<PAGE> 1
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
September 16, 1996
(Date of earliest event reported)
FIRST FEDERAL BANCSHARES OF EAU CLAIRE, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-24148
WISCONSIN 39-1782733
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
319 EAST GRAND AVENUE
EAU CLAIRE, WISCONSIN 54701
(Address of principal executive offices) (Zip Code)
(715) 833-7700
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
PROSPECTIVE ACQUISITION
On September 16, 1996, First Federal Bancshares of Eau Claire, Inc., a
Wisconsin corporation (the "Registrant"), announced that it had entered into an
Agreement and Plan of Merger (the "Agreement") with Mutual Savings Bank, a
Wisconsin chartered mutual savings bank ("Mutual"), and First Federal Merger
Corporation, a Wisconsin corporation and wholly-owned subsidiary of Mutual
("Merger Corp."), pursuant to which Merger Corp. will merge with and into
Registrant (the "Merger"), with Registrant thereafter becoming a direct,
wholly-owned subsidiary of Mutual. Mutual may further restructure its
operations by consolidating the Registrant and Registrant's wholly-owned
subsidiaries into itself. The Agreement provides, among other things, that as
a result of the Merger, each outstanding share of common stock of the
Registrant will be converted into the right to receive $18.85 in cash, subject
to a $.05 per share upward price adjustment for each calendar month or portion
of a month beyond March 31, 1997 for which consummation of the Merger is
delayed provided that such delay is not due to a breach of any representation,
warranty or covenant by, or otherwise attributable to, the Registrant.
Registrant and Mutual also entered into a stock option agreement (the
"Stock Option Agreement"), pursuant to which Registrant granted to Mutual an
option (the "Option") to purchase, subject to certain limitations, up to 19.9%
of the issued and outstanding shares of Registrant's common stock (subject to
certain adjustments) at a per share purchase price of $15.75, upon certain terms
and in accordance with certain conditions. The Option will become exercisable
upon the occurrence of certain events ("Exercise Events"), including, (i) the
termination of the Agreement by the Registrant, and (ii) the occurrence of
either of the following events: (y) the acquisition by any person or entity,
other than Mutual, of 20% of the Registrant's common stock pursuant to an
agreement between Registrant and such party, or (z) the Registrant's execution
of an agreement with any person or entity, other than Mutual, providing for the
Merger, consolidation, or any other business combination involving the
Registrant, including an acquisition of more than 10% of Registrant's assets.
No Exercise Events have occurred as of September 16, 1996.
The Registrant anticipates the Merger will be consummated during the
first quarter of fiscal 1997. Consummation of the Merger is subject to certain
conditions, including: (i) approval of the Agreement by Registrant's
shareholders; (ii) the receipt of all required regulatory approvals for the
Merger and the other transactions contemplated by the Agreement; (iii) the
occurrence of no adverse effects to Registrant greater than $1.0 million (on an
after-tax basis) due to the breach of any representations, warranties or
covenants by the Registrant or the occurrence of events after September 16,
1996, with certain exceptions; (iv) the Registrant's receipt of a fairness
opinion from its financial advisor on the date of the mailing of the Proxy
Statement for the meeting to be held at which Registrant's shareholders will
vote on the Merger; and (v) satisfaction of certain other customary conditions
of closing.
The Agreement and Stock Option Agreement are attached hereto as
exhibits and are incorporated herein by reference in their entirety. The
foregoing summary of the Agreement and Stock Option Agreement does not purport
to be complete and is qualified in its entirety by reference to such exhibits.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) No financial statements are required at this time.
(b) No pro forma financial information is required at this time.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated September 16, 1996, by
and among Mutual Savings Bank, First Federal Merger Corporation and
First Federal Bancshares of Eau Claire, Inc.
2.2 Stock Option Agreement, dated September 16, 1996, by and
between Mutual Savings Bank and First Federal Bancshares of Eau
Claire, Inc.
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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.
FIRST FEDERAL BANCSHARES
OF EAU CLAIRE, INC.
Date: September 16, 1996 By: /s/ Jerome A. Reinecke
----------------------------------------
Jerome A. Reinecke, Vice President,
Treasurer and Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------- ----------- -----------
2.1 Agreement and Plan of Merger, dated September 16, 7
1996, by and among Mutual Savings Bank, First Federal
Merger Corporation and First Federal Bancshares of
Eau Claire, Inc.
2.2 Stock Option Agreement, dated September 16, 1996, 71
by and between Mutual Savings Bank and First Federal
Bancshares of Eau Claire, Inc.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER,
DATED SEPTEMBER 16, 1996, BY AND AMONG
MUTUAL SAVINGS BANK, FIRST FEDERAL MERGER CORPORATION
AND FIRST FEDERAL BANCSHARES OF EAU CLAIRE, INC.
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MUTUAL SAVINGS BANK,
FIRST FEDERAL MERGER CORPORATION
and
FIRST FEDERAL BANCSHARES OF EAU CLAIRE, INC.
DATED AS OF SEPTEMBER 16, 1996
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TABLE OF CONTENTS
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RECITALS 1
ARTICLE I DEFINITIONS 1
1.1 Acquisition 1
1.2 Acquisition Proposal 2
1.3 Affiliate 2
1.4 Agreement 2
1.5 Announcement 2
1.6 Bank 3
1.7 Buildings 3
1.8 CERCLA 3
1.9 Closing 3
1.10 Closing Date 3
1.11 Code 3
1.12 Contracts 3
1.13 Control 3
1.14 Effective Time 3
1.15 Employee Benefit Plans 3
1.16 Environmental Claim, Environmental Hazardous Material,
Environmental Laws, Environmental Permits and Environmental
Release 4
1.17 Equipment 4
1.18 ERISA 4
1.19 Exchange Act 4
1.20 FDIC 4
1.21 FHLB of Chicago 4
1.22 First Federal 4
1.23 First Federal Closing Certificate 4
1.24 First Federal Common Stock 4
1.25 First Federal Counsel Opinion 4
1.26 First Federal Deferred Compensation Plan 4
1.27 First Federal Disclosure Schedule 5
1.28 First Federal ESOP 5
1.29 First Federal ESOP Indebtedness 5
1.30 First Federal Executives 5
1.31 First Federal Existing Contracts 6
1.32 First Federal Existing Employment Agreements 6
1.33 First Federal Existing Indebtedness 6
1.34 First Federal Existing Insurance Policies 6
1.35 First Federal Existing Investment Securities 6
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1.36 First Federal Existing Liens 6
1.37 First Federal Existing Litigation 6
1.38 First Federal Existing Permits 6
1.39 First Federal Existing Plans 6
1.40 First Federal Incentive Plan 7
1.41 First Federal Meeting 7
1.42 First Federal Profit Sharing Plan 7
1.43 First Federal Proxy Statement 7
1.44 First Federal Real Estate 7
1.45 First Federal Replacement Employment Agreement 7
1.46 First Federal Reports 7
1.47 First Federal Severance Agreement 7
1.48 First Federal Shareholders 7
1.49 First Federal Stock Option Plan 7
1.50 First Federal Stock Options 8
1.51 First Federal Subsidiaries 8
1.52 HOLA 8
1.53 Indebtedness 8
1.54 Indemnified Liabilities 8
1.55 Indemnified Parties 8
1.56 Information 8
1.57 Investment Securities 8
1.58 IRS 8
1.59 Law 8
1.60 Lien 8
1.61 Material Adverse Effect 8
1.62 Merger 9
1.63 Merger Corp 9
1.64 Merger Per Share Consideration 9
1.65 Merger Stock 9
1.66 Merger Total Consideration 9
1.67 Minnesota Savings Association Regulatory Authority 9
1.68 Mutual 9
1.69 Mutual and Merger Corp. Closing Certificate 9
1.70 Mutual Counsel Opinion 9
1.71 NASDAQ/NMS 9
1.72 OTS 9
1.73 Paying Agent 10
1.74 Payment Fund 10
1.75 Permits 10
1.76 Permitted Liens 10
1.77 Person 10
1.79 Regulatory Approvals 10
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1.80 Restructuring 10
1.81 SAIF 10
1.82 SEC 10
1.83 Securities Act 11
1.84 Stock Option Agreement 11
1.85 Stock Option Consideration 11
1.86 Subsidiary 11
1.87 Surviving Corporation 11
1.88 Trading Day 11
1.89 WBCL 11
1.90 Wisconsin Savings Association Regulatory Agency 11
ARTICLE II THE MERGER 11
2.1 The Merger 11
2.2 Effect of the Merger 12
2.3 Effective Time 12
2.4 Articles and Bylaws of Surviving Corporation 13
2.5 Charter and Bylaws of the Bank; Offices of the Bank 13
2.6 Directors and Officers of Surviving Corporation 13
2.7 Conversion of First Federal Common Stock 13
2.8 Conversion of Stock of Merger Corp. 14
2.9 Meeting of First Federal Shareholders 14
2.10 Payment of Merger Total Consideration 15
2.11 Surrender of Certificates 15
2.12 [Reserved] 16
2.13 Continuation of Deposits 16
2.14 Liquidation Account and Sub-Accounts 16
2.15 Subsequent Restructuring 17
2.16 Anti-Dilution Provisions 17
ARTICLE III OTHER AGREEMENTS 17
3.1 Access 17
3.2 First Federal's Disclosure Schedule 18
3.3 Duties Concerning Representations 18
3.4 Deliveries of Information; Consultation 19
3.5 Directors' and Officers' Indemnification 19
3.6 Letter of First Federal's Accountants 20
3.7 Legal Conditions to Merger 20
3.8 Stock Listings 21
3.9 Announcements 21
3.10 Best Efforts 21
3.11 Employee And Managerial Matters 21
3.12 Employee Benefit Matters 22
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3.13 Confidentiality 25
3.14 Conformance to Reserve Policies 25
3.15 Conduct of Mutual's Business 26
3.16 FDICIA Management Certification Systems 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL 26
4.1 Organization and Qualification; Subsidiaries 26
4.2 Articles of Incorporation and Bylaws 27
4.3 Capitalization 27
4.4 Authorization: Enforceability 28
4.5 No Violation or Conflict 29
4.6 Title to Assets; Leases 29
4.7 Litigation 29
4.8 Securities and Banking Reports; Books and Records 30
4.9 Absence of Certain Changes 30
4.10 Buildings and Equipment 31
4.11 First Federal Existing Contracts 31
4.12 Performance of First Federal Existing Contracts 32
4.13 Contingent and Undisclosed Liabilities 32
4.14 First Federal Existing Insurance Policies 33
4.15 Employee Benefit Plans 33
4.16 No Violation of Law 34
4.17 Brokers 35
4.18 Taxes 35
4.19 Real Estate 36
4.20 Governmental Approvals 36
4.21 No Pending Acquisitions 36
4.22 Labor Matters 36
4.23 Indebtedness 37
4.24 First Federal Existing Permits 37
4.25 Disclosure 37
4.26 Information Supplied 37
4.27 Vote Required 38
4.28 Opinion of Financial Advisor 38
4.29 Environmental Protection 38
4.30 Investment Securities 40
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MUTUAL AND MERGER CORP. 40
5.1 Organization and Capitalization; Business 40
5.2 Authorization; Enforceability 41
5.3 No Violation or Conflict 41
5.4 Litigation 41
5.5 Brokers 42
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Page
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5.6 Governmental Approvals 42
5.7 Disclosure 42
5.8 Information Supplied 42
5.9 Opinion of Financial Advisor 42
5.10 Cash Payment 42
5.11 Compliance with Laws 42
5.12 Consummation 42
5.13 Employee Benefit Plans 42
ARTICLE VI CONDUCT OF BUSINESS BY FIRST FEDERAL PENDING THE MERGER 43
6.1 Carry on in Regular Course 43
6.2 Use of Assets 43
6.3 No Default 43
6.4 Existing Insurance Policies 43
6.5 Employment Matters 43
6.6 Contracts and Commitments 44
6.7 Indebtedness; Investments 44
6.8 Preservation of Relationships 44
6.9 Compliance with Laws 44
6.10 Taxes 44
6.11 Amendments 44
6.12 Issuance of Stock; Dividends; Redemptions 44
6.13 Policy Changes 45
6.15 Acquisition Transaction 45
ARTICLE VII CONDITIONS PRECEDENT TO THE MERGER 46
7.1 Conditions to Each Parties Obligations to Effect the Merger 46
7.2 Conditions to Obligation of Mutual 46
7.3 Conditions to Obligation of First Federal 48
ARTICLE VIII TERMINATION; MISCELLANEOUS 49
8.1 Termination 49
8.2 Rights on Termination; Waiver 49
8.3 Survival of Representations, Warranties and Covenants 50
8.4 Entire Agreement; Amendment 50
8.5 Expenses 50
8.6 Governing Law 51
8.7 Assignment 51
8.8 Notices 51
8.9 Counterparts; Headings 52
8.10 Interpretation 52
8.11 Severability 52
8.12 Specific Performance 52
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8.13 No Reliance 52
8.14 Further Assurances 53
EXHIBITS
Exhibit 1 - Form of First Federal Closing Certificate
Exhibit 2 - Form of First Federal Counsel Opinion
Exhibit 3 - Form of First Federal Replacement Employment Agreement
Exhibit 4 - Form of First Federal Severance Agreement
Exhibit 5 - Form of Mutual and Merger Corp. Closing Certificate
Exhibit 6 - Form of Mutual Counsel Opinion
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of this 16th day of
September, 1996 by and among MUTUAL SAVINGS BANK, FIRST FEDERAL MERGER
CORPORATION and FIRST FEDERAL BANCSHARES OF EAU CLAIRE, INC.
RECITALS
WHEREAS, the respective Boards of Directors of Mutual, Merger Corp. and
First Federal have approved this Agreement by the requisite vote imposed by Law,
and deem it advisable and in the best interest of their respective institutions
and members or stockholders, as the case may be, to consummate the
reorganization provided for herein, pursuant to which Merger Corp. will merge
with and into First Federal, the surviving institution, and in connection
therewith the stockholders of First Federal will receive cash in exchange for
their shares of First Federal Common Stock;
WHEREAS, concurrently with this Agreement and as a condition and an
inducement to the willingness of Mutual to enter into this Agreement, First
Federal and Mutual are entering into a Stock Option Agreement granting Mutual,
under the conditions set forth therein, the option to purchase shares of
newly-issued First Federal Common Stock;
WHEREAS, the Board of Directors of First Federal has directed that this
Agreement and the transactions described in this Agreement be submitted for
approval at the First Federal Meeting.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Acquisition. "Acquisition" shall mean any of the following
involving First Federal or the Bank, other than the Merger:
(a) any merger, consolidation, share exchange, business
combination or other similar transaction;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of assets in a single transaction or series of
related transactions,
1
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excluding from this calculation any such transactions undertaken in the
ordinary course of business and consistent with past practice;
(c) any sale of 10% or more of the outstanding shares of capital
stock (or securities convertible or exchangeable into or otherwise evidencing,
or an agreement or instrument evidencing, the right to acquire capital stock);
(d) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock or the filing of a registration statement
under the Securities Act in connection therewith;
(e) any solicitation of proxies in opposition to approval by
First Federal's shareholders of the Merger or the Stock Option Agreement;
(f) The filing of an acquisition application (or the giving of
acquisition notice), whether in draft or final form, under HOLA with respect to
First Federal or the Bank;
(g) any person shall have acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 10% or more of the then
outstanding shares of capital stock; or
(h) any public announcement of a proposal, plan or intention to
do any of the foregoing.
1.2 Acquisition Proposal. "Acquisition Proposal" shall mean the making
of any proposal by any Person concerning an Acquisition.
1.3 Affiliate. "Affiliate" shall mean, with respect to any Person, any
other Person who directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the first Person,
including without limitation all directors and executive officers of the first
Person.
