply with applicable law) or no
material increase in the cost thereof or benefits payable thereunder on or after
January 1, 1998.
(c) Each Employee Plan and Benefit Arrangement (i) has been
administered to date, and will be administered until the Closing, in accordance
with their terms and in compliance with the Code, ERISA, and all other
applicable rules and regulations, (ii) has, in a timely, accurate, and proper
manner, both filed all required government reports and made all required
employee communications, and (iii) between the date of this Agreement and the
Closing, will complete and file all such required reports. No condition exists
that could constitute grounds for the termination of any Employee Plan under
Section 4042 of ERISA; no "prohibited transaction," as defined in Section 406 of
ERISA and Section 4975 of the Code, has occurred with respect to any Employee
Plan, or any other employee benefit plan maintained by Company or any Company
Subsidiary which is covered by Title I of ERISA, which could subject any person
to liability under Title I of ERISA or to the imposition of any tax under
Section 4975 of the Code nor has any Employee Plan subject to Part III of
Subtitle B of Title I of ERISA or Section 412 of the Code, or both, incurred any
"accumulated funding deficiency," as defined in Section 412 of the Code, whether
or not waived; nor has Company or any Company Subsidiary failed to make any
contribution or pay any amount due and owing as required by the terms of any
Employee Plan or Benefit Arrangement. Neither Company nor any Company Subsidiary
has incurred or expects to incur, directly or indirectly, any liability under
Title IV of ERISA arising in connection with the termination of, or a complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA which could constitute a liability of Commercial, or any of its
affiliates at or after the Acquisition Merger Effective Time.
(d) On or before 30 days after execution hereof, the Company will
provide Commercial with true and complete copies of the following documents
where applicable to any
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Employee Plan or Benefit Arrangement: (i) each plan document or agreement, and
any amendments thereto, and related trust agreements, insurance contracts and
policies, annuity contracts, and any other funding arrangement; (ii) the most
recent summary plan description and summary of material modifications; (iii) for
the three most recent plan years, Form 5500 Annual Return/Report and all
actuarial and financial reports and appraisals; and (iv) the most recent
determination letter received from the Internal Revenue Service, plus any open
requests and all other rulings received from any governmental agency. Within 60
days of the date hereof, the Company or Savings shall provide Commercial with
documentation, reasonably satisfactory to Commercial, demonstrating that the
requirements of Sections 401(k), 401(m), 404, 410, 412, 415, and 416 of the Code
have been satisfied by each Employee Plan that is intended to qualify under
Section 401 of the Code.
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of Company
to Commercial pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. No information material
to the Merger and which is necessary to make the representations and warranties
not misleading, to the best knowledge of the Company, has been withheld from
Commercial.
2.15 Property and Assets. The Company and the Company Subsidiaries have
marketable title to all of their real property reflected in the financial
statements at June 30, 1997, referred to in Section 2.4 hereof, or acquired
subsequent thereto, free and clear of all Encumbrances, except for (a) such
items shown in such financial statements or in the notes thereto, (b) liens for
current real estate taxes not yet delinquent, (c) customary title exceptions
that have no material adverse effect upon the value of such property, (d)
property sold or transferred in the ordinary course of business since the date
of such financial statements, and (e) pledges or liens incurred in the ordinary
course of business. Company and the Company Subsidiaries enjoy peaceful and
undisturbed possession under all material leases for the use of real property
under which they are the lessee; all of such leases are valid and binding and in
full force and effect and neither Company nor any Company Subsidiary is in
default in any material respect under any such lease. No consent of the lessor
of any material real property or material personal property lease is required
for consummation of the Merger except as set forth in Section 2.15 of Schedule
I. There has been no material physical loss, damage or destruction, whether or
not covered by insurance, affecting the real properties of Company and the
Company Subsidiaries since June 30, 1997, except such loss, damage or
destruction which does not have a material adverse effect on the Company and the
Company Subsidiaries, taken as a whole. All property and assets material to
their business and currently used by Company and the Company Subsidiaries are,
in all material respects, in good operating condition and repair, normal wear
and tear excepted.
2.16 Agreements and Instruments. Except as set forth in Section 2.16 of
Schedule I or as reflected in the audited Company consolidated financial
statements as of June 30, 1997, neither the Company nor any Company Subsidiary
is a party to (a) any material agreement, arrangement or commitment not made in
the ordinary course of business, (b) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or any Company
Subsidiary or the guarantee by the Company or any Company Subsidiary of any such
obligation (other than Federal
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Home Loan Bank advances with a maturity of one year or less from the date
hereof), (c) any agreements to make loans or for the provision, purchase or sale
of goods, services or property between Company or any Company Subsidiary and any
director or officer of Company or Savings, or any member of the immediate family
or affiliate of any of the foregoing, (d) any agreements with or concerning any
labor or employee organization to which Company or any Company Subsidiary is a
party, (e) any agreements between Company or any Company Subsidiary and any five
percent or more shareholder of Company, and (f) any agreements, directives,
orders, or similar arrangements between or involving the Company or any Company
Subsidiary and any state or federal savings institution regulatory authority.
2.17 Material Contract Defaults. Neither the Company nor any Company
Subsidiary nor the other party thereto is in default in any respect under any
contract, agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which the Company or a Company Subsidiary is a party or by which
its respective assets, business, or operations may be bound or affected or under
which it or its respective assets, business, or operations receives benefits,
and which default is reasonably expected to have either individually or in the
aggregate a material adverse effect on the Company and any Company Subsidiary,
taken as a whole, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
2.18 Tax Matters.
(a) The Company and each of the Company Subsidiaries have duly and
properly filed all federal, state, local and other tax returns required to be
filed by them and have made timely payments of all taxes due and payable,
whether disputed or not; the current status of audits of such returns by the
Internal Revenue Service ("IRS") and other applicable agencies is as set forth
in Section 2.18 of Schedule I; and there is no agreement by the Company or any
Company Subsidiary for the extension of time or for the assessment or payment of
any taxes payable. Neither the IRS nor, except as set forth in Section 2.18 of
Schedule I, any other taxing authority is now asserting or, to the best
knowledge of Company, threatening to assert any deficiency or claim for
additional taxes (or interest thereon or penalties in connection therewith), nor
is the Company aware of any basis for any such assertion or claim. The Company
and each of the Company Subsidiaries have complied in all material respects with
applicable IRS backup withholding requirements and have filed all appropriate
information reporting returns for all tax years for which the statute of
limitations has not closed. The Company and each Company Subsidiary have
complied in all material respects with all applicable state law sales and use
tax collection and reporting requirements.
(b) Adequate provision for any federal, state, local, or foreign
taxes due or to become due for the Company or any of the Company Subsidiaries
for any period or periods through and including June 30, 1997, has been made and
is reflected on the June 30, 1997 audited Company consolidated financial
statements and has been or will be made in accordance with generally accepted
accounting principles with respect to periods ending after June 30, 1997.
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2.19 Environmental Matters. Except as set forth on Section 2.19 of
Schedule I, to the best knowledge of the Company, neither the Company nor any
Company Subsidiary owns or leases any properties affected by toxic waste, radon
gas or other hazardous conditions or constructed in part with the use of
asbestos. Neither the Company nor any Company Subsidiary has knowledge of, nor
has the Company or any Company Subsidiary received written notice from any
governmental or regulatory body of, any conditions, activities, practices or
incidents which is reasonably likely to interfere with or prevent compliance or
continued compliance with hazardous substance laws or any regulation, order,
decree, judgment or injunction, issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant or chemical, or industrial, toxic or hazardous substance or waste.
There is no civil, criminal or administrative claim, action, suit, proceeding,
hearing or investigation pending or, to Company's knowledge, threatened against
Company or any Company Subsidiary relating in any way to such hazardous
substance laws or any regulation, order, decree, judgment or injunction issued,
entered, promulgated or approved thereunder.
2.20 Loan Portfolio: Portfolio Management.
(a) All evidences of indebtedness reflected as assets in the
consolidated balance sheet of the Company as of June 30, 1997, or acquired since
such date, are (except with respect to those assets which are no longer assets
of the Company or any Company Subsidiary) binding obligations of the respective
obligors named therein except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding may be brought, and the payment of no material amount thereof (either
individually or in the aggregate with other evidences of indebtedness) is
subject to any defenses which have been asserted or, to the knowledge of the
Company threatened, against the Company or any Company Subsidiary. All such
indebtedness which is secured by an interest in real property is secured by a
valid and perfected mortgage lien having the priority specified in the loan
documents. All loans originated or purchased by Savings were at the time entered
into and at all times since have been in compliance in all material respects
with all applicable laws (including, without limitation, all consumer protection
laws) and regulations. Savings administers its loan and investment portfolios
(including, but not limited to, adjustments to adjustable mortgage loans) in all
material respects in accordance with all applicable laws and regulations and the
terms of applicable instruments. The records of Savings regarding all loans
outstanding on its books are accurate in all material respects and the risk
classification system has been established in accordance with the requirements
of the OTS.
(b) Section 2.20 of Schedule I sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of loans, extensions
of credit and other assets of Savings and its subsidiaries that have been
adversely designated, criticized or classified by it as
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of June 30, 1997, separated by category of classification or criticism (the
"Asset Classification"); and no amounts of loans, extensions of credit or other
assets that have been adversely designated, classified or criticized as of the
date hereof by any representative of any government entity as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by it or any of the
Company Subsidiaries before the date hereof.