1.4 Agreement. "Agreement" shall mean this Agreement and Plan of
Merger, together with the Exhibits attached hereto and together with the First
Federal Disclosure Schedule, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
1.5 Announcement. "Announcement" shall mean any public notice, release,
statement or other communication to employees, suppliers, distributors,
customers, members, stockholders, the general public, the press or any
securities exchange or securities quotation system relating to the negotiation
and preparation of this Agreement or the transactions contemplated hereby.
2
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1.6 Bank. "Bank" shall mean First Federal Bank of Eau Claire, F.S.B., a
federally-chartered savings bank which is a wholly-owned subsidiary of First
Federal.
1.7 Buildings. "Buildings" shall mean all buildings, fixtures,
structures and improvements (including without limitation stand-alone automated
teller machines or similar devices) used by First Federal or an Affiliate and
located on the First Federal Real Estate.
1.8 CERCLA. "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as the same may be in effect
from time to time.
1.9 Closing. "Closing" shall mean the conference to be held at 10:00
A.M., Central Time, on the Closing Date at the offices of Quarles & Brady, 411
East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or such other time and place
as the parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
1.10 Closing Date. "Closing Date" shall mean the date of the Effective
Time or such other date as the parties may mutually agree to in writing.
1.11 Code. "Code" shall mean the Internal Revenue Code of 1986, as the
same may be in effect from time to time.
1.12 Contracts. "Contracts" shall mean all of the contracts,
agreements, leases, relationships and commitments, written or oral, to which the
relevant Person is a party or by which it is bound.
1.13 Control. "Control," as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. "Control," as used
with respect to securities or other property, shall mean the power to exercise
or direct the exercise of any voting rights associated therewith, or the power
to dispose or direct the disposition thereof, or both.
1.14 Effective Time. "Effective Time" shall have the meaning specified
in Section 2.3 of this Agreement.
1.15 Employee Benefit Plans. "Employee Benefit Plans" shall mean any
pension plan, profit sharing plan, bonus plan, incentive compensation plan,
deferred compensation plan, stock ownership plan, stock purchase plan, stock
option plan, stock appreciation plan, employee benefit plan, employee benefit
policy, retirement plan, fringe benefit program, insurance plan, severance plan,
disability plan, health care plan, sick leave plan, death benefit plan, or any
other plan or program to provide retirement income, fringe benefits or other
benefits to former or current employees of the relevant Person.
3
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1.16 Environmental Claim, Environmental Hazardous Material,
Environmental Laws, Environmental Permits and Environmental Release.
"Environmental Claim," " Environmental Hazardous Material," "Environmental
Laws," "Environmental Permits" and "Environmental Release" shall have the
meanings specified in Section 4.29 of this Agreement.
1.17 Equipment. "Equipment" shall mean all equipment, boilers,
furniture, fixtures, motor vehicles, furnishings, office equipment, computers
and other items of tangible personal property owned by the relevant Person which
are either presently used, or are used on the Closing Date, by the relevant
Person in the conduct of its business.
1.18 ERISA. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as the same may be in effect from time to time.
1.19 Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as the same may be in effect from time to time.
1.20 FDIC. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.21 FHLB of Chicago. "FHLB of Chicago" shall mean the Federal Home
Loan Bank of Chicago, Illinois.
1.22 First Federal. "First Federal" shall mean First Federal Bancshares
of Eau Claire, Inc., a Wisconsin corporation which is registered as a unitary
savings and loan holding company under HOLA and the rules and regulations of the
OTS promulgated thereunder.
1.23 First Federal Closing Certificate. "First Federal Closing
Certificate" shall mean the Closing Certificate of First Federal in
substantially the form of Exhibit 1 attached to this Agreement.
1.24 First Federal Common Stock. "First Federal Common Stock" shall
mean all of the authorized shares of common stock, $.01 par value per share, of
First Federal.
1.25 First Federal Counsel Opinion. "First Federal Counsel Opinion"
shall mean an opinion of Michael Best & Friedrich in substantially the form of
Exhibit 2 attached to this Agreement.
1.26 First Federal Deferred Compensation Plan. "First Federal Deferred
Compensation Plan" shall mean the First Federal Bank of Eau Claire, F.S.B.
Deferred Compensation Plan, established by the Bank effective January 1, 1994 to
provide for contributions by the Bank on behalf of certain employees in an
amount equal to the additional benefits such persons would have received under
the First Federal ESOP but for the maximum annual contribution limitation in
Section 415 of the Code and the maximum annual contribution limit in Section
401(a)(17) of the Code.
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<PAGE> 13
1.27 First Federal Disclosure Schedule. "First Federal Disclosure
Schedule" shall mean the disclosure schedule, dated the date of this Agreement,
delivered by First Federal to Mutual contemporaneously with the execution and
delivery of this Agreement and as the same may be amended from time to time
after the date of this Agreement and prior to the Closing Date in accordance
with the terms of this Agreement.
1.28 First Federal ESOP. "First Federal ESOP" shall mean the First
Federal Bank of Eau Claire, F.S.B. Employee Stock Ownership Trust effective
January 1, 1994.
1.29 First Federal ESOP Indebtedness. "First Federal ESOP Indebtedness"
shall mean the Indebtedness of the First Federal ESOP to First Federal under the
loan extended by First Federal to the First Federal ESOP for the purpose of
financing the First Federal ESOP's purchase of shares of First Federal Common
Stock in connection with the Bank's October 6, 1994 conversion from mutual to
stock form and its concurrent reorganization into a holding company structure
pursuant to which the Bank became a wholly-owned subsidiary of First Federal.
First Federal ESOP Indebtedness shall include the outstanding principal and
accrued and unpaid interest under the terms of said loan as of the relevant time
of inquiry.
1.30 First Federal Executives. "First Federal Executives" shall mean
the individuals set forth in the table below in their capacities as executive
officers of First Federal or the Bank, or both, as identified adjacent to their
respective names:
<TABLE>
<CAPTION>
OFFICE(S) HELD IN
NAME OF EXECUTIVE FIRST FEDERAL AND THE BANK
- ----------------- --------------------------
<S> <C>
Donald T. Tietz President and Chief Executive Officer
of First Federal and the Bank
Douglas D. Hillestad Vice President, Home Office Loan
Originations of the Bank
David L. Johnson Vice President, Mortgage Loan
Originations, Processing and Servicing
of the Bank
Jerome A. Reinecke Vice President, Treasurer, Chief
Financial Officer and Corporate
Secretary of First Federal and of the
Bank
Thomas E. Schommer Vice President, Branch Coordination of
the Bank
Robert D. Stanton Vice President, Marketing, Data
Processing, and Deposit Services of
the Bank
</TABLE>
5
<PAGE> 14
1.31 First Federal Existing Contracts. "First Federal Existing
Contracts" shall mean those Contracts which are listed and briefly described
pursuant to Section 4.11 of this Agreement on the First Federal Disclosure
Schedule.
1.32 First Federal Existing Employment Agreements. "First Federal
Existing Employment Agreements" shall mean the employment agreements by and
between the Bank and each of the First Federal Executives, each effective as of
October 6, 1994.
1.33 First Federal Existing Indebtedness. "First Federal Existing
Indebtedness" shall mean all Indebtedness of First Federal and the First
Federal Subsidiaries, all of which is listed and briefly described on the First
Federal Disclosure Schedule.
1.34 First Federal Existing Insurance Policies. "First Federal Existing
Insurance Policies" shall mean all of the insurance policies in effect and owned
by First Federal or any First Federal Subsidiary, all of which are listed and
briefly described on the First Federal Disclosure Schedule.
1.35 First Federal Existing Investment Securities. "First Federal
Existing Investment Securities" shall mean Investment Securities of First
Federal and the First Federal Subsidiaries, all of which are listed and briefly
described on the First Federal Disclosure Schedule.
1.36 First Federal Existing Liens. "First Federal Existing Liens" shall
mean all Liens affecting any of the assets and properties of First Federal or
any First Federal Subsidiary except for Liens for current taxes not yet due and
payable, pledges to secure deposits and such imperfections of title, easements
and other encumbrances, if any, as do not materially detract from the value of
or substantially interfere with the present use of the property affected
thereby, all of which are listed and briefly described on the First Federal
Disclosure Schedule.
1.37 First Federal Existing Litigation. "First Federal Existing
Litigation" shall mean all pending or, to the knowledge of First Federal,
threatened claims, suits, audit inquiries, charges, workers compensation claims,
litigation, arbitrations, proceedings, governmental investigations, citations
and actions of any kind against First Federal or any First Federal Subsidiary,
or affecting any assets or the business of First Federal or any First Federal
Subsidiary, all of which are listed and briefly described on the First Federal
Disclosure Schedule.
1.38 First Federal Existing Permits. "First Federal Existing Permits"
shall mean all Permits of First Federal and all First Federal Subsidiaries, the
significant ones of which are listed and briefly described on the First Federal
Disclosure Schedule.
1.39 First Federal Existing Plans. "First Federal Existing Plans" shall
mean all Employee Benefit Plans of First Federal and the First Federal
Subsidiaries and any Employee
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Benefit Plans of such entities that have been terminated since January 1, 1994,
all of which are listed and briefly described on the First Federal Disclosure
Schedule.
1.40 First Federal Incentive Plan. "First Federal Incentive Plan" shall
mean the First Federal Bank of Eau Claire, F.S.B. Incentive Plan and Trust
Agreement effective as of May 17, 1995.
1.41 First Federal Meeting. "First Federal Meeting" shall mean the
special or annual meeting of the First Federal Shareholders for the purpose of
approving the Merger, this Agreement and the transactions contemplated by this
Agreement, and for such other purposes as may be necessary or desirable.
1.42 First Federal Profit Sharing Plan. "First Federal Profit Sharing
Plan" shall mean the First Federal Bank of Eau Claire, F.S.B. Profit Sharing
Plan, a tax qualified defined contribution plan covering substantially all
full-time employees of the Bank.
1.43 First Federal Proxy Statement. "First Federal Proxy Statement"
shall have the meaning specified in Section 2.9(b) of this Agreement.
1.44 First Federal Real Estate. "First Federal Real Estate" shall mean
the parcels of real property identified in the legal descriptions set forth in
the First Federal Disclosure Schedule.
1.45 First Federal Replacement Employment Agreement. "First Federal
Replacement Employment Agreement" shall mean an employment agreement in
substantially the form of Exhibit 3 attached to this Agreement, to be entered
into at the Closing and to be effective as of the Effective Time, by and between
the Bank and any one or more of the First Federal Executives, all as provided in
Section 3.11(d) of this Agreement.
1.46 First Federal Reports. "First Federal Reports" shall have the
meaning specified in Section 4.8 of this Agreement.
1.47 First Federal Severance Agreement. "First Federal Severance
Agreement" shall mean a severance agreement in substantially the form of Exhibit
4 attached to this Agreement, to be entered into at the Closing and to be
effective as of the Effective Time, by and between the Bank and those of the
First Federal Executives with whom the Bank does not enter into a First Federal
Replacement Employment Agreement, all as described in Section 3.11(d) of this
Agreement.
1.48 First Federal Shareholders. "First Federal Shareholders" shall
mean all Persons owning shares of First Federal Common Stock on the relevant
date of inquiry.
1.49 First Federal Stock Option Plan. "First Federal Stock Option Plan"
shall mean the First Federal Bancshares of Eau Claire, Inc. 1995 Stock Option
Plan.
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1.50 First Federal Stock Options. "First Federal Stock Options" shall
mean options to purchase shares of First Federal Common Stock granted pursuant
to the First Federal Stock Option Plan which are outstanding as of the relevant
time of inquiry.
1.51 First Federal Subsidiaries. "First Federal Subsidiaries" shall
mean those Subsidiaries of First Federal listed on the First Federal
Disclosure Schedule pursuant to Section 4.1(c) of this Agreement.
1.52 HOLA. "HOLA" shall mean the Home Owners' Loan Act of 1933, as
amended, including the rules and regulations of the OTS promulgated thereunder.
1.53 Indebtedness. "Indebtedness" shall mean all liabilities or
obligations (except deposit accounts) of the relevant Person, whether primary or
secondary, absolute or contingent: (a) for borrowed money; (b) evidenced by
notes, bonds, debentures or similar instruments; or (c) secured by Liens on any
assets of the relevant Person.
1.54 Indemnified Liabilities. "Indemnified Liabilities" shall have the
meaning defined in Section 3.5 of this Agreement.
1.55 Indemnified Parties. "Indemnified Parties" shall have the meaning
defined in Section 3.5 of this Agreement.
1.56 Information. "Information" shall refer to the financial and other
business information, whether in written or oral form, furnished to Mutual or
any of its Affiliates by First Federal or any of the First Federal Subsidiaries.
1.57 Investment Securities. "Investment Securities" shall mean all
investment securities of the relevant Person permitted to be held by the
relevant Person under Law.
1.58 IRS. "IRS" shall mean the United States Internal Revenue Service.
1.59 Law. "Law" shall mean any federal, state, local or other law,
rule, regulation, policy or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder by any regulatory agencies or
other Persons.
1.60 Lien. "Lien" shall mean, with respect to any asset: (a) any
mortgage, pledge, lien, charge, claim, restriction, reservation, condition,
easement, covenant, lease, encroachment, title defect, imposition, security
interest or other encumbrance of any kind; and (b) the interest of a vendor or
lessor under any conditional sale agreement, financing lease or other title
retention agreement relating to such asset.
1.61 Material Adverse Effect. "Material Adverse Effect" shall mean any
change or effect that is or is reasonably likely to be materially adverse to the
relevant Person's business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, liabilities (including
contingent liabilities) or prospects.
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1.62 Merger. "Merger" shall mean the merger of Merger Corp. with and
into First Federal pursuant to this Agreement.
1.63 Merger Corp. "Merger Corp." shall mean First Federal Merger
Corporation, a Wisconsin corporation organized as a wholly-owned subsidiary of
Mutual specifically for the purpose of effecting the transactions contemplated
by this Agreement.
1.64 Merger Per Share Consideration. "Merger Per Share Consideration"
shall mean the amount of Eighteen and 85/100 Dollars ($18.85). The Merger Per
Share Consideration shall be subject to increase if the Closing Date is delayed
beyond March 31, 1997, unless the delay results from a breach by First Federal
of any representation or warranty made herein or a failure by First Federal to
perform or fulfill any covenant or agreement made herein, or otherwise is
attributable to the acts or omissions of First Federal. Any such increase in
the Merger Per Share Consideration shall be in an amount equal to $.05 per share
for each calendar month or portion of a month beyond March 31, 1997 for which
the Closing Date is delayed.
1.65 Merger Stock. "Merger Stock" shall mean the shares of First
Federal Common Stock outstanding as of the Effective Time, excluding the 48,560
shares of First Federal Common Stock held in the First Federal Incentive Plan
which have not been allocated to participants.
1.66 Merger Total Consideration. "Merger Total Consideration" shall
mean that amount which is equal to the product of the Merger Per Share
Consideration times the total number of shares of Merger Stock.
1.67 Minnesota Savings Association Regulatory Authority. "Minnesota
Savings Association Regulatory Authority" shall mean the Commissioner of
Commerce for the State of Minnesota.
1.68 Mutual. "Mutual" shall mean Mutual Savings Bank, a mutual savings
bank chartered under Chapter 214 of the Wisconsin Statutes.
1.69 Mutual and Merger Corp. Closing Certificate. "Mutual and Merger
Corp. Closing Certificate" shall mean the Closing Certificate of Mutual and
Merger Corp. in substantially the form of Exhibit 5 attached to this Agreement.
1.70 Mutual Counsel Opinion. "Mutual Counsel Opinion" shall mean the
opinion of Quarles & Brady in substantially the form of Exhibit 6 attached to
this Agreement.
1.71 NASDAQ/NMS. "NASDAQ/NMS" shall mean the National Association of
Securities Dealers Automated Quotations National Market System.
1.72 OTS. "OTS" shall mean the Office of Thrift Supervision, Department
of the Treasury.
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1.73 Paying Agent. "Paying Agent" shall mean a bank or trust company
selected by Mutual and reasonably satisfactory to First Federal.
1.74 Payment Fund. "Payment Fund" shall have the meaning specified in
Section 2.10 of this Agreement.
1.75 Permits. "Permits" shall mean all licenses, permits, approvals,
franchises, qualifications, permissions, agreements, orders and governmental
authorizations required for the conduct of the business of the relevant Person.
1.76 Permitted Liens. "Permitted Liens" shall mean those of the First
Federal Existing Liens which are expressly noted as Permitted Liens on the First
Federal Disclosure Schedule.
1.77 Person. "Person" shall mean a natural person, corporation, bank,
trust, partnership, association, governmental entity, agency or branch or
department thereof, or any other legal entity.
1.78 Quantified Material Adverse Effect. "Quantified Material Adverse
Effect" shall mean the occurrence of a Material Adverse Effect upon First
Federal and the First Federal Subsidiaries taken as a whole, in an amount
greater than $1,000,000, calculated on an after-tax basis, resulting solely from
a failure by First Federal to perform or fulfill any agreement or
covenant made by First Federal in this Agreement or resulting solely from one
or more of the representations and warranties made by First Federal in this
Agreement becoming untrue based upon (i) any event occurring after the date
hereof, or (ii) a discovery after the date hereof relating to the untruth of
such representations and warranties as of the date hereof, but in either case
excluding therefrom the effects on First Federal and the First Federal
Subsidiaries arising from (y) general changes in market interest rates, any
changes in Law, generally accepted accounting principals, regulatory accounting
principals, regulatory assessments or economic or other changes affecting
depository institutions or their holding companies generally, or (z) the costs
and expenses relating to this Agreement and the transactions contemplated
hereby, except to the extent such costs and expenses exceed $700,000 in the
aggregate.
1.79 Regulatory Approvals. "Regulatory Approvals" shall mean all of the
approvals which are conditions precedent to consummating the Merger, as
specified in Section 7.1(c) of this Agreement.
1.80 Restructuring. "Restructuring" shall mean exclusively the
consolidation of First Federal and the Bank with and into Mutual as described in
Section 2.15 of this Agreement.
1.81 SAIF. "SAIF" shall mean the Savings Association Insurance Fund of
the FDIC.
1.82 SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
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1.83 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as the same may be in effect from time to time.
1.84 Stock Option Agreement. "Stock Option Agreement" shall mean the
Stock Option Agreement, of even date herewith, being entered into by and
between First Federal and Mutual concurrently with their execution and delivery
of this Agreement.
1.85 Stock Option Consideration. "Stock Option Consideration" shall
mean, with respect to any First Federal Stock Option, that amount which is equal
to the difference between the Merger Per Share Consideration minus the exercise
price of such First Federal Stock Option, if a positive number.
1.86 Subsidiary. "Subsidiary" shall mean any corporation, financial
institution, joint venture, partnership, limited liability company, trust or
other business entity: (i) 25% or more of any outstanding class of whose voting
interests is directly or indirectly owned by the relevant Person, or is held by
it with power to vote; (ii) the election of a majority of whose directors,
trustees, general partners or comparable governing body is controlled in any
manner by the relevant Person; or (iii) with respect to the management or
policies of which the relevant Person has the power, directly or indirectly, to
exercise a controlling influence. Subsidiary shall include an indirect
Subsidiary of the relevant Person which is controlled in any manner specified
above through one of more corporations or financial institutions which are
themselves Subsidiaries.
1.87 Surviving Corporation. "Surviving Corporation" shall have the
meaning specified in Section 2.1 of this Agreement.
1.88 Trading Day. "Trading Day" shall mean any day on which stocks
trade on NASDAQ/NMS.
1.89 WBCL. "WBCL" shall mean the Wisconsin Business Corporation Law.
1.90 Wisconsin Savings Association Regulatory Agency. "Wisconsin
Savings Association Regulatory Agency" shall mean the Administrator of the
Division of Savings Institutions of the Wisconsin Department of Financial
Institutions.
ARTICLE II
THE MERGER
2.1 The Merger. This Agreement provides for the merger of Merger Corp.
with and into First Federal, whereby the Merger Stock outstanding as of the
Effective Time will be converted to cash as described herein. As of the
Effective Time, Merger Corp. will be merged with and into First Federal which,
as the surviving corporation (the "Surviving Corporation"), shall remain a
Wisconsin business corporation registered under HOLA as a savings and loan
holding company and, in such capacity, shall be governed by the laws of
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the State of Wisconsin and Federal laws applicable to registered savings and
loan holding companies, including rules and regulations of regulatory
authorities thereunder. The separate existence of Merger Corp. shall
thereupon cease. The Merger shall be effected pursuant to the provisions of
federal Law and the WBCL, and shall have the effects provided in the WBCL.
2.2 Effect of the Merger.
(a) At the Effective Time, the effect of the Merger shall be as
provided in the WBCL, including the effects described in Sections 2.2(b) and
2.2(c) of this Agreement.
(b) The corporate identity, existence, purposes, powers, franchises,
privileges, assets, properties and rights of both First Federal and Merger
Corp. shall be merged into and continued in the Surviving Corporation, and the
Surviving Corporation shall be fully vested therewith. The separate existence
of Merger Corp., except insofar as otherwise specifically provided by Law,
shall cease at the Effective Time, whereupon Merger Corp. and the Surviving
Corporation shall be and become one single corporation.
(c) At the Effective Time, the Surviving Corporation shall succeed
to, without other transfer, and shall possess and enjoy, all the rights,
privileges, assets, properties, powers and franchises both of a public and a
private nature, and be subject to all the restrictions, disabilities and duties
of First Federal and Merger Corp., and all the rights, privileges, assets,
properties, powers and franchises of First Federal or Merger Corp. and all
property, real, personal and mixed, tangible or intangible, and all debts due
to First Federal or Merger Corp. on whatever account, shall be vested in the
Surviving Corporation; and all rights, privileges, assets, properties, powers
and franchises, and all and every other interest shall be thereafter as
effectively the property of the Surviving Corporation as they were of First
Federal or Merger Corp.; and the title to or any interest in any real estate
vested by deed or otherwise in First Federal or Merger Corp. shall not revert
or be in any way impaired by reason of the Merger; provided, however, that all
rights of creditors and Liens upon any property of either First Federal or
Merger Corp. shall be preserved unimpaired, and all debts, liabilities and
duties of First Federal or Merger Corp. shall thenceforth attach to the
Surviving Corporation and may be enforced against the Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
2.3 Effective Time. The consummation of the Merger shall be effected as
promptly as practicable after the satisfaction or waiver of the conditions set
forth in Article VII of this Agreement. The Merger shall become effective on
the date and time specified in Articles of Merger to be filed with the Wisconsin
Secretary of Financial Institutions. The date and time on which the Merger
shall become effective is referred to in this Agreement as the "Effective Time."
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2.4 Articles and Bylaws of Surviving Corporation.
(a) The Articles of Incorporation of Merger Corp. as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation until amended in accordance with Law, except that
the name of the corporation identified therein shall be changed to First Federal
Bancshares of Eau Claire, Inc.
(b) The Bylaws of Merger Corp. as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until amended
in accordance with Law, except that the name of the corporation identified
therein shall be changed to First Federal Bancshares of Eau Claire, Inc.
2.5 Charter and Bylaws of the Bank; Offices of the Bank.
(a) The Federal Stock Charter and Bylaws of the Bank in force
immediately prior to the Effective Time initially shall be the Charter and
Bylaws of the Bank immediately following the Effective Time.
(b) The location of the main office of the Bank immediately prior
to the Effective Time initially shall continue as the main office of the Bank
immediately following the Effective Time, and the location of each of the
Bank's branch offices immediately prior to the Effective Time shall continue as
a branch location of the Bank immediately following the Effective Time.
2.6 Directors and Officers of Surviving Corporation. As of the
Effective Time, the duly qualified and acting directors and officers of Merger
Corp. immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, to hold office as provided in the Bylaws
of the Surviving Corporation.
2.7 Conversion of First Federal Common Stock. At the Effective Time,
and without any action on the part of the holders thereof:
(a) Each share of Merger Stock shall be converted into the right to
receive cash in an amount equal to the Merger Per Share Consideration in the
manner and form, and on the terms and conditions, set forth in this Agreement.
All such shares of Merger Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously representing any such shares shall thereafter represent
the right to receive cash at the rate of the Merger Per Share Consideration.
(b) Each share of First Federal Common Stock held in the treasury
of First Federal or owned by First Federal or any First Federal Subsidiary for
its own account (other than shares of First Federal Common Stock held directly
or indirectly in trust accounts,
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managed accounts and the like or otherwise held in a fiduciary capacity that are
beneficially owned by third parties) immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto.
2.8 Conversion of Stock of Merger Corp. At the Effective Time, each
share of common stock of Merger Corp. then issued and outstanding, without any
action on the part of the holder thereof, shall be converted into one share of
common stock of the Surviving Corporation.
2.9 Meeting of First Federal Shareholders.
(a) First Federal will promptly take all steps necessary to cause
the First Federal Meeting to be duly called, noticed, and held as soon as
practicable and, in any event, no later than February 28, 1997 (unless
postponed pursuant to Section 2.9(b) hereof), for the purpose of voting to
approve this Agreement, the Stock Option Agreement, the Merger and all matters
related thereto. Subject to Section 2.9(c) of this Agreement, First Federal
will use its best efforts to secure the required approval of its Shareholders.
(b) In connection with the First Federal Meeting, First Federal will
prepare and cause to be mailed to its Shareholders a notice of the Meeting and
a definitive proxy statement (together the "First Federal Proxy Statement") as
soon as practicable. Notwithstanding the foregoing, mailing of the First
Federal Proxy Statement shall be postponed until all of the conditions set
forth in Sections 7.1(a), 7.1(c) and 7.2(j) of this Agreement have been
satisfied, unless the parties mutually agree that said mailing should be
commenced notwithstanding that any one or more of such conditions has not been
satisfied. Moreover, First Federal shall not be obligated to commence mailing
the First Federal Proxy Statement unless and until First Federal receives from
Mutual written confirmation that Mutual is unaware of any facts, circumstances,
conditions or developments that would cause the conditions set forth in Section
7.2(d) of this Agreement not to be satisfied.
Mutual and Merger Corp. shall provide First Federal with any
information for inclusion in the First Federal Proxy Statement which is required
by Law or which is reasonably requested by First Federal. First Federal shall
consult with Mutual with respect to the First Federal Proxy Statement and shall
afford Mutual reasonable opportunity to comment thereon. If, at any time prior
to the First Federal Meeting, any event should occur relating to First Federal
which should be set forth in an amendment of, or a supplement to, the First
Federal Proxy Statement, First Federal will promptly inform Mutual. In each
such case, First Federal, with the cooperation of Mutual, will promptly prepare
and mail such amendment or supplement and First Federal shall consult with
Mutual with respect to such supplement or amendment and shall afford Mutual
reasonable opportunity to comment thereon prior to such mailing. First Federal
shall notify Mutual at least 48 hours prior to the mailing of the First Federal
Proxy Statement, or any amendment or supplement thereto, to First Federal's
Shareholders.
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(c) The First Federal Proxy Statement shall include the
recommendation of the Board of Directors of First Federal in favor of the
Merger; provided, however, that if the Board of Directors of First Federal
shall, in good faith and after consulting with legal counsel, determine that
to make such a recommendation would be a violation of its fiduciary obligations
under applicable Law, then the Board of Directors of First Federal shall not be
obligated to make any such recommendation.
2.10 Payment of Merger Total Consideration. At the Closing and prior to
the Effective Time, Mutual shall deliver to the Paying Agent, by a single wire
transfer of immediately available funds to an account in the United States of
America designated by the Paying Agent, an amount (such amount hereinafter
referred to as the "Payment Fund") equal to the Merger Total Consideration.
2.11 Surrender of Certificates.
(a) Promptly after the Effective Time but no later than three (3)
business days after the Effective Time, the Paying Agent shall deliver to each
First Federal Shareholder a form of letter of transmittal and instructions for
use in effecting the surrender of Merger Stock certificates for payment. Upon
surrender to the Paying Agent of such certificates, together with such letter of
transmittal, duly executed, the Paying Agent shall promptly pay to the First
Federal Shareholder entitled thereto, in cash, the Merger Per Share
Consideration multiplied by the number of shares of Merger Stock covered by such
surrendered certificates and transmittal letters.
(b) Until surrendered, each outstanding certificate, which prior
to the Effective Time represented shares of Merger Stock, shall be deemed to
represent and evidence only the right to receive the consideration to be paid
therefor as set forth in Section 2.7 of this Agreement and until such surrender,
no cash shall be paid to the holder of such outstanding certificate in respect
thereof.
(c) If payment of cash is to be made to a Person other than the
Person in whose name the certificate surrendered is registered, it shall be a
condition to such payment that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and that the Person
requesting such payment shall (i) pay to the Paying Agent any transfer or other
taxes required by reason of payment to a person other than the registered
holder of the certificates surrendered, (ii) authorize the Paying Agent to
deduct any such taxes from such payment, or (iii) establish to the satisfaction
of the Paying Agent that such tax has been paid or is not applicable.
(d) No interest shall accrue or be payable with respect to any
amounts which any holder of shares of Merger Stock shall be entitled to receive
pursuant to this Agreement. The Paying Agent shall be authorized to pay the
Merger Per Share Consideration attributable to any certificate representing
shares of Merger Stock which has been lost or destroyed upon receipt of
evidence of ownership of the shares of Merger Stock
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represented thereby and of appropriate indemnification, in each case
reasonably satisfactory to Mutual.
(e) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of Merger Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in this Section 2.11 of this Agreement.
(f) Any portion of the Payment Fund which remains undistributed to
the shareholders of the Company six (6) months after the Effective Time shall be
returned, at Mutual's request, by the Paying Agent to Mutual, which thereafter
shall act as paying agent subject to the rights of holders of unsurrendered
certificates of Merger Stock under this Article II and subject to applicable
Law. Notwithstanding the foregoing, neither Mutual, the Paying Agent, nor any
other party hereto shall be responsible or liable to any holder of Merger Stock
for any cash delivered to any public official pursuant to any abandoned
property, escheat or similar Law.
(g) Mutual shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Merger Stock such amounts as Mutual is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld by
Mutual, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Merger Stock in respect of
which such deduction and withholding was made by Mutual.
2.12 [Reserved].
2.13 Continuation of Deposits. All savings accounts of the Bank shall
retain the same status immediately after the Effective Time as they had prior
thereto. Each deposit shall have a value equal to and the same character as the
deposit immediately prior to the Effective Time and each holder of a savings
account shall retain, without payment, a withdrawable savings account or
accounts in the Bank equal in withdrawable amount to the withdrawal value of
such holder's savings account in the Bank immediately prior to the Effective
Time.
2.14 Liquidation Account and Sub-Accounts. The liquidation account and
sub-account balances of the Bank shall be continued for the benefit of certain
account holders of First Federal who maintain their account in the Bank in the
event of a complete liquidation of the Bank. The liquidation account balance
shall be subject to downward adjustment to the extent of any downward adjustment
to any sub-account balance in accordance with Section 563b.3(f) of the
regulations of the OTS. A distribution of each sub-account balance may be made
only in the event of a complete liquidation of the Bank and only out of funds
available for such purpose after payment of all creditors but before any
payments to stockholders. In the event the restructuring described in Section
2.15
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below is effected following the Merger, the liquidation rights of holders
of savings accounts in the Bank will be replaced with liquidation rights
established for the benefit of Mutual's account holders under Laws applicable to
Mutual and Mutual's Articles and Bylaws.