2.21 Real Estate Loans and Investments. Except for properties acquired
in settlement of loans, there are no facts, circumstances or contingencies known
to the Company or any Company Subsidiary which exist which would require a
material reduction under generally accepted accounting principles in the present
carrying value of any of the real estate investments, joint ventures,
construction loans, other investments or other loans of the Company or any
Company Subsidiary (either individually or in the aggregate with other loans and
investments).
2.22 Derivatives Contracts. Neither the Company nor any of its
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on its Balance Sheet which is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 2.22 of Schedule I, including a list, as applicable, of any
of its or any of its Subsidiaries' assets pledged as security for a Derivatives
Contract.
2.23 Insurance. The Company and the Company Subsidiaries have in effect
insurance coverage which, in respect to amounts, types and risks insured, is
reasonably adequate for the business in which the Company and the Company
Subsidiaries are engaged. A schedule of all insurance policies in effect as to
the Company and the Company Subsidiaries (the "Insurance Policies") is as set
forth on Section 2.23 of Schedule I (other than policies pertaining to mortgage
loans made in the ordinary course of business). All Insurance Policies are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date of this Agreement have been paid, such premiums
covering all periods from the date hereof up to and including the Acquisition
Merger Effective Date shall have been paid on or before the Acquisition Merger
Effective Date, to the extent then due and payable (other than retrospective
premiums which may be payable with respect to worker's compensation insurance
policies, adequate reserves for which are reflected in the Company's financial
statements). The Insurance Policies are valid, outstanding and enforceable in
accordance with their respective terms and will not, except as set forth in
Section 2.11 of Schedule I, in any way be affected by, or terminated or lapsed
solely by reason of, the transactions contemplated by this Agreement. Neither
the Company nor any Company Subsidiary has been refused any insurance with
respect to any material properties, assets or operations, nor has any coverage
been limited or terminated by any insurance carrier to which it has applied for
any such insurance or with which it has carried insurance during the last three
years.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Commercial and the Bank represent and warrant to Company and Savings
that, except as disclosed in Schedule II attached hereto, and except that Bank
makes no representations or warranties regarding Commercial:
3.1 Organization, Good Standing, Authority, Insurance, Etc. Commercial
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nebraska. Each of the subsidiaries of Commercial within
the meaning of Section 10(a)(1)(G) of HOLA (individually a "Commercial
Subsidiary" and collectively the "Commercial Subsidiaries") is duly organized,
validly existing, and in good standing under the laws of the respective
jurisdiction under which it is organized. Commercial and each Commercial
Subsidiary has all requisite power and authority and is duly qualified and
licensed to own, lease and operate its properties and conduct its business as it
is now being conducted. Commercial and each Commercial Subsidiary is qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which qualification is necessary under applicable law, except to
the extent that any failures to so qualify would not, in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of Commercial and the Commercial Subsidiaries, taken as a whole. The
Bank is a member in good standing of the Federal Home Loan Bank of Topeka, and
all eligible accounts issued by the Bank are insured by the SAIF to the maximum
extent permitted under applicable law. The Bank is a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Code, and is a "qualified
thrift lender" as defined in Section 10(m) of the HOLA and the Thrift
Regulations. Commercial is duly registered as a savings and loan holding company
under the HOLA.
3.2 Capitalization. The authorized capital stock of Commercial consists
of 50,000,000 shares of Commercial common stock, par value $.01 per share, of
which 21,729,756 shares were issued and outstanding as of the date of this
Agreement (prior to the stock split paid as of the date hereof) and 10,000,000
shares of serial preferred stock, par value of $.01 per share, of which no
shares were outstanding as of the date of this Agreement. All outstanding shares
of Commercial common stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights.
3.3 Ownership of Subsidiaries. All the outstanding shares of the
capital stock of the Commercial Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by Commercial or a Commercial
Subsidiary free and clear of any Encumbrance. All of the outstanding capital
stock or other ownership interests in all of the Commercial Subsidiaries is
owned either by Commercial or the Bank. There are no options, convertible
securities, warrants, or other rights (preemptive or otherwise) to purchase or
acquire any capital stock of any Commercial Subsidiary and no contracts to which
Commercial or any of its affiliates is subject with respect to the issuance,
voting or sale of issued or unissued shares of the capital stock of any of the
Commercial Subsidiaries.
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3.4 Financial Statements and Reports.
(a) No registration statement, proxy statement, schedule or report
filed by Commercial or any Commercial Subsidiary with the SEC or the OTS under
the 1933 Act, or the 1934 Act, on the date of effectiveness in the case of such
registration statements, or on the date of filing in the case of such reports or
schedules, or on the date of mailing in the case of such proxy statements,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. For
the past five years, Commercial and the Commercial Subsidiaries have timely
filed all documents required to be filed by them with the SEC, the OTS, or the
FDIC under various securities and financial institution laws and regulations,
except to the extent that all failures to so file, in the aggregate, would not
have a material adverse effect on the business, financial condition or results
of operations of Commercial and the Commercial Subsidiaries, taken as a whole;
and all such documents, as finally amended, complied in all material respects
with applicable requirements of law and, as of their respective date or the date
as amended, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent stated therein, all financial statements
and schedules included in the documents referred to in the preceding sentences
(or to be included in similar documents to be filed after the date hereof) (i)
are or will be (with respect to financial statements in respect of periods
ending after June 30, 1997) in accordance with Commercial's books and records
and those of any of its Subsidiaries, and (ii) present (and in the case of
financial statements in respect of periods ending after June 30, 1997 will
present) fairly the consolidated statement of financial condition and the
consolidated statements of operations, stockholders' equity and cash flows of
Commercial and the Commercial Subsidiaries as of the dates and for the periods
indicated in accordance with generally accepted accounting principles (except
for the omission of notes to unaudited statements, year end adjustments to
interim results and changes in generally accepted accounting principles). The
audited consolidated financial statements of Commercial as of June 30, 1997 and
for the three years then ended and the consolidated financial statements for all
periods thereafter up to the Closing disclose or will disclose, to the extent
required by generally accepted accounting principles, as the case may be, all
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or due to become due and regardless of when asserted), as of their
respective dates, of Commercial and the Commercial Subsidiaries required to be
reflected in such financial statements according to generally accepted
accounting principles, other than liabilities which are not, in the aggregate,
material to Commercial and the Commercial Subsidiaries, taken as a whole, and
contain or will contain in the opinion of management adequate reserves for
losses on loans and properties acquired in settlement of loans, taxes and all
other material accrued liabilities and for all reasonably anticipated material
losses, if any as of such date. There exists no set of circumstances that could
reasonably be expected to result in any liability or obligation material to
Commercial or the Commercial Subsidiaries, taken as a whole, except as disclosed
in the audited consolidated financial statements at June 30, 1997, or for
transactions effected, actions occurring or omitted to be taken, or claims made
after June 30, 1997, (i) in the ordinary course of business, or (ii) as
permitted by this Agreement.
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(b) Commercial has delivered to the Company all periodic reports
filed with the SEC under the 1934 Act for periods since June 30, 1997 through
the date hereof and will through Closing upon written request promptly deliver
copies of 1934 Act reports for future periods.
3.5 Absence of Changes. Since June 30, 1997, there have been no
material adverse changes in the business, properties, financial condition,
operations or assets of Commercial or any Commercial Subsidiary, other than any
changes attributable to or resulting from any change in law, regulation or
generally accepted accounting principles or regulatory accounting principles,
which impairs both Commercial and other comparably sized thrift institutions in
a substantially similar manner and other than changes attributable to or
resulting from changes in economic conditions applicable to depository
institutions generally or in general levels of interest rates affecting
Commercial and comparably sized thrift institutions to a similar extent and in a
similar manner. Since June 30, 1997 to the date hereof, there has been no
occurrence, event or development of any nature existing, or to the knowledge of
Commercial, threatened, which is reasonably expected to result in such a change.
Since June 30, 1997 and through the date hereof, each of Commercial and
the Commercial Subsidiaries has owned and operated their respective assets,
properties and businesses in the ordinary course of business and consistent with
past practice.
3.6 Prospectus/Proxy Statement. At the time the Registration Statement
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of the Company for the solicitation of proxies for the approval
referred to in Section 1.7 hereof and at all times subsequent to such mailings
up to and including the times of such approval, such Registration Statement and
Prospectus/Proxy Statement (including any amendments or supplements thereto),
with respect to all information set forth therein relating to Commercial
(including the Commercial Subsidiaries), its shareholders and representatives,
Commercial Common Stock, this Agreement, the Merger and all other transactions
contemplated hereby, will:
(a) comply in all material respects with applicable provisions of
the 1933 Act, the 1934 Act and the rules and regulations under such Acts; and
(b) not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
3.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf or under authority of Commercial or any of the
Commercial Subsidiaries is or will be entitled to any broker's or finder's fee
or any other commission or similar fee directly or indirectly in connection with
the Merger or any other transaction contemplated hereby, except Commercial has
engaged Merrill Lynch & Co., an investment banking firm, to provide financial
advisory services to Commercial.
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3.8 Compliance With Law.