2.15 Subsequent Restructuring. Concurrent with the Merger or promptly
following the Effective Time, Mutual plans to consolidate First Federal and the
Bank with and into Mutual. Presently it is anticipated that the Restructuring
will be completed by liquidating First Federal and distributing its assets,
after paying off or providing for all of its liabilities, to Mutual as First
Federal's sole shareholder. Alternatively, First Federal may be merged into
Mutual pursuant to applicable Law. Concurrent with or promptly following such
liquidation or merger, the Bank will be merged with and into Mutual pursuant to
the provisions of applicable Law, and dissolving First Federal. The
Restructuring is subject to certain regulatory approvals. In the event the
Restructuring is effected, Mutual agrees that it will assume and timely
discharge any and all obligations, covenants and agreements of First Federal
under this Agreement which are to be performed or discharged after the Effective
Time, but which have not been fully performed or discharged as of the time the
Restructuring is effected. Mutual agrees, however, that it will not alter the
structure of the Restructuring as described herein if it would: (i) alter,
change or reduce the amount of the consideration to be paid to holders of First
Federal Common Stock or the manner or basis upon which such exchange is made;
(ii) have an adverse federal or state income tax consequence to First Federal,
or any of the shareholders of First Federal; (iii) have an adverse effect on the
shareholders of First Federal Common Stock; or (iv) would be likely to delay or
jeopardize receipt of the Regulatory Approvals or satisfaction of any of the
conditions to the Merger set forth in Article VII.
2.16 Anti-Dilution Provisions. In the event that between the date of
this Agreement and the Effective Time the issued and outstanding shares of First
Federal Common Stock shall have been changed into a different number of shares
as a result of a stock split, reverse stock split, stock dividend,
recapitalization, reclassification or other similar transaction, or in the event
the number of authorized and unissued shares of First Federal Common Stock
subject to issuance upon the exercise of outstanding First Federal Stock Options
shall have changed between the date of this Agreement and the Effective Time as
the result of the granting of additional First Federal Stock Options, then the
Per Share Merger Consideration shall be adjusted appropriately.
ARTICLE III
OTHER AGREEMENTS
3.1 Access. Upon reasonable notice, First Federal shall afford to
Mutual's officers, employees, accountants, legal counsel and other
representatives access, during normal business hours, to all of First Federal's
and its Subsidiaries' properties, books, contracts, commitments and records;
provided that First Federal shall have the right to redact any information from
such materials which relates to assessments, analyses or discussions of a
possible Acquisition engaged in by First Federal prior to the date of this
Agreement, or
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which, subsequent to such date, relates to any breach by Mutual, any failure of
any of the closing conditions of any of the parties, or any other matters or
issues related to First Federal's evaluation of the Merger or its obligations
under this Agreement, or would impair the First Federal Board of Directors'
ability to discharge its fiduciary duties.
3.2 First Federal's Disclosure Schedule.
(a) Contemporaneously with the execution and delivery of this
Agreement, First Federal is delivering to Mutual the First Federal Disclosure
Schedule, which is accompanied by a certificate signed by the Chief Executive
Officer and Secretary of First Federal stating that the First Federal
Disclosure Schedule is being delivered pursuant to this Agreement and is
the First Federal Disclosure Schedule referred to in this Agreement. The First
Federal Disclosure Schedule is deemed to constitute an integral part of this
Agreement and to modify the representations, warranties, covenants or agreements
of First Federal contained in this Agreement to the extent that such
representations, warranties, covenants or agreements expressly refer to the
First Federal Disclosure Schedule. All capitalized terms used in the First
Federal Disclosure Schedule shall have the definitions specified in this
Agreement. All descriptions or listings of documents contained in the First
Federal Disclosure Schedule are qualified in their entirety by reference to the
documents so described, true copies of which First Federal heretofore has
delivered to Mutual. Except as expressly stated to the contrary in the First
Federal Disclosure Schedule, disclosure of a matter or document in the First
Federal Disclosure Schedule shall not be deemed to be an acknowledgement that
such matter is material or outside the ordinary course of business of First
Federal. Disclosure of any matter or event in any of the schedules included in
the First Federal Disclosure Schedule shall be deemed disclosure for purposes of
any and all other schedules included therein without the need of specific cross
reference or duplication, provided, however, that disclosure of an agreement or
other document in a listing of agreements or documents without any summary or
description of the substance thereof shall be deemed disclosure only for
purposes of the schedule in which such agreement or other document is listed.
(b) Updates. Prior to the Closing Date, First Federal shall
update the First Federal Disclosure Schedule on a monthly basis by written
notice to Mutual to reflect any matters which have occurred from and after the
date of this Agreement which, if existing on the date of this Agreement, would
have been required to be described in the First Federal Disclosure Schedule.
3.3 Duties Concerning Representations. Each party to this Agreement
shall: (a) to the extent within its control, use best efforts to cause all of
its representations and warranties contained in this Agreement to be true and
correct in all respects at the Effective Time with the same force and effect as
if such representations and warranties had been made on and as of the Effective
Time; (b) use best efforts to cause all of the conditions precedent set forth in
Article VII of this Agreement to be satisfied. Neither party shall take any
action, nor agree to commit to take any action, which would or reasonably can be
expected to: (i) adversely affect the ability of either Mutual or First Federal
to obtain the
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Regulatory Approvals; (ii) adversely affect a party's ability to perform its
covenants or agreements under this Agreement; or (iii) result in any of the
conditions to the Merger set forth in Article VII not being satisfied.
3.4 Deliveries of Information; Consultation. From time to time prior to
the Effective Time, and subject to the limitations on Mutual's access rights
under Section 3.1 of this Agreement and to the confidentiality provisions of
Section 3.13 of this Agreement:
(a) Deliveries by First Federal. First Federal shall furnish
promptly to Mutual: (i) a copy of each significant report, schedule and other
document filed by or received by First Federal or its Subsidiaries pursuant to
the requirements of federal or state securities or financial institution Laws or
any other applicable Laws promptly after such documents are available; (ii) its
consolidated monthly financial statements (as prepared in accordance with its
normal accounting procedures) promptly after such financial statements are
available; (iii) a summary of any action taken by First Federal or its
Subsidiaries' Board of Directors, or any committee thereof; and (iv) all other
significant information concerning First Federal and its Subsidiaries' business,
properties and personnel as Mutual may reasonably request.
(b) Consultation. Representatives of First Federal and Mutual shall
confer and consult with one another on a regular and frequent basis to report
on operational matters and the general status of First Federal's ongoing
business operations.
(c) Regulatory Matters. Representatives of First Federal and
Mutual shall discuss with one another any matters in which any state or federal
regulator (i) of First Federal or any of its Subsidiaries, is involved, or (ii)
of Mutual is involved if such involvement relates to any of the transactions
contemplated by this Agreement.
(d) Litigation. Each party to this Agreement shall provide prompt
notice to the other party of any litigation, arbitration, proceeding,
governmental investigation, citation or action of any kind which may be
commenced, threatened or proposed by any Person concerning the legality,
validity or propriety of the transactions contemplated by this Agreement. If
any such litigation is commenced against any party to this Agreement, the
parties shall cooperate in all respects in connection with such litigation.
3.5 Directors' and Officers' Indemnification.
(a) Mutual's Indemnification. From and after the Effective Time,
Mutual shall indemnify, defend and hold harmless each person who is now, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer, director or employee of First Federal or any First Federal
Subsidiary (the "Indemnified Parties") against (i) all losses, claims, damages,
costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of Mutual (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation which is based in whole or in part on or arising in
whole or in part out of the fact that such person
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is or was a director, officer or employee of First Federal or any First Federal
Subsidiary, whether pertaining to any matter existing or occurring at or prior
to the Effective Time, but only if filed, initiated, asserted or claimed prior
to, or at or within seven years after, the Effective Time ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part, or
arising in whole or in part out of, or pertaining to, this Agreement or the
transactions contemplated hereby, in each case to the full extent First Federal
would have been permitted under the WBCL and First Federal's Articles of
Incorporation and Bylaws (as amended and in effect as of the date of this
Agreement) to indemnify such person, and Mutual shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by Law upon receipt of any affirmation and
undertaking required by Section 180.0853 of the WBCL. Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether brought before
or within seven years after the Effective Time): (x) any counsel retained by
the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to Mutual; (y) after the Effective Time, Mutual shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (z) after the Effective Time,
Mutual will use all reasonable efforts to assist in the vigorous defense of any
such matter, provided that Mutual shall not be liable for any settlement of any
claim effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 3.5, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify Mutual (but the failure so to notify
Mutual shall not relieve it from any liability which it may have under this
Section 3.5 except to the extent such failure prejudices such party), and shall
deliver to Mutual the affirmation and undertaking, if any, required by Section
180.0853 of the WBCL. The Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(b) Parties Benefitted. The provisions of this Section 3.5 are
intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and his or her representatives, and shall
survive the Effective Time and any merger, consolidation or reorganization of
Mutual, including the Restructuring.
3.6 Letter of First Federal's Accountants. First Federal shall use its
best efforts to cause to be delivered to Mutual a letter of Ernst & Young LLP,
First Federal's independent auditors, dated a date within three business days
before the date on which the First Federal Proxy Statement is first mailed to
First Federal Shareholders and addressed to Mutual, in form and substance
reasonably satisfactory to Mutual and customary in scope and substance for
letters delivered by independent public accountants in connection with proxy
statements similar to the First Federal Proxy Statement.
3.7 Legal Conditions to Merger. Each party to this Agreement will: (a)
take all reasonable actions necessary to comply promptly with all legal
requirements which may be
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imposed on it with respect to the Merger (including making all filings and
requests in connection with the Regulatory Approvals and furnishing all
information required in connection therewith); (b) promptly cooperate with and
furnish information to the other party in connection with any such
requirements imposed upon any of them in connection with the Merger; and (c)
take all reasonable actions necessary to obtain (and will cooperate with the
other party in obtaining) any consent, authorization, order or approval of, or
any exemption by, any governmental entity or other public or private Person,
required to be obtained by the parties to this Agreement in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
3.8 Stock Listings. First Federal shall use its best efforts to
maintain the listing of First Federal Common Stock on the NASDAQ/NMS through the
Effective Time. It is the intention of the parties that by taking this action
First Federal Shareholders will not be entitled to any dissenters' or appraisal
rights under applicable Law as a result of the Merger and the transactions
contemplated by this Agreement.
3.9 Announcements. Subject to each party's disclosure obligations
imposed by Law, First Federal and Mutual will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any public Announcement or statement
with respect thereto prior to consultation with the other party.
3.10 Best Efforts. Subject to the terms and conditions of this
Agreement and subject to the fiduciary duties of the Board of Directors of each
party, each of the parties agrees to use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary or
advisable to consummate the transactions contemplated by this Agreement.
3.11 Employee And Managerial Matters.
(a) Employees. Mutual agrees to consider each of the Bank's
employees for continued employment by the Bank in a comparable position
following the Effective Time. All such evaluations will be conducted in
accordance with Mutual's hiring practices and employment standards, including
Mutual's assessments of the Bank's present and future needs for the experience
and skills possessed by any particular employee. Mutual anticipates that, at
least initially, the Bank will continue to employ substantially all, if not all,
of the Bank's present employees. In the event any full-time employee who has
completed one or more years of service with the Bank (and who is not covered by
an employment contract or severance agreement) is terminated by Mutual other
than for cause and within four months of the Closing Date, such employee shall
be entitled to a severance benefit equal to two weeks' base compensation plus an
additional week of base compensation for each additional full year of service
completed with the Bank prior to the Closing Date (up to a total maximum
severance benefit of eight weeks' base compensation).
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(b) Advisory Board of Mutual. Mutual shall establish an
advisory board of directors of Mutual consisting of the following individuals,
all of whom presently serve as directors of First Federal: Donald T. Tietz,
Douglas R. Trembath, David G. Anderson, Michael P. Kell, Kermit C. Walker and
David M. Frederikson. Such individuals shall serve and remain as members of
Mutual's Advisory Board pursuant to the terms of Mutual's Bylaws for a period of
eighteen (18) months following the Closing Date. For their services in this
capacity, each member of the Advisory Board shall receive a retainer fee in the
amount of $1,000 per month. Mutual shall have no obligation to fill any vacancy
which arises on the Advisory Board as a result of the voluntary resignation,
disability or death of any member of the Advisory Board.
(c) Board of Directors of Bank. The Board of Directors of the
Bank initially shall consist of individuals designated by Mutual.
(d) First Federal Replacement Employment Agreements; Severance
Benefits. At the Closing and at the election and direction of Mutual, the Bank
shall, with respect to each of the First Federal Executives, either: (i) enter
into a First Federal Replacement Employment Agreement; or (ii) enter into a
First Federal Severance Agreement.
3.12 Employee Benefit Matters.
(a) First Federal Stock Option Plan. Prior to the Closing Date,
First Federal shall take any and all actions necessary so that, effective as
of the Effective Time, the First Federal Stock Option Plan will be terminated,
and any and all shares reserved for issuance in connection with the exercise of
options granted under such Plan (including those reserved for issuance upon the
exercise of First Federal Stock Options granted prior to, and outstanding as of,
the Effective Time) shall be free of all restrictions associated with such
reservation and shall constitute authorized and unissued shares of First Federal
Common Stock.
(b) First Federal ESOP. At or prior to the Effective Time,
participation in the First Federal ESOP shall be discontinued and no additional
participants shall be permitted in the First Federal ESOP at or after such time.
Mutual shall, as soon as reasonably practicable after all assets of the ESOP
have been allocated to the participants in accordance with the terms of the
ESOP, terminate the First Federal ESOP and apply for a letter of determination
from the IRS confirming that the termination of the First Federal ESOP does not
adversely affect its tax qualified status. The cash proceeds received in
connection with the Merger upon the conversion into cash of shares of First
Federal Common Stock held in the First Federal ESOP suspense account shall be
used to prepay the principal and interest outstanding and unpaid under the First
Federal ESOP Indebtedness. Upon full payment of the First Federal ESOP
Indebtedness, maximum allocations from the First Federal ESOP suspense account
shall be made to participants' accounts until completely exhausted.
(c) First Federal Deferred Compensation Plan. Prior to the Closing
Date, First Federal shall cause to be taken any and all actions necessary to
limit contributions to
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the First Federal Deferred Compensation Plan so that: (i) for the year ending
December 31, 1997 and for all years thereafter until the First Federal ESOP has
been terminated as provided in Section 3.12(b) of this Agreement, such
contributions will be calculated so as to provide to the participant an
allocation in an amount equal to the difference between the amount of the
allocation such participant would be entitled to receive for the relevant year
under the provisions of the First Federal ESOP (including as total compensation
for such participant only such participant's base salary and bonus for the
relevant year) without taking into effect the limitations imposed under the
Code, minus the amount of the First Federal ESOP allocation actually received by
such participant as a result of the application of such Code limitations; and
(ii) for years after the First Federal ESOP is terminated as provided in Section
3.12(b) of this Agreement, so as to provide the participant with a contribution
in an amount equal to the difference between the amount of the contribution
Mutual would make to its qualified retirement plans on behalf of such
participant (including as the participant's total compensation only the
participant's base salary and bonus for the relevant year) without giving effect
to any limitations imposed under the Code, minus the amount of the contribution
actually made by Mutual to its qualified retirement plans on behalf of such
participant giving effect to the limitations imposed by the Code. After the
Closing Date, Mutual shall assume and continue the First Federal Deferred
Compensation Plan for the benefit of Mr. Tietz to this limited extent.
(d) First Federal Profit Sharing Plan. At or prior to the
Effective Time, participation in the First Federal Profit Sharing Plan shall be
discontinued and no additional participants shall be permitted in such Plan at
or after such time. Mutual shall as soon as reasonably practicable after the
Effective Time terminate the First Federal Profit Sharing Plan and apply for a
letter of determination from the IRS confirming that the termination of the
First Federal Profit Sharing Plan does not adversely affect its tax qualified
status. Upon receipt of such a determination letter, all assets held in the
First Federal Profit Sharing Plan shall be distributed to participants or
transferred on behalf of the participants to Mutual's tax-qualified retirement
plans in accordance with the terms of the Plan and ERISA.
(e) First Federal Incentive Plan. First Federal shall take any
and all actions necessary so that, effective as of the Effective Time, all
shares of First Federal Common Stock awarded to participants in the First
Federal Incentive Plan prior to the Effective Time immediately will vest to the
participant, and the 48,560 shares of First Federal Common Stock held by the
First Federal Incentive Plan which have not been awarded to participants will be
cancelled without consideration and restored to the status of authorized and
unissued shares of First Federal Common Stock.
(f) Health and Welfare Benefits. Prior to the Closing Date, First
Federal shall cause to be taken all actions necessary to terminate and
discontinue, as of the Effective Time, all of First Federal's and the Bank's
health and welfare benefit plans, programs, insurance and policies, except as
necessary to continue paying benefits to eligible participants receiving
benefits as of the Effective Time and except as necessary to provide COBRA
benefits to any employees of the Bank who may be entitled to receive such
benefits as a result of discontinuance of their employment with the Bank, if
any. In this regard,
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Mutual acknowledges that First Federal sponsors a defined benefit healthcare
plan that provides post-retirement medical benefits to all retired employees,
directors and their spouses who have completed 10 or more years of service.
Mutual agrees to cause the Bank to continue offering benefits to those
employees who have reached age 50 and have completed 15 years of service with
the Bank prior to the Closing Date and who subsequently remain employed by the
Bank, Mutual or any Subsidiary of Mutual until attainment of age 65 (a schedule
of employees receiving such benefits, or who may become eligible to receive such
benefits, is included in the First Federal Disclosure Schedule), it being agreed
that, prior to the Closing Date, First Federal shall cause to be taken any and
all actions necessary to amend such plan so as to achieve this result and so
that, on an actuarial basis, the total projected benefits payable under such
plan will not exceed $846,000 (the accrued liability associated with this plan
as reflected on First Federal's consolidated balance sheet as of December 31,
1995). Notwithstanding the foregoing, the parties agree and intend that
Mutual's total liability to pay benefits under this plan is limited in the
aggregate to $846,000. From and after the Effective Time, employees retained in
the employment of the Bank will be eligible to participate in the health and
welfare benefits, programs, plans, insurance and policies sponsored by Mutual
for the benefit of its employees.
(g) Sick Leave and Vacation Pay. Effective as of the Effective
Time, employees retained in the employment of the Bank will receive sick days
and vacation days in accordance with Mutual's standard policies. Such
employees will not be permitted to carry over any accrued and unused sick days
or vacation time accumulated during their employment with the Bank prior to the
Effective Time. However, for purposes of determining the amount of vacation
time such employees will be entitled to receive under Mutual's vacation policy,
such employees will receive credit for their years of credit service with the
Bank prior to the Effective Time. Furthermore, as soon as reasonably
practicable following the Effective Time, Mutual shall cause the Bank to pay to
all persons in its employ as of the Effective Time who have accumulated accrued
and unused vacation days while employed by the Bank prior to the Effective Time
an aggregate amount equal to their respective shares of the accrued value of the
total vacation days as will be reflected on First Federal's consolidated balance
sheet as of December 31, 1996. For purposes of determining the amount of sick
days such employees will be entitled to receive under Mutual's sick days policy,
employees will receive credit for their years of credit service prior to the
Effective Time.
(h) Participation in Qualified Mutual Employee Benefit Plans. All
employees retained in the employment of the Bank following the Effective Time
shall be eligible to participate in any and all qualified pension and
retirement plans and other qualified Employee Benefit Plans sponsored from time
to time by Mutual for the benefit of its employees as of the first entry date
following the date on which the First Federal ESOP is terminated as provided in
Section 3.12(b) of this Agreement. Such employees shall be credited for
eligibility and vesting purposes, but not for benefit purposes, for the years
of credit service they accumulated during their employment with the Bank prior
to the Effective Time. In addition, Mutual shall exercise all reasonable
efforts to enable employees retained
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<PAGE> 33
by the Bank following the Effective Time to reinvest in Mutual's 401(k) Savings
Plan the proceeds received by them in connection with the distributions from
the First Federal ESOP, the First Federal Deferred Compensation Plan and the
First Federal Profit Sharing Plan described in Sections 3.12(b), (c) and (d),
respectively, of this Agreement.
3.13 Confidentiality. Mutual agrees to treat as strictly confidential
and agrees not to divulge to any other Person (other than its employees,
attorneys, accountants, financial advisors and other agents and representatives
who have a need to know such information for purposes of assisting Mutual in
fulfilling its obligations under this Agreement) any financial statements,
schedules, contracts, agreements, instruments, papers, documents and other
information relating to First Federal which it may come to know or which may
come into its possession pursuant to this Agreement or otherwise during the
course of conducting its investigations contemplated by this Agreement and, if
the transactions contemplated by this Agreement are not consummated for any
reason, Mutual agrees promptly to return to First Federal all materials
furnished to Mutual by or at the direction of First Federal. Notwithstanding
the foregoing, information shall not be deemed confidential, and Mutual shall
have no duty of confidentiality with respect to information which: (a) is known
to Mutual at the time it is disclosed by or at the direction of First Federal;
(b) is disclosed to Mutual by a third party not known by Mutual to have an
independent duty of confidentiality to First Federal with respect thereto; (c)
is in the public domain at the time it is provided to Mutual by or at the
direction of First Federal, or thereafter falls into the public domain otherwise
than as a result of a breach by Mutual of its obligation of confidentiality
under this Section 3.13 of this Agreement. In the event Mutual is required or
finds it necessary to disclose any of the confidential information in connection
with any of the Regulatory Approvals, Mutual will notify First Federal of that
fact and will cooperate with First Federal so as to minimize the amount of
confidential information to be so disclosed and to take such reasonable
precautions to maintain the confidentiality of such information as may be
requested by First Federal, including requests to the regulatory authorities
that such information be deemed confidential and not subject to disclosure under
the Freedom of Information Act. In the event Mutual otherwise is required to
disclose any such confidential information, Mutual agrees that it will provide
First Federal with prompt notice of such required disclosures so that First
Federal may seek an appropriate protective order and/or waive Mutual's
compliance with the provisions of this Section 3.13 of this Agreement.
3.14 Conformance to Reserve Policies. First Federal shall cause the
Bank to establish such additional accruals and reserves as may be necessary, in
the reasonable judgment of Mutual, to conform the Bank's general valuation
allowances to Mutual's asset classification policy, as well as to reflect the
costs and expenses of First Federal with respect to the Merger and the other
transactions contemplated by this Agreement; provided, however, that First
Federal shall not be required to cause the Bank to take any such action until
the Regulatory Approvals have been received and First Federal is reasonably
satisfied that the Merger will be consummated. First Federal's representations,
warranties and covenants contained in this Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modification or changes undertaken by the
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Bank in order for First Federal to comply with the requirements of this
Section 3.14 of this Agreement.
3.15 Conduct of Mutual's Business. Mutual will maintain its corporate
existence in good standing and conduct its business so as to be able to
consummate the transactions contemplated by the Agreement. Mutual shall, in the
event it becomes aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations, covenants or agreements contained or
referred to herein, give prompt written notice thereof to First Federal and use
its best efforts to prevent or promptly remedy the same.
3.16 FDICIA Management Certification Systems. As soon as reasonably
practicable following the date of this Agreement, First Federal shall retain the
services of its independent accounting firm, Ernst & Young LLP, for the purpose
of providing consultation and advice to First Federal in connection with First
Federal's development of management certification systems and controls designed
to comply with the requirements of the Federal Deposit Insurance Corporation
Improvement Act of 1991 applicable to institutions with total consolidated
assets in excess of $500 million. Any expenses incurred by First Federal in
this regard will not be considered expenses incurred in connection with the
transactions contemplated by this Agreement, nor shall such expenses be
considered in determining whether a Quantified Material Adverse Effect has
occurred for purposes of Section 7.2(d) of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL
First Federal hereby represents and warrants to Mutual that:
4.1 Organization and Qualification; Subsidiaries.
(a) First Federal is a corporation duly organized, validly existing
and in active status under the Laws of the State of Wisconsin, and is a
registered savings and loan holding company under HOLA. The Bank is a
Federally-chartered capital stock savings bank duly organized, validly existing
and in good standing under the Laws of the United States. The deposits of the
Bank are insured by the SAIF of the FDIC as permitted by Federal Law, and the
Bank has paid all premiums and assessments required thereunder. The Bank is a
member in good standing of the FHLB of Chicago. Each of the other First Federal
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of First Federal and the First
Federal Subsidiaries has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("First Federal
Approvals") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, including appropriate authorizations
from the OTS, the FDIC, the Wisconsin Savings Association Regulatory Agency and
the Minnesota
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Savings Association Regulatory Agency, except where a failure to be so
organized, existing and in good standing or to have such power, authority
and First Federal Approvals would not, individually or in the aggregate, have a
Material Adverse Effect on First Federal and the First Federal Subsidiaries,
taken as a whole, and neither First Federal nor any First Federal Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any First Federal Approvals.
(b) First Federal and each First Federal Subsidiary is duly
qualified or licensed as a foreign corporation to conduct business, and is in
good standing (or the equivalent thereof) in each jurisdiction where the
character of the properties it owns, leases or operates or the nature of the
activities it conducts make such qualification or licensing necessary, except
for such failures to be so duly qualified and licensed and in good standing that
would not, either individually or in the aggregate, have a Material Adverse
Effect on First Federal and the First Federal Subsidiaries, taken as a whole.
(c) A true and complete list all Subsidiaries of First Federal (the
"First Federal Subsidiaries"), together with (i) First Federal's direct or
indirect percentage ownership of each First Federal Subsidiary; (ii) the
jurisdiction in which the First Federal Subsidiaries are incorporated; and (iii)
a description of the principal business activities conducted by each First
Federal Subsidiary, is set forth in the First Federal Disclosure Schedule.
Except as set forth in the First Federal Disclosure Schedule, First Federal
and/or one or more of the First Federal Subsidiaries owns beneficially and of
record all of the outstanding shares of capital stock of each of the First
Federal Subsidiaries. Except for the Subsidiaries identified in the First
Federal Disclosure Schedule, First Federal does not directly or indirectly own
any equity or similar interests in, or any interests convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity other than in the ordinary course of business,
and in no event in excess of 10% of the outstanding equity or voting securities
of such entity.
4.2 Articles of Incorporation and Bylaws. First Federal heretofore has
furnished to Mutual a complete and correct copy of the Articles of Incorporation
and Bylaws, as amended or restated, of First Federal and of each First Federal
Subsidiary. Such Articles of Incorporation and Bylaws are in full force and
effect. Neither First Federal nor any First Federal Subsidiary is in violation
of any of the provisions of its Articles of Incorporation or Bylaws.
4.3 Capitalization. The authorized capital stock of First Federal
consists of 12,000,000 shares of First Federal Common Stock and 1,000,000 shares
of preferred stock, par value $.01 per share. As of the date of this Agreement,
(a) 6,855,379 shares of First Federal Common Stock are issued and outstanding,
all of which are duly authorized, validly issued, fully paid and non-assessable,
except as otherwise provided by Section 180.0622(2)(b) of the WBCL (including
judicial interpretations thereof and of Section 180.40(6), its predecessor
statute), and not issued in violation of any preemptive right of any First
Federal Shareholder, (b) 360,809 shares of First Federal Common Stock are held
in the
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treasury of First Federal, (c) 523,174 shares of First Federal Common Stock are
subject to issuance pursuant to outstanding First Federal Stock Options, and (d)
198,444 shares of First Federal Common Stock are reserved for future issuance
pursuant to the First Federal Stock Option Plan. As of the date of this
Agreement, no shares of First Federal's preferred stock are issued and
outstanding. Except as set forth in clauses (c) and (d) above, as of the date
of this Agreement First Federal has not granted any options, warrants or other
rights, agreements, arrangements or commitments of any character, including
without limitation voting agreements or arrangements, relating to the issued or
unissued capital stock of First Federal or any First Federal Subsidiary or
obligating First Federal or any First Federal Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, First Federal or any
First Federal Subsidiary. All shares of First Federal Common Stock subject to
issuance as described in the foregoing, upon issue on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable, except as otherwise
provided in Section 180.0622(2)(b) of the WBCL (including judicial
interpretations thereof and of Section 180.40(6), its predecessor statute), and
will not be issued in violation of any preemptive right of any First Federal
Shareholder. Except as described in the First Federal Disclosure Schedule,
there are no obligations, contingent or otherwise, of First Federal or any First
Federal Subsidiary to repurchase, redeem or otherwise acquire any shares of
First Federal Common Stock or the capital stock of any First Federal Subsidiary
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any First Federal Subsidiary or any other entity.
Each of the outstanding shares of capital stock of each First Federal Subsidiary
is duly authorized, validly issued, fully paid and nonassessable, except, where
applicable, as provided in Section 180.0622(2)(b) of the WBCL (including
judicial interpretations thereof and of Section 180.40(6), its predecessor
statute), and such shares owned by First Federal or another First Federal
Subsidiary are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations of First Federal's voting rights, charges or
other encumbrances of any nature whatsoever.
4.4 Authorization: Enforceability. The entering into, execution,
delivery and performance of this Agreement and all of the documents and
instruments required by this Agreement to be executed and delivered by First
Federal or the Bank are within the corporate power of First Federal or the Bank,
as the case may be, and: (a) have been duly and validly authorized by the
requisite vote of the Board of Directors of First Federal or the Bank, as the
case may be; and (b) upon the approval of the First Federal Shareholders and
receipt of all Regulatory Approvals, shall be duly and validly authorized by all
necessary corporate action. This Agreement is, and the other documents and
instruments required by this Agreement to be executed and delivered by First
Federal or the Bank will be, when executed and delivered by First Federal and
the Bank, the valid and binding obligations of First Federal and the Bank,
enforceable against each of them in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws generally affecting the
rights of creditors and subject to general equity principles.
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4.5 No Violation or Conflict. Subject to the receipt of the Regulatory
Approvals, the execution, delivery and performance of this Agreement and all of
the documents and instruments required by this Agreement to be executed and
delivered by First Federal do not and will not conflict with or result in a
breach of any Law, the Articles of Incorporation or Bylaws of First Federal, the
Federal Stock Charter or Bylaws of the Bank or the Articles of Incorporation or
Bylaws of any First Federal Subsidiary, constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any First Federal Existing Contract or any First Federal Existing Permit, or the
creation of any Lien upon any of the properties or assets of First Federal or
any First Federal Subsidiary, in each case which would have a Material Adverse
Effect on First Federal and the First Federal Subsidiaries taken as a whole.
4.6 Title to Assets; Leases. Except for Liens for current taxes not yet
due and payable, pledges to secure deposits and such imperfections of title,
easements and other encumbrances, if any, as do not materially detract from the
value of or substantially interfere with the present use of the property
affected thereby, First Federal owns good and marketable title to the assets and
properties which it owns or purports to own, free and clear of any and all
Liens, except: (a) the First Federal Existing Liens; and (b) the Permitted
Liens on the Closing Date. There is not, under any leases pursuant to which
First Federal or any of the First Federal Subsidiaries leases from others real
or personal property, any default by First Federal, any First Federal Subsidiary
or, to the best of First Federal's knowledge, any other party thereto, or any
event which with notice or lapse of time or both would constitute such a
default.