(a) To the best knowledge of Commercial, Commercial and the
Commercial Subsidiaries are in compliance in all material respects with all
material laws and regulations applicable to their respective business or
operations or with respect to which compliance is a condition of engaging in the
business thereof, and neither Commercial nor any Commercial Subsidiary has
received notice from any federal, state or local government or governmental
agency of any material violation of, and does not know of any material
violations of, any of the above.
(b) To the best knowledge of Commercial, Commercial and each of it
Subsidiaries have all material permits, licenses, certificates of authority,
orders and approvals of, and have made all material filings, applications and
registrations with, all federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
respective business as it is presently conducted.
3.9 Corporate Actions. The Boards of Directors of Commercial and the
Bank have duly authorized their respective officers to execute and deliver (as
applicable) this Agreement, the Acquisition Plan of Merger, the Bank Plan of
Merger and the Option Agreement and to take all action necessary to consummate
the Merger and the other transactions contemplated hereby. All corporate
authorizations by the Boards of Directors of Commercial and the Bank required
for the consummation of the Merger have been obtained, and no other corporate
action is required to be taken.
3.10 Authority. The execution, delivery and performance of this
Agreement and the Option Agreement by Commercial and the Bank does not violate
any of the provisions of, or constitute a default under or give any person the
right to terminate or accelerate payment or performance under (i) the articles
of incorporation or bylaws of Commercial, the charter or bylaws of the Bank, or
the articles of incorporation or bylaws of any other Commercial Subsidiary, (ii)
any regulatory restraint on the acquisition of the Company or Savings or control
thereof, (iii) any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which
Commercial or any of the Commercial Subsidiaries is subject or (iv) any other
Contract to which Commercial or any of the Commercial Subsidiaries is a party or
is subject to or by which any of their properties or assets is bound which
default, termination or acceleration would have a material adverse effect on the
financial condition, business or results of operations of Commercial and the
Commercial Subsidiaries, taken as a whole. The parties acknowledge that the
consummation of the Merger and the other transactions contemplated hereby is
subject to various regulatory approvals. Commercial and the Bank have all
requisite corporate power and authority to enter into this Agreement and the
Option Agreement and to perform their obligations hereunder. Other than the
receipt of Governmental Approvals, no consents or approvals are required on
behalf of Commercial or any Commercial Subsidiary in connection with the
consummation of the transactions contemplated by this Agreement, the Option
Agreement, the Acquisition Plan of Merger or the Bank Plan of Merger. This
Agreement, the Option Agreement, the Acquisition Plan of Merger and the Bank
Plan of Merger constitute the valid and binding obligations of Commercial and
the Bank, and are enforceable in accordance with
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their terms, except as enforceability may be limited by applicable laws relating
to bankruptcy, insolvency or creditors' rights generally and general principles
of equity.
3.11 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of
Commercial to Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or any material omission. No information
material to the Merger and which is necessary to make the representations and
warranties not misleading, to the best knowledge of Commercial, has been
withheld from the Company.
3.12 Litigation and Other Proceedings. Except for matters which would
not have a material adverse effect on the business, financial condition or
results of operations of Commercial and the Commercial Subsidiaries taken as a
whole, neither Commercial nor any Commercial Subsidiary is a defendant in, nor
is any of its property subject to, any pending, or, to the best knowledge of the
management of Commercial, threatened, claim, action, suit, investigation, or
proceeding, or subject to any judicial order, judgment or decree.
3.13 Agreements and Instruments. As of the date of this Agreement,
there are no agreements, directives, orders or similar arrangements between or
involving Commercial or any Commercial Subsidiary and any state or federal
savings institution regulatory authority.
3.14 Tax Matters. Commercial and each of the Commercial Subsidiaries
have duly and properly filed all federal, state, local and other tax returns
required to be filed by them and have made timely payments of all taxes due and
payable, whether disputed or not; there is no agreement by Commercial or any
Commercial Subsidiary for the extension of time or for the assessment or payment
of any taxes payable. Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Commercial, threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is Commercial aware of any basis for any such
assertion or claim. Commercial and each of the Commercial Subsidiaries have
complied in all material respects with applicable IRS backup withholding
requirements and have filed all appropriate information reporting returns for
all tax years for which the statute of limitations has not closed. Commercial
and each Commercial Subsidiary have complied in all material respects with all
applicable state law sales and use tax collection and reporting requirements.
3.15 Property and Assets. To the best knowledge of Commercial,
Commercial and the Commercial Subsidiaries have marketable title to all of their
real property reflected in the financial statements at June 30, 1997, referred
to in Section 3.4 hereof, or acquired subsequent thereto, free and clear of all
Encumbrances, except for (a) such items shown in such financial statements or in
the notes thereto, (b) liens for current real estate taxes not yet delinquent,
(c) customary title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Commercial and the Commercial
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Subsidiaries enjoy peaceful and undisturbed possession under all material leases
for the use of real property under which they are the lessee; all of such leases
are valid and binding and in full force and effect and neither Commercial nor
any Commercial Subsidiary is in default in any material respect under any such
lease. There has been no material physical loss, damage or destruction, whether
or not covered by insurance, affecting the real properties of Commercial and the
Commercial Subsidiaries since June 30, 1997, except such loss, damage or
destruction which does not have a material adverse effect on Commercial and
Commercial Subsidiaries, taken as a whole. All property and assets material to
their business and currently used by Commercial and Commercial Subsidiaries are,
in all material respects, in good operating condition and repair, normal wear
and tear excepted.
3.16 Derivatives Contracts Neither Commercial nor any of the Commercial
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on its Balance Sheet which is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 3.16 of Schedule II, including a list, as applicable, of
any of its or any of its Subsidiaries' assets pledged as security for a
Derivatives Contract.
3.17 Insurance. Commercial and Commercial Subsidiaries have in effect
insurance coverage which, in respect to amounts, types and risks insured, is
reasonably adequate for the business in which Commercial and Commercial
Subsidiaries are engaged. All insurance policies in effect as to Commercial and
the Commercial Subsidiaries are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of this
Agreement have been paid, such premiums covering all periods from the date
hereof up to and including the Acquisition Merger Effective Date shall have been
paid on or before the Acquisition Merger Effective Date, to the extent then due
and payable (other than retrospective premiums which may be payable with respect
to workers' compensation insurance policies, adequate reserves for which are
reflected in Commercial's financial statements). The insurance policies are
valid, outstanding and enforceable in accordance with their respective terms and
will not in any way be affected by, or terminated or lapsed solely by reason of,
the transactions contemplated by this Agreement. Neither Commercial nor any
Commercial Subsidiary has been refused any insurance with respect to any
material properties, assets or operations, nor has any coverage been limited or
terminated by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last three years.
ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies. Between the date of this
Agreement and the Acquisition Merger Effective Time, each party agrees to give
to the other party and its respective representatives and agents full access (to
the extent lawful) to all of the premises, books, records and employees of it
and its subsidiaries at all reasonable times, upon not less than three days'
prior
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notice, and to furnish and cause its subsidiaries to furnish to the other party
and its respective agents or representatives access to and true and complete
copies of such financial and operating data, all documents with respect to
matters to which reference is made in Articles II or III of this Agreement or on
any list, schedule or certificate delivered or to be delivered in connection
herewith, and such other documents, records, or information with respect to the
business and properties of it and its subsidiaries as the other party or its
respective agents or representative shall from time to time reasonably request;
provided, however, that any such inspection (a) shall be conducted in such
manner as not to interfere unreasonably with the operation of the business of
the entity inspected and (b) shall not affect any of the representations and
warranties hereunder. Each party will also give prompt written notice to the
other party of any event or development (x) which, had it existed or been known
on the date of this Agreement, would have been required to be disclosed under
this Agreement, (y) which would cause any of its representations and warranties
contained herein to be inaccurate or otherwise materially misleading, or (z)
which materially relate to the satisfaction of the conditions set forth in
Article V of this Agreement.