4.7 Litigation. Except for the First Federal Existing Litigation: (a)
neither First Federal nor any First Federal Subsidiary is subject to any
continuing order of, or written agreement or memorandum of understanding with,
or, to the knowledge of First Federal, any continuing material investigation by,
any federal or state savings and loan or insurance authority or other
governmental entity, or any judgment, order, writ, injunction, decree or award
of any governmental entity or arbitrator, including, without limitation, cease
and desist or other orders of any savings and loan regulatory authority; (b)
there is no claim, litigation, arbitration, proceeding, governmental
investigation, citation or action of any kind pending or, to the knowledge of
First Federal, proposed or threatened, against or relating to First Federal or
any First Federal Subsidiary, nor is there any basis known to First Federal for
any such action; (c) there are no actions, suits or proceedings pending or, to
the knowledge of First Federal, proposed or threatened, against First Federal by
any Person which question the legality, validity or propriety of the
transactions contemplated by this Agreement; and (d) there are no uncured
material violations or violations with respect to which material refunds or
restitutions may be required, cited in any compliance report to First Federal or
any First Federal Subsidiary as a result of an examination by any regulatory
authority.
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4.8 Securities and Banking Reports; Books and Records
(a) Since January 1, 1993, First Federal and the Bank have filed all
reports, registration statements, definitive proxy statements and prospectuses,
together with any amendments required to be made with respect thereto, that
were and are required to be filed under the Securities Act, Exchange Act or any
other Law with: (i) the SEC; (ii) the OTS; (iii) the FHLB of Chicago; (iv) the
FDIC; and (v) any other applicable state securities or savings and loan
authorities (all such reports, statements and prospectuses are collectively
referred to herein as the "First Federal Reports"). When filed, each of the
First Federal Reports complied as to form and substance in all material
respects with the requirements of applicable Laws.
(b) Each of the consolidated audited financial statements and
consolidated unaudited interim financial statements (including, in each case,
any related notes thereto) of First Federal included in the First Federal
Reports filed with the SEC have been or will be, as the case may be, prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto and except
with respect to consolidated unaudited interim statements as permitted by Form
10-Q of the SEC) and each fairly present the consolidated financial condition of
First Federal as of the respective dates thereof and the consolidated income,
equity and cash flows for the periods then ended, subject, in the case of the
consolidated unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein.
(c) The minute books of First Federal and the First Federal
Subsidiaries contain accurate and complete records of all meetings and actions
taken by written consent by their respective shareholders and Boards of
Directors (including all committees of such Boards), and all signatures
contained therein are the true signatures of the Persons whose signatures they
purport to be. The share transfer books of First Federal are correct, complete
and current in all respects. The accounting books and records of First
Federal: (i) are in all material respects correct and complete; (ii) are
current in a manner consistent with past practice; and (iii) have recorded
therein all the properties and assets and liabilities of First Federal.
4.9 Absence of Certain Changes. Except as set forth in the First
Federal Disclosure Schedule, since December 31, 1995 there has not been any:
(a) change in the financial condition, properties, business or
results of operations of First Federal or any First Federal Subsidiary having a
Material Adverse Effect on First Federal and the First Federal Subsidiaries,
taken as a whole;
(b) damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of First Federal or any First Federal
Subsidiary having a Material Adverse Effect on First Federal and the First
Federal Subsidiaries, taken as a whole;
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(c) transactions by First Federal or any First Federal Subsidiary
outside the ordinary course of their respective businesses or inconsistent
with past practices, except for the transactions contemplated by this Agreement;
(d) except for regular quarterly cash dividends of $0.07 per share
on First Federal Common Stock with usual record and payment dates, declaration
or payment or setting aside the payment of any dividend or any distribution in
respect of the capital stock of First Federal or any direct or indirect
redemption, purchase or other acquisition of any such stock by First Federal;
(e) allocations to the accounts of any directors, officers or
employees of First Federal or of any First Federal Subsidiary pursuant to any
of the First Federal Existing Plans other than in the normal course and in
accordance with the terms of the First Federal Existing Plans (none of which
have been amended or established subsequent to December 31, 1995);
(f) contribution to, increase in, or establishment of any Employee
Benefit Plan (including, without limitation, the granting of stock options,
stock appreciation rights, performance awards or restricted stock awards), or
any other increase in the compensation payable or to become payable to any
officers, directors or key employees of First Federal or any First Federal
Subsidiary other than in the normal course and in accordance with the terms of
the First Federal Existing Plans (none of which have been amended or established
subsequent to December 31, 1995); or
(g) change in the method of accounting or accounting practices of
First Federal or any First Federal Subsidiary.
4.10 Buildings and Equipment. Except as set forth in the First Federal
Disclosure Schedule: (a) the Buildings and the Equipment of First Federal and
the First Federal Subsidiaries are in good operating condition and repair,
reasonable wear and tear excepted; (b) are adequately insured for the nature of
First Federal's business with the self-insured retentions specified on the First
Federal Disclosure Schedule; (c) such assets and their use conform in all
material respects to applicable Laws; and (d) no notice of any violation of any
building, zoning or other Law relating to such assets or their use has been
received by First Federal or any First Federal Subsidiary.
4.11 First Federal Existing Contracts. The First Federal Disclosure
Schedule lists and briefly describes each Contract (the "First Federal Existing
Contracts") to which First Federal or a First Federal Subsidiary is a party or
by which its assets are bound and which constitutes:
(a) a lease of, or agreement to purchase or sell, any capital
assets;
(b) any management, consulting, employment, personal service,
severance, agency or other contract or contracts providing for employment or
rendition of services and
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which: (i) are in waiting, or (ii) create other than an at will employment
relationship; or (iii) provide for any commission, bonus, profit sharing,
incentive, retirement, consulting or additional compensation;
(c) any agreements or notes evidencing any Indebtedness;
(d) a power of attorney (whether revocable or irrevocable) given
to any Person by First Federal or any First Federal Subsidiary that is in force;
(e) an agreement by First Federal or any First Federal Subsidiary
not to compete in any business or in any geographical area;
(f) an agreement restricting the right of First Federal or any
First Federal Subsidiary to use or disclose any information in its possession;
(g) a partnership, joint venture or similar arrangement;
(h) a license;
(i) an agreement or arrangement with any Affiliate;
(j) an agreement for data processing services;
(k) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or other regulatory order
or decree with or by the SEC, OTS, the FDIC or any other regulatory authority.
(l) any other agreement or set of related agreements or series of
agreements which: (i) involve an amount in excess of $50,000 on an annual
basis or $100,000 in the aggregate; or (ii) is not in the ordinary course of
business of First Federal or any First Federal Subsidiary.
4.12 Performance of First Federal Existing Contracts. First Federal and
each First Federal Subsidiary has fully performed each term, covenant and
condition of each First Federal Existing Contract which is to be performed by it
at or before the date hereof, except where such non-performance would not have a
Material Adverse Effect on First Federal and the First Federal Subsidiaries
taken as a whole.
4.13 Contingent and Undisclosed Liabilities. First Federal and the
First Federal Subsidiaries have no material liabilities of any nature
(contingent or otherwise) except for those which: (a) are disclosed in the
First Federal Reports or in the First Federal Disclosure Schedule or in this
Agreement; or (b) arise in the ordinary course of business since December 31,
1995 and are not required to be disclosed in the First Federal Reports or
pursuant to this Agreement or the First Federal Disclosure Schedule.
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4.14 First Federal Existing Insurance Policies. All real and personal
property owned or leased by First Federal or any First Federal Subsidiary has
been and is being insured against, and First Federal or the respective First
Federal Subsidiary maintains liability insurance against, such insurable risks
and in such amounts as set forth in the First Federal Existing Insurance
Policies. The First Federal Existing Insurance Policies constitute all insurance
coverage owned by First Federal or any First Federal Subsidiary and are in full
force and effect and First Federal or any First Federal Subsidiary has not
received notice of and is not otherwise aware of any cancellation or threat of
cancellation of such insurance. Except as described in the First Federal
Disclosure Schedule, no property damage, personal injury or liability claims
have been made, or are pending, against First Federal or any First Federal
Subsidiary that are not covered by insurance. Within the past two (2) years, no
insurance company has canceled any insurance (of any type) maintained by First
Federal or any First Federal Subsidiary. Neither First Federal nor any First
Federal Subsidiary has any liability for unpaid premiums or premium adjustments
for any insurance policy. To the knowledge of First Federal, the cost of any
insurance currently maintained by First Federal or any First Federal Subsidiary
will not increase significantly upon renewal other than increases consistent
with the general upward trend in the cost of obtaining insurance.
4.15 Employee Benefit Plans.
(a) Except for the First Federal Existing Plans, First Federal
does not maintain, nor is it bound by, any Employee Benefit Plan. First Federal
has furnished Mutual with a complete and accurate copy of each First Federal
Existing Plan and a complete and accurate copy of each material document
prepared in connection with each such First Federal Existing Plan, including,
without limitation and where applicable, a copy of (i) each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500, (iv) the most
recently received IRS determination letter, and (v) the most recently prepared
actuarial report and financial statement.
(b) Except as indicated on the First Federal Disclosure Schedule,
no member of First Federal's "controlled group," within the meaning of Section
4001(a)(14) of ERISA, maintains or contributes to, or within the two years
preceding the Effective Time has maintained or contributed to, an employee
pension benefit plan subject to Title IV of ERISA. Except as indicated on the
First Federal Disclosure Schedule, none of the First Federal Existing Plans or
First Federal Existing Contracts obligates First Federal or any First Federal
Subsidiary to pay material separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement
or as a result of a "change in control," within the meaning of such term under
Section 280G of the Code. Except as indicated on the First Federal Disclosure
Schedule, none of the First Federal Existing Plans or First Federal Existing
Contracts provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of
First Federal or any First Federal Subsidiary. Each of the First Federal
Existing Plans is subject only to the Laws of the United States or a political
subdivision thereof.
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(c) Each First Federal Existing Plan has always been operated in
material compliance with the requirements of all applicable Law, and all persons
who participate in the operation of such First Federal Existing Plans and all
First Federal Existing Plan "fiduciaries" (within the meaning of Section 3(21)
of ERISA) have always acted in material compliance with the provisions of all
applicable Law. First Federal and all of the First Federal Subsidiaries have
performed in all material respects all obligations required to be performed by
any of them under, are not in any material respect in default under or in
violation of, and have no knowledge of any material default or violation by any
party to, any First Federal Existing Plan. No legal action, suit or claim is
pending or, to the knowledge of First Federal, threatened with respect to any
First Federal Existing Plan (other than claims for benefits in the ordinary
course) and no fact or event exists to the knowledge of First Federal that could
give rise to any such action, suit or claim.
(d) Except as set forth on the First Federal Disclosure Schedule,
each First Federal Existing Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified, and each trust
established in connection with any First Federal Existing Plan that is intended
to be exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no fact
or event has occurred since the date of such determination letter from the IRS
to adversely affect the qualified status of any such First Federal Existing
Plan or the exempt status of any such trust. No trust maintained or
contributed to by First Federal or any First Federal Subsidiary is intended to
be qualified as a voluntary employees' beneficiary association or is intended
to be exempt from federal income taxation under Section 501(c)(9) of the Code.
(e) There has been no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any First Federal Existing Plan. First Federal and each of the First Federal
Subsidiaries has not incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code and no fact or event exists that could give
rise to any such liability.
(f) All contributions, premiums or payments required to be made
with respect to any First Federal Existing Plan have been made on or before
their due dates. There is no accumulated funding deficiency, within the meaning
of ERISA or the Code, in connection with the First Federal Existing Plans and
no reportable event, as defined in ERISA, has occurred in connection with the
First Federal Existing Plans. First Federal and the First Federal Subsidiaries
are not contributing to, and have not contributed to any multi-employer plan,
as defined in ERISA.
4.16 No Violation of Law. Except as set forth in the First Federal
Disclosure Schedule, neither First Federal, any First Federal Subsidiary nor any
of the assets of First Federal or the First Federal Subsidiaries materially
violate or conflict with any Law, any First Federal Exiting Permits, or any
decree, judgment or order, or any zoning, building line restriction, planning,
use or other similar restriction, in each case which would have a Material
Adverse Effect on First Federal and the First Federal Subsidiaries taken as a
whole.
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4.17 Brokers. Except for fees to Dain Bosworth Incorporated, First
Federal's financial advisor, neither First Federal nor any First Federal
Subsidiary has incurred any brokers', finders', financial advisor or any similar
fee in connection with the transactions contemplated by this Agreement. The
First Federal Disclosure Schedule contains a list of all fees to be paid to Dain
Bosworth Incorporated in connection with the transactions contemplated by this
Agreement.
4.18 Taxes.
(a) Except as disclosed in the First Federal Disclosure Schedule
and except as may arise as a result of the transactions contemplated by this
Agreement: First Federal and the First Federal Subsidiaries have timely and
properly filed all federal, state, local and foreign tax returns (including but
not limited to income, franchise, sales, payroll, employee withholding and
social security and unemployment) which were required to be filed except where
the failure to have filed timely or properly would not have a Material Adverse
Effect on First Federal and the First Federal Subsidiaries taken as a whole;
First Federal and the First Federal Subsidiaries have paid or made adequate
provision, in reserves reflected in its financial statements included in the
First Federal Reports in accordance with generally accepted accounting
principles, for the payment of all taxes (including interest and penalties) and
withholding amounts owed by them or assessable against them; no tax
deficiencies have been assessed or proposed against First Federal or any First
Federal Subsidiary and to the knowledge of First Federal there is no basis in
fact for the assessment of any tax or penalty tax against First Federal or any
First Federal Subsidiary.
(b) As of the date of this Agreement, there are no fiscal years of
First Federal currently under examination by the IRS or the Wisconsin Department
of Revenue, and none of the open years have been examined by the IRS or the
Wisconsin Department of Revenue. First Federal and the First Federal
Subsidiaries have not consented to any extension of the statute of limitation
with respect to any open tax returns.
(c) There are no tax Liens upon any property or assets of First
Federal or any First Federal Subsidiary except for Liens for current taxes not
yet due and payable.
(d) As soon as practicable after the date of this Agreement, First
Federal and the First Federal Subsidiaries will deliver to Mutual correct and
complete copies of all tax returns and reports of First Federal filed for all
periods not barred by the applicable statute of limitations. No examination or
audit of any tax return or report for any period not closed by audit or not
barred by the applicable statute of limitations has occurred, no such
examination is in progress and, to the knowledge of First Federal, no such
examination or audit is planned.
(e) Except where the failure to withhold, pay or file would not
have a Material Adverse Effect on First Federal and the First Federal
Subsidiaries taken as a whole, First Federal and the First Federal Subsidiaries
have properly withheld and timely paid all withholding and employment taxes
which they were required to withhold and pay relating
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to salaries, compensation and other amounts heretofore paid to their employees
or other Persons. All Forms W-2 and 1099 required to be filed with respect
thereto have been timely and properly filed.
4.19 Real Estate. The First Federal Real Estate: (a) constitutes all
real property and improvements (or interest therein, including without
limitation easements, licenses or similar arrangements authorizing First Federal
or a First Federal Subsidiary to place, maintain, operate and/or use an
automated teller machine or similar device on real property of a third-party)
leased or owned by First Federal or any First Federal Subsidiary; (b) other than
with respect to First Federal or any First Federal Subsidiary as lessee, is not
subject to any leases or tenancies of any kind; (c) is not in the possession of
any adverse possessors; (d) has direct access to and from a public road or
street; (e) is used in a manner which is consistent with applicable Law; (f) is,
and has been since the date of possession thereof by First Federal or any First
Federal Subsidiary, in the peaceful possession of First Federal or any First
Federal Subsidiary; (g) is served by all water, sewer, electrical, telephone,
drainage and other utilities required for the normal operations of the Buildings
of First Federal and the First Federal Subsidiaries and the First Federal Real
Estate; (h) except as disclosed in the First Federal Disclosure Schedule, to the
knowledge of First Federal, is not located in an area designated as a flood
plain or wetland; (i) is not subject to any outstanding special assessment; (j)
is not subject to any zoning, ordinance, decrees or other Laws which would
materially restrict or prohibit Mutual from continuing the operations presently
conducted thereon by First Federal or any First Federal Subsidiary; (k) is not
subject to any interest of any Person under an easement, contract, option or
mineral rights or other agreements which would have a Material Adverse Effect on
First Federal and the First Federal Subsidiaries, taken as a whole; (l) is not
subject to any presently pending condemnation proceedings, nor to First
Federal's knowledge, are such proceedings threatened against the Real Estate.