4.2 Conduct of Business of the Company and the Company Subsidiaries.
Between the date of this Agreement and the Acquisition Merger Effective Time,
the Company and Savings agree:
(a) That the Company and the Company Subsidiaries shall conduct
their business only in the ordinary course, and maintain their books and records
in accordance with past practices and not to take any action that would (i)
adversely affect the ability to obtain the Governmental Approvals or (ii)
adversely affect the Company's ability to perform its obligations under this
Agreement or the Option Agreement;
(b) That the Company shall not, without the prior written consent of
Commercial: (i) declare, set aside or pay any dividend or make any other
distribution with respect to Company's capital stock, except for the declaration
and payment of regular quarterly cash dividends in an amount not to exceed $.075
per share of Company common stock with respect to any full calender quarter
after the date hereof; (ii) reacquire any of Company's outstanding shares of
capital stock; (iii) except as set forth at Schedule 4.2(c) hereof, issue or
sell or buy any shares of capital stock of the Company or any Company
Subsidiary, except shares of Company common stock issued pursuant to the Company
Option Plan and the Option Agreement; (iv) effect any stock split, stock
dividend or other reclassification of Company's common stock; or (v) grant any
options or issue any warrants exercisable for or securities convertible or
exchangeable into capital stock of Company or any Company Subsidiary or grant
any stock appreciation or other rights with respect to shares of capital stock
of Company or of any Company Subsidiary;
(c) That Company and the Company Subsidiaries shall not, without the
prior written consent of Commercial: (i) except as set forth at Schedule 4.2(c)
hereof, sell or dispose of any significant assets of the Company or of any
Company Subsidiary other than in the ordinary course of business consistent with
past practices; (ii) merge or consolidate the Company or any Company Subsidiary
with or, except as set forth at Schedule 4.2(c) hereof, otherwise acquire any
other entity, or file any applications or make any contract with respect to
branching by Savings
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(whether de novo, purchase, sale or relocation) or acquire or construct, or
enter into any agreement to acquire or construct, any interest in real property
(other than with respect to security interests in properties securing loans and
properties acquired in settlement of loans in the ordinary course) or
improvements to real property in the aggregate in excess of $100,000; (iii)
change the articles or certificate of incorporation, charter documents or other
governing instruments of the Company or any Company Subsidiary, except as
provided in this Agreement or as required by law; (iv) grant to any executive
officer, director or employee of the Company or any Company Subsidiary any
increase in annual compensation, or any bonus type payment except for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice (including, but not limited to, the
payment of bonuses for which such expense has previously been accrued) and
except as set forth on Schedule 4.2(c); (v) adopt any new or amend or terminate
any existing Employee Plans or Benefit Arrangements of any type except as
contemplated herein or as set forth at Schedule 4.2(c); (vi) except as set forth
on Schedule 4.2(c) or Schedule 4.16(d) hereof, authorize severance pay or other
benefits for any officer, director or employee of Company or any Company
Subsidiary; (vii) incur any material indebtedness or obligation or enter into or
extend any material agreement or lease, except in the ordinary course of
business consistent with past practices; (viii) engage in any lending activities
other than in the ordinary course of business consistent with past practices;
(ix) except as set forth at Schedule 4.2(c) hereof, form any new subsidiary or
cause or permit a material change in the activities presently conducted by any
Company Subsidiary or make additional investments in subsidiaries; (x) purchase
any debt securities or derivative securities, including CMO or REMIC products,
that are defined as "high risk mortgage securities" under OTS Thrift Bulletin
No. 52 dated January 10, 1992 as revised or purchase any Derivatives Contracts
or Structured Notes; (xi) except as set forth at Schedule 4.2(c) hereof,
purchase any equity securities other than Federal Home Loan Bank stock; (xii)
make any investment which would cause Savings to not be a qualified thrift
lender under Section 10(m) of the HOLA, or not to be a "domestic building and
loan association" as defined in Section 7701(a)(19) of the Code; (xiii) make any
loan with a principal balance of $750,000 or more; (xiv) authorize capital
expenditures other than in the ordinary course of business; (xv) adopt or
implement any change in its accounting principles, practices or methods other
than as may be required by generally accepted accounting principles or by a
regulatory authority or adopt or implement any change in its methods of
accounting for Federal income tax purposes; or (xvi) make any loan in which
participation interests therein are to be sold to other persons or entities or
acquire a participation interest in a loan originated by another person or
entity in excess of $500,000. The limitations contained in this Section 4.2(c)
shall also be deemed to constitute limitations as to the making of any
commitment with respect to any of the matters set forth in this Section 4.2(c).
Notwithstanding the foregoing, Savings may engage in any of the foregoing
activities exclusively with the Bank.
4.3 No Solicitation. The Company will not authorize any officer,
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of Company or any Company Subsidiary,
directly or indirectly, to initiate contact with any person or entity in an
effort to solicit, initiate or encourage any "Takeover Proposal" (as such term
is defined below). Except as the fiduciary duties of the Company Board of
Directors may otherwise require under applicable law (as determined in
consultation with Company legal counsel), the Company will not
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authorize any officer, director, employee, investment banker, financial
consultant, attorney, accountant or other representative of the Company or any
Company Subsidiary, directly or indirectly, (A) to cooperate with, or furnish or
cause to be furnished any non-public information concerning its business,
properties or assets to, any person or entity in connection with any Takeover
Proposal; (B) to negotiate any Takeover Proposal with any person or entity; or
(C) to enter into any agreement, letter of intent or agreement in principle as
to any Takeover Proposal. The Company will promptly give written notice to
Commercial upon becoming aware of any Takeover Proposal, such notice to contain,
at a minimum, the identity of the persons submitting the Takeover Proposal, a
copy of any written inquiry or other communication, the terms of any Takeover
Proposal and any information requested or discussions sought to be initiated. As
used in this Agreement with respect to the Company, "Takeover Proposal" shall
mean any bona fide proposal, other than as contemplated by this Agreement, for a
merger or other business combination involving the Company or Savings or for the
acquisition of a 10% or greater equity interest in Company or Savings, or for
the acquisition of a substantial portion of the assets of Company or Savings
(other than loans or securities sold in the ordinary course).
4.4 Shareholder Approval. Subject to Section 1.7 herein, the Company
shall call the meeting of its shareholders to be held for the purpose of voting
upon this Agreement, the Acquisition Merger and related matters, as referred to
in Section 1.7 hereof, as soon as practicable, but in no event later than sixty
(60) days after the Registration Statement becomes effective under the 1933 Act.
In connection with such meeting, the Company Board of Directors shall favorably
recommend approval of this Agreement and the Acquisition Merger, except as the
fiduciary duties of the Company's Board of Directors may otherwise require. The
Company shall use its best efforts to solicit from its shareholders proxies in
favor of approval and to take all other action necessary or helpful to secure a
vote of the holders of the shares of Company common stock in favor of the
Merger, except as the fiduciary duties of the Boards of Directors may otherwise
require.
4.5 Filing of Holding Company and Merger Applications. Commercial shall
use its best efforts promptly to prepare, submit and file within 75 days of the
date hereof a holding company application to the OTS pursuant to 12 C.F.R.
ss.574.3 for acquisition of control of Company and Savings and a merger
application to the OTS pursuant to the Bank Merger Act and 12 C.F.R. 563.22(a)
for the Bank Merger and any other applications required to be filed in
connection with the transactions contemplated hereby.
4.6 Consents. Company and Savings will use their best efforts to obtain
the consent or approval of each person whose consent or approval shall be
required in order to permit Company or Savings, as the case may be, to
consummate the Merger.
4.7 Resale Letter Agreements. After execution of this Agreement, (i)
Company shall use its best efforts to cause to be delivered to Commercial from
each person who may be deemed to be an "affiliate" of Company within the meaning
of Rule 145 under the 1933 Act, a written letter agreement in the form attached
at Schedule 4.7 regarding restrictions on resale of the shares of Commercial
Common Stock received by such persons in the Merger and upon exercise of
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options received under Section 1.8 hereof subsequent to the Acquisition Merger
Effective Time to ensure compliance with applicable resale restrictions imposed
under the federal securities laws and, to the extent applicable, to ensure
pooling of interest accounting treatment and (ii) neither Commercial nor the
Company (including the Company Subsidiaries) shall take any action which would
materially impede or delay consummation of the Merger, or prevent the
transactions contemplated hereby from (A) qualifying for accounting treatment as
a "pooling of interests" (if applicable) or (B) qualifying as a reorganization
within the meaning of Section 368 of the Code; provided that nothing hereunder
shall limit the ability of Commercial to exercise its rights under the Option
Agreement.
4.8 Publicity. Between the date of this Agreement and the Acquisition
Merger Effective Time, neither Commercial, Company or any of their subsidiaries
shall, without the prior approval of the other, issue or make, or authorize any
of its directors, employees, officers or agents to issue or make, any press
release, disclosure or statement to the press or any third party with respect to
the Merger or the transactions contemplated hereto, except as required by law.
The parties shall cooperate when issuing or making any press release, disclosure
or statement with respect to Merger or the transactions contemplated hereby,
except as required by law or by applicable stock exchange rules.
4.9 Cooperation Generally. Except as otherwise contempated hereby,
between the date of this Agreement and the Acquisition Merger Effective Time,
Commercial, Company and their subsidiaries shall use their best efforts, and
take all actions necessary or appropriate, to consummate the Merger and the
other transactions contemplated by this Agreement at the earliest practicable
date. Commercial and the Bank, on one hand, and the Company and the Company
Subsidiaries, on the other hand, agree not to knowingly take any action that
would (i) adversely effect their respective ability to obtain the Governmental
Approvals or (ii) adversely affect their respective ability to perform their
obligations under this Agreement.
4.10 Additional Financial Statements and Reports. As soon as reasonably
practicable after they become publicly available, the Company shall furnish to
Commercial and Commercial shall furnish to the Company, respectively, its
balance sheet and related statements of operations, cash flows and stockholders'
equity for all periods prior to the Closing. Such financial statements will be
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and fairly present the financial condition, results of
operations and cash flows of the Company or Commercial, as the case may be
(subject, in the case of unaudited financial statements, to (a) normal year-end
audit adjustments, (b) any other adjustments described therein and (c) the
absence of notes which, if presented, would not differ materially from those
included in its most recent audited consolidated balance sheet), and all of such
financial statements will be prepared in conformity with the requirements of
Form 10-Q or Form 10-K, as the case may be, under the 1934 Act.
4.11 Stock Listing. Commercial agrees to use its best efforts to cause
to be listed on the New York Stock Exchange, subject to official notice of
issuance, the shares of Commercial
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Common Stock to be issued in the Merger and the shares issuable in accordance
with Section 1.8 hereto.
4.12 Allowance for Loan and Real Estate Owned Losses. At the request of
Commercial and in an amount specified by Commercial, immediately prior to the
Acquisition Merger Effective Time, the Company and Savings shall establish such
additional provisions for loan and real estate owned losses as may be necessary
in the sole determination of Commercial to conform the Company's and Savings'
loan and real estate owned allowance practices and methods to those of
Commercial and the Bank (as such practices and methods are to be applied to
Company and Savings from and after the Acquisition Merger Effective Time);
provided, however, that Company and Savings shall not be required to take such
action until: (i) Company and Savings provide to Commercial a written statement
dated the date of Closing certified by the Chairman of the Board, the President
and the Chief Financial Officer of the Company and Savings, that the conditions
in Sections 5.1 and 5.2 to be satisfied by the Company or Savings or both of
them have been satisfied by either or both of them or, alternatively, setting
forth in detail the circumstances that have prevented such conditions from being
satisfied (the "Reliance Certificate"), and Commercial and Bank provide to
Company and Savings a Reliance Certificate relating to the satisfaction of the
conditions in Sections 5.1 and 5.3; and (ii) Commercial and the Bank, after
reviewing the Reliance Certificate, provide the Company and Savings a written
waiver of any right either entity may have to terminate the Agreement which
waiver shall contain an express condition precedent that Company and Savings
have established such additional provisions for loan and real estate losses as
requested by Commercial pursuant to this Section 4.12; and provided further that
the Company shall not be required to take any action that is not consistent with
generally accepted accounting principles. No additional provision for loan and
real estate owned losses taken by Savings pursuant to this Section 4.12 shall be
deemed in and of itself to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement.
4.13 D&O Indemnification and Insurance. For a period of three (3) years
following the Acquisition Merger Effective Time or until the expiration of the
applicable statute of limitations, but in no event beyond six years following
the Acquisition Merger Effective Time, Commercial and Bank shall indemnify, and
advance expenses in matters that may be subject to indemnification to, persons
who served as directors and officers of Company or Savings or any other Company
Subsidiaries on or before the Acquisition Merger Effective Time with respect to
liabilities and claims (and related expenses, including fees and disbursements
of counsel) made against them resulting from their service as such prior to the
Acquisition Merger Effective Time in accordance with and subject to the
requirements and other provisions of the Certificate of Incorporation or Charter
and Bylaws of Company and Savings as in effect on the date of this Agreement and
applicable provisions of law. Commercial shall cause the persons serving as
officers and directors of the Company immediately prior to the Acquisition
Merger Effective Time to be covered for a period of 18 months from the
Acquisition Merger Effective Time by the directors' and officers' liability
insurance policy maintained by the Company (provided that Commercial may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not materially less advantageous than
such policy) with respect to acts or omissions occurring prior to the
Acquisition Merger Effective Time which were committed by such officers and
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directors in their capacity as such; provided, however, that in no event shall
Commercial be required to expend more than 150% of the amount currently expended
by the Company on an annual basis to maintain or procure insurance coverage for
such 18 month period pursuant hereto. This Section 4.13 shall be construed as an
agreement as to which the directors and officers of Company and Savings referred
to herein are intended to be third party beneficiaries and shall be enforceable
by such persons and their heirs and representatives.
4.14 Tax Treatment. Commercial and Company shall use their best efforts
to cause the Merger to qualify as a reorganization under Section 368(a)(1) of
the Code. The Company agrees to consent to the form of representation letter
provided by Deloitte & Touche LLP or other tax advisor for purposes of issuing
its federal tax opinion pursuant to Section 5.1(e) of this Agreement no later
than thirty (30) days prior to the Closing.
4.15 Update Disclosure. From and after the date hereof until the
Acquisition Merger Effective Time, the Company shall promptly, but not less
frequently than monthly, update Schedule I hereto by notice to Commercial to
reflect any matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described therein
and which, in the case of all such updates other than the last such update prior
to the Acquisition Merger Effective Time, reflect a material change from the
information provided in Schedule I as of the date hereof; provided, however,
that no such update shall affect the conditions to the obligation of Company and
Savings to consummate the transactions contemplated hereby, and any and all
changes reflected in any such update shall be considered in determining whether
such conditions have been satisfied.
4.16 Company's Employee Plans and Benefit Arrangements.
(a) Except as otherwise provided in this Section, if Commercial so
requests, the Company and any Company Subsidiary shall develop a plan and
timetable for terminating each Employee Plan and Benefit Arrangement as of the
date of Closing, and, with the advance written consent of Commercial, shall
proceed with the implementation of said termination plan and timetable. The
Company shall be solely responsible for all costs, expenses, and other
obligations whatsoever arising out of or resulting from termination of any
Employee Plan or Benefit Arrangement. Neither the Company nor any Company
Subsidiary will establish any new benefit plan or arrangement for directors,
officers, or employees, or amend (or commit to distribute any assets from) any
Employee Plan or Benefit Arrangement without Commercial's prior written
approval, except as provided in Section 4.2(c) of Schedule I, this Section 4.16
or in Section 7.2 hereof.
(b) With respect to any benefit plan that provides for vesting of
benefits, there shall be no discretionary acceleration of vesting, except as set
forth at Section 4.2(c) of Schedule I or Schedule 4.16(b), except in connection
with the termination of any Employee Plan or Benefit Arrangements.
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(c) Commercial shall assume and honor the terms of Company's
Recognition and Retention Plan and, subject to the provisions of Section 1.8,
the Company Option Plan, and all provisions for vested benefits or other vested
amounts earned or accrued through the Acquisition Merger Effective Time under
the Employee Plans and Benefit Arrangements.
(d) Commercial shall honor in accordance with their terms the
employment, severance and deferred compensation agreements and policies set
forth at Schedule 4.16(d). Commercial acknowledges that for purposes of the
Employment Agreement dated June 16, 1997 by and between the Company and James L.
Roberts, that Mr. Roberts' resignation within 24 months following the
Acquisition Merger Effective Time shall entitle him to the payments and benefits
set forth in Section 6(h) and, if applicable, Section 3(f) of such agreement.
(e) The Company's Employee Stock Ownership Plan (the "Company ESOP")
and 401(k) Profit Sharing Plan ("401(k) Plan") shall be terminated effective one
day prior to the Acquisition Merger Effective Time. As soon as practicable after
the Acquisition Merger Effective Time (but not prior to the publication of
financial results covering at least 30 days of combined operations after the
Acquisition Merger), the trustees of the Company ESOP shall convert to cash a
portion of the Commercial Common Stock received by the Company ESOP in the
Acquisition Merger with respect to unallocated Company Common Stock in order to
repay the entire outstanding balance of the Company ESOP loan in accordance with
ERISA, the rules and regulations promulgated thereunder, the Code, and the
rules, regulations promulgated thereunder, and any precedential rulings issued
by the Internal Revenue Service ("IRS"). As soon as practicable after the
retirement of the Company ESOP loan (but not later than 120 days after the
publication of financial results covering at least 30 days of combined
operations after the Merger) the trustees of the Company ESOP shall allocate the
remaining Commercial Common Stock received by the Company ESOP in the
Acquisition Merger with respect to unallocated shares of Company Common Stock to
the accounts of all Company ESOP participants (whether or not such participants
are then actively employed) and beneficiaries in proportion to the account
balances of such participants and beneficiaries as they existed as of the
Acquisition Merger Effective Time (and, if required, to the accounts of former
participants or their beneficiaries) as investment earnings of the Company ESOP
unless restricted by the IRS determination letter referred to in the following
sentence. Subject to receipt of such IRS determination letter, the Company
and/or Commercial shall exercise best efforts to implement procedures that will
assure the full allocation of the remaining suspense account to such
participants or their beneficiaries). In connection with the joint termination
of the Company ESOP and 401(k) Plan, the Company shall promptly apply to the IRS
for a favorable determination letter on their tax-qualified status on
termination under Code Sections 401(a), 409 and 4975. Such application shall be
subject to prior review, comment, and approval (which approval will not be
unreasonably withheld) of Commercial and its counsel. Any and all distributions
from the Company ESOP and 401(k) Plan after their termination shall be made in a
manner consistent with the aforementioned determination letter issued by the IRS
relating to such termination.
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4.17 Amendment of Savings' Federal Stock Charter. Company and Savings
will take all actions necessary to effectuate an amendment to Section 8 of
Savings' Federal Stock Charter to make inapplicable to Commercial and Bank the
restrictions therein, provided that Company and Savings may make such amendment
contingent upon consummation of the Merger.
4.18 Commercial Goodwill Claim. Between the date hereof and the
Closing, Commercial and the Bank shall not spin-off or otherwise distribute the
rights to receive payment upon resolution of the claims against the FDIC or
other agency of the Federal government with respect to the confiscation of the
goodwill as capital of the Bank.