4.20 Governmental Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement by First Federal or any
First Federal Subsidiary, except for the Regulatory Approvals.
4.21 No Pending Acquisitions. Except for this Agreement, First Federal
is not a party to or bound by any agreement, undertaking or commitment with
respect to an Acquisition on the date of this Agreement.
4.22 Labor Matters.
(a) Except as disclosed on the First Federal Disclosure Schedule
(or in an updated First Federal Disclosure Schedule with respect to vacations in
(iii) below), there is no present or former employee of First Federal or any
First Federal Subsidiary who has any claim against any of such entities
(whether under Law, under any employee agreement or otherwise) on account of or
for: (i) overtime pay, other than overtime pay for the current payroll period;
(ii) wages or salaries, other than wages or salaries for the current payroll
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period; or (iii) vacations, sick leave, time off or pay in lieu of vacation,
sick leave or time off, other than vacation, sick leave or time off (or pay in
lieu thereof) earned in the twelve-month period immediately preceding the date
of this Agreement or incurred in the ordinary course of business and appearing
as a liability on the most recent financial statements included in the First
Federal Reports.
(b) There are no pending and unresolved claims by any Person
against First Federal or any First Federal Subsidiary arising out of any Law
relating to discrimination against employees or employee practices or
occupational or safety and health standards. There is no pending or, to the
knowledge of First Federal, threatened, nor has First Federal or any First
Federal Subsidiary ever experienced any, labor dispute, strike or work stoppage
which affected, affects or may affect the business of First Federal or any First
Federal Subsidiary or which did, may or would interfere with the continued
operation of First Federal or any First Federal Subsidiary.
(c) Neither First Federal nor any First Federal Subsidiary is a
party to any collective bargaining agreement. There is not now pending or, to
the knowledge of First Federal, threatened, any charge or complaint against
First Federal or any First Federal Subsidiary by or before the National Labor
Relations Board or any representative thereof, or any comparable state agency or
authority. No union organizing activities are in process or contemplated and no
petitions have been filed for union organization or representation of employees
of First Federal or any First Federal Subsidiary and First Federal and the First
Federal Subsidiaries have not committed any unfair labor practices which have
not heretofore been corrected and fully remedied.
4.23 Indebtedness. Except for the First Federal Existing Indebtedness,
First Federal has no Indebtedness.
4.24 First Federal Existing Permits. The First Federal Existing Permits
constitute all Permits which First Federal and the First Federal Subsidiaries
currently have and need for the conduct of their respective businesses as
currently conducted.
4.25 Disclosure. No statement of fact by First Federal contained in
this Agreement, the First Federal Disclosure Schedule, the First Federal Proxy
Statement or any other document furnished or to be furnished by First Federal
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein contained, in the light of the circumstances under which they
were made, not misleading as of the date to which it speaks.
4.26 Information Supplied. None of the information supplied or to be
supplied by First Federal for inclusion or incorporation by reference in the
First Federal Proxy Statement will, at the date(s) mailed to the First Federal
Shareholders and at the time(s) of the First Federal Meeting, 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 therein, in light of
the circumstances under which they are made, not misleading. The First Federal
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Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations of the SEC
thereunder.
4.27 Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of First Federal Common Stock is the only vote of the
holders of any class or series of capital stock or other securities of First
Federal necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
4.28 Opinion of Financial Advisor. First Federal has received the
opinion of Dain Bosworth Incorporated dated the date of this Agreement, to the
effect that the consideration to be received in the Merger by the First Federal
Shareholders is fair to the First Federal Shareholders from a financial point of
view, and a copy of such opinion has been delivered to Mutual.
4.29 Environmental Protection.
(a) As used in this Section 4.29 of this Agreement:
(i) "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (A) the presence, or
release into the environment, of any Environmental Hazardous Materials at any
location, whether or not owned by First Federal or any First Federal Subsidiary;
or (B) circumstances forming the basis of any violation or alleged violation, of
any Environmental Law; or (C) any and all claims by any Person seeking damages,
contribution, indemnification, cost, recovery, compensation or injunctive relief
resulting from the presence or Environmental Release of any Environmental
Hazardous Materials.
(ii) "Environmental Laws" shall mean all federal, state,
local or foreign statute, Law, rule, ordinance, code, policy, guideline, rule of
common law and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without limitation,
Laws and regulations relating to Environmental Releases or threatened
Environmental Releases of Environmental Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Environmental Hazardous Materials.
(iii) "Environmental Hazardous Materials" shall mean: (A) any
petroleum or petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls (PCBs) and radon
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gas; and (B) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes, restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any Environmental Law; and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by any
governmental authority.
(iv) "Environmental Release" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or property.
(b) Except as set forth in the First Federal Disclosure Schedule,
to the knowledge of First Federal, First Federal and the First Federal
Subsidiaries: (i) are in material compliance with all applicable Environmental
Laws; and (ii) have not received any communication (written or oral), from a
governmental authority or other Person, that alleges that First Federal is not
in compliance with applicable Environmental Laws.
(c) Except as set forth in the First Federal Disclosure Schedule,
to the knowledge of First Federal, First Federal and the First Federal
Subsidiaries have obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for its operations, and all such permits are in good standing and
First Federal and the First Federal Subsidiaries are in material compliance with
all terms and conditions of the Environmental Permits.
(d) Except as set forth in the First Federal Disclosure Schedule,
there is no Environmental Claim pending or, to the knowledge of First Federal,
threatened against First Federal, any First Federal Subsidiary or against any
Person whose liability for any Environmental Claim First Federal or any First
Federal Subsidiary has or may have retained or assumed either contractually or
by operation of Law, or against any real or personal property or operations
which First Federal or any First Federal Subsidiary owns, leases or manages.
(e) Except as set forth in the First Federal Disclosure Schedule,
to the knowledge of First Federal, there have been no Environmental Releases of
any Environmental Hazardous Material by First Federal or by any Person on
real property owned (including REO properties of the Bank), used, leased or
operated by First Federal or any of the First Federal Subsidiaries.
(f) To the knowledge of First Federal, no real property at any
time owned (including REO properties of the Bank), operated, used or controlled
by First Federal or any First Federal Subsidiary is currently listed on the
National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under the
CERCLA, or on any comparable state list, and, except as described in the First
Federal Disclosure Schedule, First Federal has not received any written notice
from any Person under or relating to CERCLA or any comparable state or local
Law.
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(g) To the knowledged of First Federal, no off-site location at
which First Federal or any First Federal Subsidiary has disposed or arranged for
the disposal of any waste is listed on the National Priorities List or on any
comparable state list and neither First Federal nor any First Federal
Subsidiary has received any written notice from any Person with respect to any
off-site location, of potential or actual liability or a written request for
information from any Person under or relating to CERCLA or any comparable state
or local Law.
(h) The First Federal Disclosure Schedule includes an estimate by
First Federal of future costs to First Federal and each First Federal Subsidiary
of compliance with, and environmental cleanup and response under, Environmental
Laws.
4.30 Investment Securities. Except for the First Federal Existing
Investment Securities, First Federal does not own, and does not have any right
or obligation to acquire, any Investment Securities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MUTUAL AND MERGER CORP.
Mutual and Merger Corp. hereby jointly and severally represent and
warrant to First Federal that:
5.1 Organization and Capitalization; Business.
(a) Mutual is a mutual savings bank duly organized, validly
existing and in good standing under Chapter 214 of the Wisconsin Statutes. The
deposits of Mutual are insured by the SAIF of the FDIC as permitted by
Federal Law, and Mutual has paid all premiums and assessments required
thereunder. Mutual is a member in good standing of the FHLB of Chicago.
(b) Mutual has full corporate power and authority and those Permits
necessary to carry on its business as it is now conducted and to own, lease and
operate its assets and properties.
(c) Merger Corp. is a corporation duly organized, validly existing
and in active status under the Laws of the State of Wisconsin. Prior to the
date of this Agreement, Merger Corp. engaged in no business other than matters
necessary to the organization and incorporation of Merger Corp. and to authorize
Merger Corp. to enter into, execute and deliver this Agreement. The authorized
capital stock of Merger Corp. consists of 9,000 shares of common stock, One Cent
($.01) par value per share. As of the date of this Agreement, 100 shares of
Merger Corp.'s common stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid, and non-assessable, except as otherwise
provided by Section 180.0622(2)(b) of the WBCL (including judicial
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interpretations thereof and of Section 180.40(6), its predecessor statute), and
are owned by Mutual.
(d) Copies of the Articles of Incorporation and Bylaws of Mutual
and of Merger Corp. have been delivered to First Federal. Such copies are
complete and correct copies of such documents, and are in full force and effect.
Neither Mutual nor Merger Corp. are in violation of any of the provisions of
their Articles of Incorporation or Bylaws in any respect which reasonably could
be expected to have an adverse effect on their ability to consummate the
transactions contemplated by this Agreement.
5.2 Authorization; Enforceability. The entering into, execution,
delivery and performance of this Agreement and all of the documents and
instruments required by this Agreement to be executed and delivered by Mutual or
Merger Corp. are within the corporate power of Mutual or Merger Corp., as the
case may be, and: (a) have been duly and validly authorized by the requisite
vote of the Board of Directors of Mutual and, where required, by the Board of
Directors and sole shareholder of Merger Corp.; and (b) upon receipt of all
Regulatory Approvals, shall be duly and validly authorized by all necessary
corporate action on the part of both Mutual and Merger Corp. This Agreement is,
and the other documents and instruments required by this Agreement to be
executed and delivered by Mutual or Merger Corp. will be, when executed and
delivered by Mutual or Merger Corp., as the case may be, the valid and binding
obligations of Mutual or Merger Corp., as the case may be, enforceable against
Mutual or Merger Corp., as the case may be, in accordance with their respective
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws generally
affecting the rights of creditors and subject to general equity principles.
5.3 No Violation or Conflict. Subject to the receipt of the Regulatory
Approvals, the execution, delivery and performance of this Agreement and all of
the documents and instruments required by this Agreement to be executed and
delivered by Mutual or Merger Corp. do not and will not conflict with or result
in a breach of any Law or the Articles of Incorporation or Bylaws of Mutual or
Merger Corp. or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any Contract of Mutual
or Merger Corp. or any Permit held by or the creation of any Lien upon any of
the properties or assets of Mutual or Merger Corp.
5.4 Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of Mutual, proposed or threatened, against Mutual or Merger
Corp. by any Person which question the legality, validity or propriety of the
transactions contemplated by this Agreement. There is no reasonable basis for
any proceeding, claim, action or governmental investigation against Mutual which
reasonably can be expected to have an adverse effect on the ability of Mutual to
consummate the transactions contemplated by this Agreement.
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5.5 Brokers. Except for fees to RP Financial, L.L.C., Mutual's
financial advisor, neither Mutual nor Merger Corp. has not incurred any
brokers', finders', financial advisor or any similar fee in connection with the
transactions contemplated by this Agreement.
5.6 Governmental Approvals. Other than the Regulatory Approvals, no
permission, approval, determination, consent or waiver by, or any declaration,
filing or registration with, any governmental or regulatory authority is
required in connection with the execution, delivery and performance of this
Agreement by Mutual or Merger Corp.
5.7 Disclosure. No statement of fact by Mutual contained in this
Agreement, the First Federal Proxy Statement or any other document furnished or
to be furnished by Mutual contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained, in the light of the
circumstances under which they were made, not misleading as of the date to which
it speaks.
5.8 Information Supplied. None of the information supplied or to be
supplied by Mutual for inclusion or incorporation by reference in the First
Federal Proxy Statement will, at the date(s) mailed to the First Federal
Shareholders and at the time(s) of the First Federal Meeting, 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 therein, in light of
the circumstances under which they are made, not misleading.
5.9 Opinion of Financial Advisor. Mutual has received the opinion of RP
Financial, L.L.C., dated the date of this Agreement, to the effect that the
consideration to be paid in the Merger by Mutual is fair to Mutual and its
Members from a financial point of view, and a copy of such opinion has been
delivered to First Federal.
5.10 Cash Payment. Mutual has sufficient funds or has financing
committed (evidence of which has been provided to First Federal) to pay the cash
payment required under Section 2.10 of this Agreement and such payment will not
cause Mutual to fail to meet any regulatory capital requirements to which it is
subject.
5.11 Compliance with Laws. Mutual is in compliance in all material
respects with all applicable Laws.
5.12 Consummation. Mutual has no reason to believe that it will be
unable to obtain the Regulatory Approvals.
5.13 Employee Benefit Plans. Each "employee benefit plan," as that term
is defined in Section 3 of ERISA, any "employee welfare benefit plan" or
"multi-employer plan," as those terms are defined in Section 3 of ERISA, or
dental plan, retirement plan, flexible benefits or cafeteria plan, deferred
compensation plan, or other employee benefit program or arrangement maintained
by Mutual or any Subsidiary of Mutual (collectively, "Mutual Benefit Plans") has
been operated in all material respects in compliance with the applicable
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provisions of ERISA, the Code, and all regulations, rulings and announcements
promulgated or issued thereunder. Each of the Mutual Benefit Plans that is
intended to be a pension, profit sharing, thrift, or savings plan that is
qualified under Section 401(a) of the Code satisfies the applicable requirements
of such provision, and there exist no circumstances that would adversely affect
the qualified status of any such Plan under that Section, except with respect to
any required retroactive amendment for which the remedial amendment period has
not yet expired.
ARTICLE VI
CONDUCT OF BUSINESS BY FIRST FEDERAL PENDING THE MERGER
From and after the date of this Agreement and until the Effective Time,
First Federal and the First Federal Subsidiaries shall:
6.1 Carry on in Regular Course. Diligently carry on their business in
the regular course and substantially in the same manner as heretofore conducted
and shall not make or institute any unusual or novel methods of lending,
investing, purchasing, selling, leasing, managing, accounting or operating.
6.2 Use of Assets. Use, manage, operate, maintain and repair all of
their assets and properties in a normal business manner.
6.3 No Default. Not do any act or omit to do any act, or permit any act
or omission to act, which will cause a breach of any of the First Federal
Existing Contracts, except where such breach would not have a Material Adverse
Effect on First Federal and the First Federal Subsidiaries taken as a whole.
6.4 Existing Insurance Policies. Use reasonable efforts to maintain all
of the First Federal Existing Insurance Policies in full force and effect,
except as mutually agreed to by First Federal and Mutual.
6.5 Employment Matters. Not: (a) except as described in the First
Federal Disclosure Schedule, grant any increase in the rate of pay of any of
their employees, other than regularly scheduled year-end pay adjustments in the
normal course which shall not, in the aggregate, exceed (i) 3.5% of current
payroll for all employees not subject to employment contracts and (ii) a total
of $20,000 for those employees who have employment agreements; (b) institute or
amend any Employee Benefit Plan, except as expressly contemplated under this
Agreement; (c) enter into or modify any written employment arrangement with any
Person; (d) make any discretionary contributions to any of the First Federal
Existing Plans, except for contributions to the First Federal ESOP necessary for
the First Federal ESOP to make scheduled installment payments required under the
terms of the First Federal ESOP Indebtedness; or (e) make any allocation to the
account of any participant(s) in any of the First Federal Existing Plans, other
than in the normal course and in accordance with the terms of the relevant First
Federal Existing Plan or except as
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expressly contemplated by this Agreement. Notwithstanding the foregoing, First
Federal may provide for the payment of normal 1996 year-end bonuses, which
shall not in the aggregate exceed $40,000 for all non-contract employees as a
group and $65,000 for all employees with employment contracts as a group, and
may further establish a bonus pool of not in excess of $28,000 which may be used
as additional 1996 year-end bonus payments at the discretion of the Board and as
needed to assure the retention of key personnel necessary to the integration of
Mutual's and First Federal's operations.