4.19 Environmental Reports. Commercial, at its expense, shall undertake
within 15 days of the date hereof to order, and shall within 40 days (subject to
extension with the consent of the Company) after ordering, receive, a Phase I
Environmental Risk Report (as contemplated in OTS Thrift Bulletin #16)
("Report") on (i) all commercial real estate owned by, (ii) all offices and
premises used as facilities by, and (iii) all properties which serve as security
for any commercial real estate loan having an original principal balance of
$1,000,000 or more of, the Company and Savings. Failure to order such Report on
any particular properties within such 15 day period shall constitute a waiver of
such condition with respect to such property. In the event that Commercial
believes in good faith that such Report indicates a reasonable likelihood that
the costs to cleanup, remove, remediate, or take any other action necessary to
bring any such property or properties into material compliance with Company's or
any Company Subsidiary's obligations under any environmental laws exceed
$500,000 in the aggregate, Commercial shall, within 15 days of its receipt of
such Report, provide Company with written notice to that effect. Commercial
shall thereafter undertake to order within 15 days of receipt of such Report and
shall within 30 days of ordering receive a Phase II Environmental Report (as
contemplated in OTS Thrift Bulleting #16) to confirm such belief. Failure to
order such Phase II report ("Phase II Report") on any particular properties
within such 15 day period shall constitute a waiver of such condition with
respect to such property. Commercial shall within seven days of receipt of such
Phase II Report either deliver written notice to Company of its termination of
this Agreement in that the aggregate costs to cleanup, remove, remediate or take
such other action necessary to bring such properties into material compliance
with the Company's or any Company Subsidiary's obligations under any
environmental laws will exceed $500,000 determined in good faith and that
Commercial shall elect to terminate this Agreement, or Commercial shall deliver
in writing notice of its waiver of the condition contained at Section 5.2(i)
hereof. Failure to deliver such written notice of its termination of the
Agreement shall constitute waiver of this condition as provided at Section
5.2(i). Commercial shall deliver complete copies of all Phase I and Phase II
reports to Company within five days of receipt of any such reports. The contents
of such reports shall remain confidential whether or not the Merger is
consummated.
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ARTICLE V
CONDITIONS TO THE MERGER; TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of Commercial, the Bank, the
Company and Savings to effect the Acquisition Merger and the Bank Merger shall
be subject to the following conditions:
(a) Stockholder Approval and Effectiveness of Charter Amendment. The
holders of the outstanding shares of Company common stock shall have approved
this Agreement and the Acquisition Merger as specified in Section 1.7 hereof or
as otherwise required by applicable law and the Charter Amendment shall be
effective under applicable law.
(b) No Proceedings. No order, decree or injunction shall have been
entered and remain in force restraining or prohibiting the Merger in any legal,
administrative, arbitration, investigatory or other proceedings (collectively,
"Proceedings").
(c) Government Approvals. To the extent required by applicable law
or regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including without limitation those of
the OTS, the FDIC, the Federal Trade Commission, DOJ, the SEC, and any state
securities or Blue Sky authorities, shall have been obtained or made and any
waiting periods shall have expired in connection with the consummation of the
Merger. All other statutory or regulatory requirements for the valid
consummation of the Merger and related transactions shall have been satisfied.
(d) Registration Statement. The Registration Statement shall have
been declared effective and shall not be subject to a stop order of the SEC and,
if the offer and sale of Commercial Common Stock in the Merger pursuant to this
Agreement is subject to the Blue Sky laws of any state, shall not be subject to
a stop order of any state securities commissioner.
(e) Federal Tax Opinion. Receipt of an opinion of Deloitte & Touche
LLP, in form and content reasonably satisfactory to Commercial and the Company,
to the effect that (i) the Acquisition Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, (ii) the exchange in the
Acquisition Merger of Company common stock for Commercial Common Stock will not
give rise to gain or loss to shareholders of the Company with respect to such
exchange (except to the extent of any cash received), and (iii) neither the
Company nor Commercial will recognize gain or loss as a consequence of the
Acquisition Merger or the Bank Merger.
5.2 Conditions to Obligations of Commercial and Bank. The obligations
of Commercial and Bank to effect the Merger and the transactions contemplated
herein shall be subject to the following additional conditions to the extent not
waived:
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(a) Opinion of Counsel for Company. Commercial shall have received
from Silver, Freedman & Taff, L.L.P. an opinion dated as of the Closing covering
the matters to be set forth in Exhibit 5.2(a).
(b) Required Consents. In addition to Governmental Approvals,
Company and Savings shall have obtained all necessary third party consents or
approvals required by or in connection with the Merger, the absence of which
would materially and adversely affect Company and the Company Subsidiaries,
taken as a whole. In this connection, the Company and Savings shall use its
reasonable best efforts to obtain consents from all lessors to their respective
real estate leases that may be required for consummation of the Merger.
(c) Company Accountants' Letter. Commercial at its expense shall
have received from Crowe, Chizek and Company, LLP letters dated the date of
mailing the Prospectus/Proxy Statement and the date of the Closing to the effect
that: (i) with respect to the Company they are independent accountants within
the meaning of the 1933 Act and 1934 Act and the applicable rules and
regulations thereunder, (ii) it is their opinion that the audited financial
statements of the Company included in or incorporated by reference into the
Prospectus/Proxy Statement comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and 1934 Act and the
applicable published accounting rules and regulations thereunder, (iii) on the
basis of such procedures as are set forth therein but without performing an
examination in accordance with generally accepted auditing standards nothing has
come to their attention which would cause them to believe that (A) any unaudited
interim financial statements appearing in the Prospectus/Proxy Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and 1934 Act and the published rules and
regulations thereunder; (B) said financial statements are not stated on a basis
substantially consistent with that of the audited financial statements; (C) (1)
at the date of the latest available consolidated financial statements of the
Company and at a specific date not more than five (5) business days prior to the
date of each such letter there has been, except as specified in such letter, any
increase in the outstanding capital stock, or indebtedness for borrowed money of
the Company (other than deposits and Federal Home Loan Bank advances with a
maturity of one year or less) or any decrease in the stockholders' equity
thereof as compared with amounts shown in the latest statement of financial
condition included in the Prospectus/Proxy Statement, or (2) for the period from
the date of the latest audited financial statements of the Company included in
or incorporated by reference into the Prospectus/Proxy Statement to a specific
date not more than five (5) business days prior to the date of each such letter,
there were, except as specified in such letter, any decreases, as compared with
the corresponding period in the preceding year, in consolidated net income for
Company excluding expenses associated with the Merger, or any increase, as
compared with the corresponding period in the preceding year, in the provision
for loan losses for Company, (iv) they have performed certain specific
procedures as a result of which they determined that certain information of an
accounting, financial or statistical nature included in the Prospectus/Proxy
Statement and requested by Commercial and agreed upon by such accountants, which
is expressed in dollars (or percentages obtained from such dollar amounts) and
obtained from accounting records which are subject to the internal controls of
the Company's accounting system or which has been derived directly from such
accounting records by analysis or
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computation is in agreement with such records or computations made therefrom
(excluding any questions of legal interpretation), and (v) on the basis of such
procedures as are set forth in such letter, nothing came to their attention with
respect to the Company which would cause them to believe that the pro forma
financial statements had not been properly compiled on the pro forma basis
described therein.
(d) No Material Adverse Change. Between the date of this Agreement
and the date of Closing, there shall not have occurred any material adverse
change in the financial condition, business, results of operations or assets of
Company and the Company Subsidiaries, taken as a whole, other than any such
change attributable to or resulting from any change in law, regulation or
generally accepted accounting principles which impairs both the Company and
other comparably sized thrift institutions in a substantially similar manner,
and other than any such change attributable to or resulting from changes in
economic conditions applicable to depository institutions generally or in
general levels of interest rates affecting both the Company and other comparably
sized thrift institutions to a similar extent and in a similar manner. No
payments made or expenses incurred in accordance with Section 4.16 hereof or
otherwise contemplated by this Agreement shall be deemed to constitute a
material adverse change under this Section 5.2(d).
(e) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. The representations and warranties of the Company and
Savings shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date) except for events or
occurrences arising after the date of this Agreement, which individually or
collectively, are not reasonably likely to result in a material adverse effect
on the business, financial condition or results of operations of the Company and
the Company Subsidiaries, taken as a whole; Company and Savings shall have
performed all obligations and complied with each covenant, in all material
respects, and all conditions under this Agreement on their parts to be performed
or complied with at or prior to the Acquisition Merger Effective Time; and
Company shall have delivered to Commercial a certificate, dated the Acquisition
Merger Effective Time and signed by its chief executive officer and chief
financial officer, to such effect.
(f) No Litigation. Neither the Company nor any Company Subsidiary
shall be a party to any pending litigation, reasonably probable of being
determined adversely to the Company or any Company Subsidiary, which would have
a material adverse effect on the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole.
(g) Regulatory Approval. All Governmental Approvals required
hereunder to consummate the transactions contemplated hereby shall have been
obtained without the imposition of any conditions which Commercial reasonably
and in good faith determine to be unduly burdensome upon the conduct of the
business of Commercial or the Bank.
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(h) Affiliates Letters. Commercial shall have received the letter
agreements from all affiliates of the Company as contemplated in Section 4.7(i)
herein.
(i) Environmental Reports. Commercial shall not have exercised its
right to terminate this Agreement pursuant to Section 4.19.
5.3 Conditions to Obligations of Company and Savings. The obligations
of Company and Savings to effect the Acquisition Merger and the transactions
contemplated herein shall be subject to the following additional conditions:
(a) Opinion of Counsel for Commercial. Company shall have received
from Housley Kantarian & Bronstein, P.C., special counsel to Commercial, and
Fitzgerald, Schorr, Barmettler & Brennan, P.C. an opinion dated as of the
Closing covering the matters to be set forth in Exhibit 5.3(a).
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. The representations and warranties of Commercial and
the Bank shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Commercial and the Bank
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Commercial shall have delivered to Company a certificate, dated the
Acquisition Merger Effective Time and signed by its chief executive officer and
chief financial officer, to such effect.
(c) Commercial Common Stock. A certificate for the required number
of whole shares of Commercial Common Stock, as determined pursuant to Section
1.3 hereof, and cash for fractional share interests, as so determined, shall
have been delivered to the Exchange Agent.
(d) Required Consents. In addition to Governmental Approvals,
Commercial and the Bank shall have obtained all necessary third party consents
or approvals in connection with the Merger, the absence of which would
materially and adversely affect Commercial and the Commercial Subsidiaries,
taken as a whole.
(e) NYSE Listing. The shares of Commercial Common Stock issuable
pursuant to this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
5.4 Termination of Agreement and Abandonment of Merger. This Agreement
and the Acquisition Plan of Merger may be terminated at any time before the
Acquisition Merger Effective Time, whether before or after approval thereof by
shareholders of Company, as provided below:
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(a) Mutual Consent. By mutual consent of the parties, evidenced by
their written agreement.
(b) Closing Delay. At the election of either party, evidenced by
written notice, if the Closing shall not have occurred on or before August 31,
1998, or such later date as shall have been agreed to in writing by the parties;
provided, however, that the right to terminate under this Section 5.4(b) shall
not be available to any party whose failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the Closing to occur
on or before such date.
(c) Conditions to Commercial Performance Not Met. By Commercial upon
delivery of written notice of termination to Company if any event occurs which
renders impossible the satisfaction in any material respect one or more of the
conditions to the obligations of Commercial and the Bank to effect the Merger
set forth in Sections 5.1 and 5.2 and noncompliance is not waived by Commercial,
provided, however, that the right to terminate under this Section 5.4(c) shall
not be available to Commercial where Commercial's or Bank's failure to perform
an obligation hereunder has been the cause of, or has resulted in, the failure
of the Closing to occur on or before such date.
(d) Conditions to Company Performance Not Met. By the Company upon
delivery of written notice of termination to Commercial if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Company and Savings to effect the Merger
set forth in Sections 5.1 and 5.3 and noncompliance is not waived by Company,
provided, however, that the right to terminate under this Section 5.4(d) shall
not be available to the Company where the Company's or Savings' failure to
perform an obligation hereunder has been the cause of, or has resulted in, the
failure of the Closing to occur on or before such date.
(e) Average NYSE Closing Price. By the Company at any time during
the two business day period commencing on the business day immediately after the
end of the Determination Period, if the Average NYSE Closing Price shall be less
than $45.25 (adjusted as indicated in Section 1.3(a)(iv)), subject, however, to
the following three sentences. If the Company elects to exercise its termination
right pursuant to this Section 5.4(e), it shall give written notice to
Commercial no later than the end of the aforementioned two business day period.
During the two business day period commencing with the business day after its
receipt of such notice, Commercial shall have the option to increase the
consideration to be received by the holders of Company common stock hereunder,
by adjusting the Exchange Ratio to equal the number (calculated to four decimal
places and rounded down) obtained by dividing (A) $26.05 by (B) the Average NYSE
Closing Price. If Commercial so elects within such two day period, it shall give
written notice to the Company no later than the end of the aforementioned two
day period of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 5.4(e) and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified).
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For purposes of this Section 5.4, "Average NYSE Closing Price" and
"Determination Period" shall have the meanings specified in Section 1.3(b).
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
6.1 Termination; Lack of Survival of Representations and Warranties. In
the event of the termination and abandonment of this Agreement pursuant to
Section 5.4 of this Agreement, this Agreement shall become void and have no
effect, except that (i) the provisions of Sections 2.7 and 3.7 (Brokers and
Finders), 4.8 (Publicity), this Section 6.1, 6.2 (Expenses) and 8.2
(Confidentiality) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 5.4(c) or 5.4(d) of
this Agreement shall not relieve the breaching party from liability for an
uncured intentional and willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination.
The representations, warranties and agreements of the parties set forth
in this Agreement shall not survive the Acquisition Merger Effective Time, and
shall be terminated and extinguished at the Acquisition Merger Effective Time,
and from and after the Acquisition Merger Effective Time none of the parties
hereto shall have any liability to the other on account of any breach or failure
of any of those representations, warranties and agreement; provided, however,
that the foregoing clause shall not (i) apply to agreements of the parties which
by their terms are intended to be performed after the Acquisition Merger
Effective Time, and (ii) shall not relieve any person for liability for fraud,
deception or intentional misrepresentation.
6.2 Payment of Expenses.
(a) 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.
(b) Notwithstanding any provision in this Agreement to the contrary,
in order to induce Commercial and the Bank to enter into this Agreement and as a
means of compensating Commercial and the Bank for the substantial direct and
indirect monetary and other costs incurred and to be incurred in connection with
this Agreement and the transactions contemplated hereby, the Company and Savings
agree that at such time as the option granted by the Company to Commercial
pursuant to the Option Agreement becomes exercisable under the Option Agreement,
the Company or Savings will upon demand pay to Commercial or the Bank in
immediately available funds $1,350,000.
ARTICLE VII
CERTAIN POST-MERGER AGREEMENTS
7.1 Reports to the SEC. Commercial shall continue to file all reports
and data with the SEC necessary to permit the shareholders of Company who may be
deemed "underwriters" (within the meaning of Rule 145 under the 1933 Act) of
Company common stock to sell the Company
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common stock received by them in connection with the Merger pursuant to Rules
144 and 145(d) under such Act if they would otherwise be so entitled.
7.2 Employees.
(a) Employees of the Company and the Company Subsidiaries who become
employees of Commercial or a Commercial Subsidiary after the Acquisition Merger
Effective Time shall be eligible to participate in all benefit plans sponsored
by Commercial or a Commercial Subsidiary to the same extent as other similarly
situated Commercial or any Commercial Subsidiary employees, (i) with full credit
for prior service with the Company or Company Subsidiaries for purposes of
vesting, eligibility for participation and other purposes other than determining
the amount of benefit accruals under any defined benefit plan, (ii) without any
waiting periods, evidence of insurability, or application of any pre-existing
condition limitations, and (iii) with full credit for claims arising prior to
the Acquisition Merger Effective Time for purposes of deductibles, out-of-pocket
maximums, benefit maximums and all other similar limitations for the applicable
plan year during which the Merger is consummated. Commercial shall honor all
accrued vacation leave for the employees of Company and the Company Subsidiaries
following the Acquisition Merger Effective Time. Except as otherwise provided
herein, the Company's health (including the Company's supplemental care plan)
and dental insurance plans shall not be terminated by reason of the Merger but
shall continue thereafter as plans of the Surviving Corporation until such time
as the employees of the Company and the Company Subsidiaries are integrated into
Commercial's or other applicable Commercial Subsidiary's health and dental
insurance plans. Commercial and the Commercial Subsidiaries shall take such
steps as are necessary or required to integrate the employees of the Company and
the Company Subsidiaries in such plans as soon as practicable after the
Acquisition Merger Effective Time.
(b) Commercial as the Surviving Corporation shall provide to the
employees of the Company and Company Subsidiaries full credit for prior service
with the Company and with the Company Subsidiaries for purposes of severance
benefits under Commercial's guidelines in respect of such matters, which
guidelines currently provide a severance benefit equivalent to one week's salary
for each year of service, with a maximum aggregate entitlement equal to eight
weeks of salary. In addition, Commercial or the Commercial Subsidiaries will pay
for accrued vacation upon termination of service and will offer outplacement
services or counseling to severed employees.
ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this Agreement may be
amended, whether before or after any relevant approval of shareholders, by an
agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that, after the adoption of the Agreement by the shareholders of the
Company, no such amendment without further shareholder approval may reduce the
amount or change the form of the consideration to be received by the Company
shareholders in the Merger.
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8.2 Confidentiality. All information disclosed hereafter by any party
to this Agreement to any other party to this Agreement, including, without
limitation, any information obtained pursuant to Section 4.1 hereof, shall be
kept confidential by such other party and shall not be used by such other party
otherwise than as herein contemplated except to the extent that (i) it was known
by such other party when received, (ii) it is or hereafter becomes lawfully
obtainable from other sources, (iii) it is necessary or appropriate to disclose
to the OTS, the FDIC or any other regulatory authority having jurisdiction over
the parties or their subsidiaries or as may otherwise be required by law, or
(iv) to the extent such duty as to confidentiality is waived by the other party.
In the event of the termination of this Agreement, each party shall use all
reasonable efforts to return upon request to the other parties all documents
(and reproductions thereof) received from such other parties (and, in the case
of reproductions, all such reproductions made by the receiving party) that
include information not within the exceptions contained in the first sentence of
this Section 8.2.
8.3 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Nebraska without taking into account a provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
8.4 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to Commercial or Bank, to
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
Attention: William A. Fitzgerald, Chairman of the Board
and Chief Executive Officer
with a copy to:
Housley Kantarian & Bronstein, P.C.
Suite 700
1220 19th Street, N.W.
Washington, DC 20036
Attention: Cynthia R. Cross, Esquire
and if to Company or Savings, to
Perpetual Midwest Financial, Inc.
700 First Avenue, N.E.
Cedar Rapids, Iowa 52401
Attention: James L. Roberts, President and
Chief Executive Officer
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with a copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005-3934
Attention: Barry P. Taff, P.C.
Christopher R. Kelly, P.C.
or such other address as shall be furnished in writing by any such party, and
any such notice or communication shall be deemed to have been given two business
days after the date of such mailing (except that the notice of change of address
shall not be deemed to have been given until received by the addressee). Notices
may also be sent by telegram, telex, facsimile transmission or hand delivery and
in such event shall be deemed to have been given as of the date received.
8.5 No Assignment. This Agreement may not be assigned by any of the
parties hereto, by operation of law or otherwise, without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.6 Headings. The description heading of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be extended in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the context otherwise
requires, (a) all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and (b)
all references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
8.9 Entire Agreement. This Agreement, together with the schedules,
lists, exhibits and certificates required to be delivered hereunder, and any
amendment hereafter executed and delivered in accordance with Section 8.1,
constitutes the entire agreement of the parties, and supersedes any prior
written or oral agreement or understanding among any of the parties hereto
pertaining to the Merger, except for the Confidentiality and Non-Disclosure
Agreement between the Company and Commercial dated October 1, 1997, which shall
remain in full force and effect. This Agreement is not intended to confer upon
any other persons any rights or remedies hereunder except as expressly set forth
herein.
8.10 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision
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of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of the Agreement.
8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person (other than the Company, Savings, Commercial or the Bank and
their respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise expressly provided
herein.
8.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, all as of the
date set forth above.
COMMERCIAL FEDERAL CORPORATION PERPETUAL MIDWEST FINANCIAL, INC.
By: /s/ James A. Laphen By: /s/ James L. Roberts
---------------------- -------------------------
Name: James A. Laphen Name: James L. Roberts
Title: President and Chief Title: President and Chief
Operating Officer Executive Officer
COMMERCIAL FEDERAL BANK, A PERPETUAL SAVINGS BANK, FSB
FEDERAL SAVINGS BANK
By: /s/ James A. Laphen By: /s/ James L. Roberts
---------------------- -------------------------
Name: James A. Laphen Name: James L. Roberts
Title: President and Chief Title: President and Chief
Operating Officer Executive Officer
47
Exhibit 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 15, 1997, between Commercial
Federal Corporation, a Nebraska corporation ("Grantee"), and Perpetual Midwest
Financial, Inc., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to continue to
pursue the transactions contemplated by the Merger Agreement, Issuer has agreed
to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 185,419 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of Issuer ("Common Stock") at a price per share equal
to the average of last reported sale prices per share of Common Stock as
reported on the Nasdaq National Market System on December 12, 1997; provided,
however, that in the event Issuer issues or agrees to issue any shares of Common
Stock (other than shares of Common Stock issued pursuant to stock options
granted prior to the date hereof) at a price less than such price per share (as
adjusted pursuant to subsection (b) of Section 5), such price shall be equal to
such lesser price (such price, as adjusted if applicable, the "Option Price");
provided, further, that in no event shall the number of shares for which this
Option is exercisable exceed 9.9% of the issued and outstanding shares of Common
Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 9.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach any provision of the Merger Agreement.
<PAGE>
2. (a) The Holder (as hereinafter defined) 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
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 5.4(c) due to a breach of the
Company's covenants at Sections 4.2, 4.3, 4.4, 4.6 or 4.9 or the condition at
Section 5.2(e) of the Merger Agreement (but only if the breach giving rise to
the termination was willful) (each, a "Listed Termination"); or (iii) the
passage of eighteen (18) months (or such longer period as provided in Section
10) after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a Listed Termination. The term
"Holder" shall mean the holder or holders of the Option. Notwithstanding
anything to the contrary contained herein, (i) the Option may not be exercised
at any time when Grantee shall be in material breach of any of its covenants or
agreements contained in the Merger Agreement such that Issuer shall be entitled
to terminate the Merger Agreement as a result of a material breach.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary (other than mergers,
consolidations or similar transactions involving solely Issuer and/or one
or more wholly-owned (except for directors' qualifying shares and a de
minimis number of other shares) Subsidiaries of the Issuer, provided, any
such transaction is not entered into in violation of the terms of the
Merger Agreement), (y) a purchase, lease or other acquisition of all or
any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Issuer
Subsidiary and (b) "Subsidiary" shall have the meaning set forth in Rule
12b-2 under the 1934 Act;
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(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postpone ment thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
cancelled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or any Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Office of Thrift Supervision
(the "OTS") or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
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(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the OTS or any other
regulatory or antitrust agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify Issuer of such filing, and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option .
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option 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.
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(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, dated as of December 15,
1997, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "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 reasonably
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 in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed subject to the receipt of any necessary regulatory
approvals to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Savings and
Loan Holding Company Act ("SLHCA"), or the Change in Bank Control Act of 1978,
as amended, or any state or other federal banking law, prior approval of or
notice to the OTS or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such information to the
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OTS or such state or other federal regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 9.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
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6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
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7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause
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to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Holder and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its reasonable best efforts to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option and/or the Option Shares
whether in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, and/or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee
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Subsidiary and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, the then outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock shall
after such merger or plan of exchange represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (iii) to
sell or otherwise transfer all or a substantial part of its or the Issuer
Subsidiary's assets or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
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of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 9.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
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the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
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<PAGE>
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the OTS has approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner approved by the OTS.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
OTS under the SLHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the
13
<PAGE>
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price; provided,
however, that Grantee may not exercise its rights pursuant to this Section 14 if
Issuer has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "Surrender Price" shall be equal to $1.35 million (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
and (ii) minus, if applicable, the excess of (B) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
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. In connection therewith both
parties waive the posting of any bond or similar requirement.
14
<PAGE>
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, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Nebraska, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
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.
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 assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
COMMERCIAL FEDERAL CORPORATION PERPETUAL MIDWEST FINANCIAL, INC.
By: /s/ James A. Laphen By: /s/ James L. Roberts
---------------------------- ----------------------------
Name: James A. Laphen Name: James L. Roberts
Title: President and Chief Title: President and Chief
Operating Officer Executive Officer
16
Exhibit 99
[PMFI PERPETUAL MIDWEST FINANCIAL, INC. (LETTERHEAD)]
- --------------------------------------------------------------------------------
For Immediate Release
NEWS RELEASE
DATE: December 15, 1997
CONTACT: James L. Roberts, President & CEO
(319) 366-1851
PERPETUAL MIDWEST FINANCIAL, INC.
ANNOUNCES BUSINESS COMBINATION WITH
COMMERCIAL FEDERAL CORPORATION
CEDAR RAPIDS, IOWA---------
Perpetual Midwest Financial, Inc. ("Perpetual"), parent of Perpetual
Savings Bank, FSB ("Perpetual Savings"), announced today that it has signed a
definitive agreement with Commercial Federal Corporation ("Commercial"),
headquartered in Omaha, Nebraska, pursuant to which Perpetual will merge with
Commercial and Perpetual Savings will merge with Commercial Federal Bank, a
wholly owned subsidiary of Commercial.
The agreement provides for Perpetual shareholders to receive 0.5757 shares
of Commercial common stock for each share of Perpetual common stock owned (or
0.8636 shares taking into account Commercial's 3-for-2 stock split payable
December 15, 1997). Based on the closing price of Commercial common stock of
$53.250 (equivalent to $35.50 on a post split basis) on December 15, the
indicated transaction value for each share of Perpetual common stock would be
$30.66. The agreement provides that, if the average price of Commercial common
stock over a defined pricing period prior to closing is below $30.167 per share
on a post-split basis, Perpetual can terminate the transaction unless Commercial
agrees to increase the exchange ratio to an indicated price per share (based on
the average price per share of Commercial common stock over the pricing period)
to Perpetual shareholders of $26.05.
<PAGE>
2
Commercial, parent company of Commercial Federal Bank, has operations in
Nebraska, Kansas, Colorado, Oklahoma and Iowa. At September 30, 1997, Commercial
had total assets of $7.2 billion and total shareholders' equity of $444 million.
Perpetual Savings, headquartered in downtown Cedar Rapids, Iowa, has four full
service branch offices including: Cedar Rapids West, Cedar Rapids East, Cedar
Rapids Northeast, and Iowa City, Iowa. At September 30, 1997, Perpetual had
total assets of $402 million and total shareholders' equity of $34 million.
James L. Roberts, Perpetual President and CEO, said, "We look forward to
our combination with Commercial. By combining with Commercial, we are offering
our customers, employees and shareholders the benefits that come from being part
of a larger company, while maintaining our commitment to the local community.
Commercial's business philosophy, like ours, is focused on satisfying customers'
financial needs and, at the same time, maintaining strong local commitments to
communities served. With Commercial's added resources, we will be even more
effective in serving the banking and financial needs of our customers and the
entire Cedar Rapids and Iowa City areas."
The merger has been approved by the Boards of Directors of both Commercial
and Perpetual and is subject to Perpetual shareholder approval, customary
regulatory approvals and certain other conditions. The merger is expected to be
completed in Mid 1998.
Perpetual's common stock is traded on the Nasdaq National Market under the
symbol "PMFI".
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