6.6 Contracts and Commitments. Not enter into any contract or
commitment or engage in any transaction not in the usual and ordinary course of
business and consistent with First Federal's normal business practices and not
purchase, lease, sell or dispose of any capital asset, except for such capital
asset transactions which individually do not involve a dollar amount in excess
of $50,000 and which together do not involve an aggregate dollar amount in
excess of $150,000.
6.7 Indebtedness; Investments. Not create, incur, invest in or assume
any Indebtedness or Investment Securities not in the usual and ordinary course
of business; and not, without the prior written consent of Mutual, incur costs
and expenses in connection with the transactions contemplated by this Agreement
which materially exceed the estimate set forth in the First Federal Disclosure
Schedule pursuant to Section 8.5 of this Agreement.
6.8 Preservation of Relationships. Use their best efforts to preserve
their business organizations intact, to retain the services of their present
officers and key employees and to preserve the goodwill of depositors, borrowers
and other customers, suppliers, creditors and others having business
relationships with First Federal.
6.9 Compliance with Laws. Comply with all applicable Laws, except for
such noncompliances which would not individually or in the aggregate have a
Material Adverse Effect on First Federal and the First Federal Subsidiaries
taken as a whole.
6.10 Taxes. Timely and properly file all federal, state, local and
foreign tax returns which are required to be filed, and shall pay or make
provision for the payment of all taxes owed by it.
6.11 Amendments. Not amend First Federal's Articles of Incorporation or
Bylaws, the Bank's Federal Stock Charter or Bylaws, or the Articles of
Incorporation or Bylaws of any other First Federal Subsidiary, except as
mutually agreed to by First Federal and Mutual or as required by Law.
6.12 Issuance of Stock; Dividends; Redemptions. Not: (a) issue any
additional shares of stock of any class (including any shares of First Federal
Preferred Stock) or grant any warrants, options (including any options pursuant
to the First Federal Stock Option Plan) or rights to subscribe for or acquire
any additional shares of stock of any class other than the issuance of First
Federal Common Stock issuable upon exercise of First Federal Stock Options
outstanding as of the date of this Agreement; (b) except as provided below,
declare
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or pay any dividend or make any capital or surplus distributions of any nature,
except for First Federal's regular quarterly cash dividends not exceeding $0.07
per share for each outstanding share of First Federal Common Stock; or (c)
directly or indirectly redeem, purchase or otherwise acquire, recapitalize or
reclassify any of their capital stock or liquidate in whole or in part.
6.13 Policy Changes. Not make a material change in any lending,
investment, liability, management or other material policies concerning their
business or operations, except as required by Law or as required by the Board
of Directors of First Federal in the exercise of its fiduciary duties.
6.14 Carlson Loans. Not, except with the prior approval of Mutual,: (a)
make any loans or otherwise extend any additional credit to David Carlson or any
Affiliate of David Carlson; or (b) modify the terms of any existing loans or
other credit facilities previously extended to David Carlson or any Affiliate of
David Carlson.
6.15 Acquisition Transaction. Promptly following the execution of this
Agreement, take affirmative steps necessary to discontinue, and thereafter not
initiate, solicit or knowingly encourage (including by way of furnishing any
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, or negotiate with any person in
furtherance of such inquires or to obtain an Acquisition Proposal, or agree to
endorse, or endorse, any Acquisition Proposal, or authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by First Federal or any of
the First Federal Subsidiaries to take any such action, and First Federal shall
promptly notify Mutual orally, and confirm in writing, subject to disclosure
being consistent with the fiduciary duties of the Board of Directors of First
Federal, all of the relevant details relating to all inquiries and proposals
which First Federal or a First Federal Subsidiary may receive relating to any of
such matters; provided, however, that nothing contained in this Section 6.15
shall prohibit the Board of Directors of First Federal from: (a) furnishing or
permitting any of its officers, directors, employees, investment bankers,
financial advisors, attorneys, accountants or other representatives to furnish
information to any party that requests information as to First Federal and/or
the Bank or take any other action if (i) the Board of Directors of First
Federal, after consultation with legal counsel, determines in good faith that
such action is required for the Board of Directors of First Federal to comply
with its fiduciary duties to shareholders imposed by applicable Laws, and (ii)
prior to furnishing such information to such party, First Federal receives from
such party an executed confidentiality agreement in reasonably customary form;
or (b) complying with Rules 14d-2 and 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
7.1 Conditions to Each Parties Obligations to Effect the Merger. The
respective obligations of Mutual and First Federal to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing and as of the Effective Time of the following conditions
precedent:
(a) No Litigation. No suit, action or other proceeding shall be
pending or overtly threatened before any court in which the consummation of the
transactions contemplated by this Agreement is restrained or enjoined or in
which the relief requested is to restrain, enjoin or prohibit the consummation
of the transactions contemplated by this Agreement and, in either case, where
in the reasonable judgment of either Mutual or First Federal, such suit, action
or other proceeding, is likely to have a material adverse effect with respect
to such party's interest.
(b) Approval of First Federal Shareholders. This Agreement and the
Merger shall have received the requisite approval and authorization of the
First Federal Shareholders.
(c) Regulatory Approvals.
(i) The Merger, this Agreement and the transactions contemplated
hereby, shall have been approved by the OTS, the FDIC, the Wisconsin Savings
Association Regulatory Agency, the Minnesota Savings Association Regulatory
Agency, and any other governmental entities whose approval is necessary, all
conditions required to be satisfied prior to the Effective Time imposed by the
terms of such approvals shall have been satisfied, and all waiting periods
relating to such approvals shall have expired. The Restructuring described in
Section 2.15 of this Agreement also shall have been approved by the OTS, the
FDIC and the Wisconsin Savings Association Regulatory Agency, and any other
governmental entity whose approval is necessary in order for Mutual to proceed
with such restructuring.
(ii) No permission, approval, determination, consent or waiver
received pursuant to Section 7.1(c)(i) of this Agreement shall contain any
condition applicable to Mutual which is, in the reasonable judgment of
Mutual, materially burdensome upon the conduct of Mutual's business or which
would so adversely impact the economic and business benefits of the Merger to
Mutual so as to render it inadvisable to proceed with the Merger.
7.2 Conditions to Obligation of Mutual. The obligation of Mutual to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing and as of the Effective Time of the
following additional conditions precedent:
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(a) Compliance with Agreement. First Federal shall have performed
and complied in all material respects with all of its covenants, agreements and
other obligations under this Agreement which are to be performed or complied
with by it prior to or on the Closing Date and as of the Effective Time.
(b) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Mutual, and First Federal shall have
made available to Mutual for examination the originals or true and correct
copies of all documents Mutual may reasonably request in connection with the
transactions contemplated by this Agreement.
(c) Representations and Warranties of First Federal. Each of the
representations and warranties of First Federal contained in this Agreement,
after giving effect to any update to the First Federal Disclosure Schedule or
notice to Mutual under Section 3.2(b), shall be true and correct, as of the
Effective Time with the same force and effect as though made on and as of the
Effective Time, except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and except for those breaches which individually or in the
aggregate do not or would not be reasonably likely to have a Material Adverse
Effect on First Federal and the First Federal Subsidiaries taken as a whole.
(d) No Material Adverse Change. During the period from the date of
this Agreement to the Closing Date and as of the Effective Time there shall not
have occurred, and there shall not exist on the Closing Date and as of the
Effective Time, any condition(s) or fact(s) having individually or in the
aggregate a Quantified Material Adverse Effect (including any such condition(s)
or fact(s) disclosed in an update to the First Federal Disclosure Schedule
delivered to Mutual by First Federal pursuant to Section 3.2(b) of this
Agreement).
(e) Deliveries at Closing. First Federal shall have delivered to
Mutual the following documents, each properly executed and dated the Closing
Date: (i) the First Federal Closing Certificate; and (ii) the First Federal
Counsel Opinion.
(f) Other Documents. First Federal shall have delivered to Mutual
such certificates and documents of officers of First Federal and public
officials as shall be reasonably requested by Mutual to establish the
existence of First Federal and the due authorization of this Agreement and the
transactions contemplated by this Agreement by First Federal.
(g) Accountant Letters. Mutual shall have received a copy of each
of the following letters from Ernst & Young LLP, each of which shall be in form
and substance reasonably satisfactory to Mutual and shall contain information
concerning the financial condition of First Federal: (i) the letter described
in Section 3.6 of this Agreement; (ii) a similar letter dated the Closing Date.
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(h) First Federal Replacement Employment Agreements and Severance
Agreements. Pursuant to Section 3.11(d) of this Agreement, First Federal shall
have delivered to Mutual, with respect to each of the First Federal Executives,
either: (i) a First Federal Replacement Employment Agreement; or (ii) a First
Federal Severance Agreement, as directed by Mutual, in each case dated as of the
Closing Date and duly executed by the appropriate First Federal Executive.
(i) Stock Listing. First Federal Common Stock shall continue to
be listed on the NASDAQ/NMS.
(j) First Federal Stock Options. First Federal shall have, at its
election, either (i) taken all steps necessary to accelerate exercisability of
all outstanding First Federal Stock Options so that the same become exercisable
as of a date prior to the Closing Date, and each holder of a First Federal
Stock Option shall voluntarily have exercised all of his or her First Federal
Stock Options prior to the Closing Date; or (ii) prior to the Closing Date and
with the written consent of the First Federal Stock Option holder, cashed out
each of such holder's First Federal Stock Options without the exercise thereof
at a price equal to the Stock Option Consideration. In any event, as of the
Closing Date there shall be no outstanding First Federal Stock Options.
7.3 Conditions to Obligation of First Federal. The obligation of First
Federal to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing and as of the Effective
Time of the following additional conditions precedent:
(a) Compliance with Agreement. Mutual and Merger Corp. each shall
have performed and complied in all material respects with all of its
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Closing Date and as of the Effective Time.
(b) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to First Federal, and Mutual shall have
made available to First Federal for examination the originals or true and
correct copies of all documents which First Federal may reasonably request in
connection with the transactions contemplated by this Agreement.
(c) Representations and Warranties of Mutual and Merger Corp. Each
of the representations and warranties of Mutual and Merger Corp. contained in
this Agreement shall be true and correct in all material respects (except that
where any statement in a representation or warranty expressly includes a
statement of materiality, such statement shall be true and correct in all
respects) as of the Effective Time with the same force and effect as though made
on and as of the Effective Time, except for those representations and warranties
which address matters only as of a particular date (which shall remain true and
correct as of such date).
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(d) Deliveries at Closing. Mutual shall have delivered to First
Federal the following documents, each properly executed and dated the Closing
Date: (i) the Mutual and Merger Corp. Closing Certificate; and (ii) the Mutual
Counsel Opinion.
(e) Other Documents. Mutual shall have delivered to First Federal
such certificates and documents of officers of Mutual and of public officials
as shall be reasonably requested by First Federal to establish the existence of
Mutual and the due authorization of this Agreement and the transactions
contemplated by this Agreement by Mutual.
(f) Opinion of Financial Advisor. First Federal shall have
received the opinion of Dain Bosworth Incorporated dated the date on which the
First Federal Proxy Statement is first mailed to First Federal Shareholders, to
the effect that the consideration to be received in the Merger by the First
Federal Shareholders is fair to the First Federal Shareholders from a financial
point of view.
(g) First Federal Replacement Employment Agreements and Severance
Agreements. Pursuant to Section 3.11(d) of this Agreement, First Federal shall
have delivered to Mutual, on behalf of each of the First Federal Executives,
either: (i) a First Federal Replacement Employment Agreement; or (ii) a First
Federal Severance Agreement, in each case dated as of the Closing Date and
executed on behalf of the Bank by a duly authorized officer and by the
appropriate First Federal Executive.
ARTICLE VIII
TERMINATION; MISCELLANEOUS
8.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the Closing
(whether before or after approval of this Agreement by the First Federal
Shareholders), as follows:
(a) by mutual written agreement of Mutual and First Federal;
(b) by Mutual if any of the conditions set forth in Sections 7.1 or
7.2 of this Agreement shall not have been fulfilled by the Closing;
(c) by First Federal if any of the conditions set forth in Sections
7.1 or 7.3 of this Agreement shall not have been fulfilled by the Closing;
(d) by either Mutual or First Federal if the Closing has not
occurred on or before 11:59 p.m. on August 31, 1997.
8.2 Rights on Termination; Waiver. The representations, warranties,
covenants, agreements and other obligations of the parties set forth in this
Agreement shall terminate upon the termination of this Agreement pursuant to
Section 8.1 hereof, except that the
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agreements set forth in Sections 3.9, 3.13, and Article VIII of this Agreement
shall survive any such termination indefinitely, and each party to this
Agreement shall retain any and all remedies which it may have for breach of
contract provided by Law based on another party's willful failure to comply
with the terms of this Agreement. If any of the conditions set forth in
Sections 7.1 and 7.2 of this Agreement have not been satisfied, Mutual may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement and if any of the conditions set forth in
Sections 7.1 and 7.3 of this Agreement have not been satisfied, First Federal
may nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement. Any such election to proceed shall be
evidenced by a certificate signed on behalf of the waiving party by an officer
of that party.
8.3 Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants, agreements and other obligations of the
parties set forth in this Agreement shall terminate at the Effective Time,
except the covenants, agreements, and other obligations of the parties which by
their terms are contemplated to be performed after the Effective Time, including
those set forth in Sections 2.10, 2.11, 2.12, 2.13, 2.14, 3.5, 3.11, 3.12, 8.4,
8.6, 8.8, 8.9, 8.10, 8.11, 8.13 and 8.14 shall survive the Effective Time
indefinitely.
8.4 Entire Agreement; Amendment. This Agreement, the Stock Option
Agreement, and the other documents referred to in this Agreement and required to
be delivered pursuant to this Agreement constitute the entire agreement among
the parties pertaining to the subject matter of this Agreement, and supersede
all prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. This Agreement may be amended by the parties at any
time before or after approval of this Agreement by the First Federal
Shareholders, except that after such approval no amendment shall be made without
the further approval of the First Federal Shareholders if such amendment: (a)
reduces the Per Share Merger Consideration; or (b) otherwise materially
adversely affects the rights of the First Federal Shareholders. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
8.5 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses. The First Federal Disclosure Schedule
includes an estimate by First Federal of all costs and expenses incurred or to
be incurred by First Federal in connection with the transactions contemplated by
this Agreement. Notwithstanding the foregoing, in the event Mutual terminates
this Agreement pursuant to Section 8.1(b) on account of First Federal having
failed to fulfill or comply with one or more of the conditions set forth in
Section
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7.2(a) or 7.2(c) of this Agreement, or if First Federal terminates this
Agreement pursuant to Section 8.1(c) hereof on account of Mutual having failed
to fulfill or comply with one or more of the conditions set forth in Section
7.3(a) or 7.3(c) of this Agreement, then, in addition to any other rights or
remedies such party (the "non-breaching party") shall have against the other
party (the "breaching party") under this Agreement or at law or in equity, the
non-breaching party shall have the right to recover from the breaching party all
reasonable and necessary expenses incurred by the non-breaching party
exclusively for the purpose of entering into this Agreement and consummating the
transactions contemplated hereby.
8.6 Governing Law. This Agreement shall be construed and interpreted
according to the Laws of the State of Wisconsin.
8.7 Assignment. This Agreement and the Stock Option Agreement shall not
be assigned by operation of law or otherwise, except that Mutual may assign all
or any of its rights hereunder and thereunder to any Affiliate provided that no
such assignment shall relieve Mutual of its obligations hereunder.
8.8 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by personal
delivery or telephonic facsimile transmission or when deposited in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this Section of a change of address:
IF TO MUTUAL OR MERGER CORP.: Mutual Savings Bank
Attn: Michael T. Crowley, Jr.
President and Chief Executive Officer
4949 West Brown Deer Road
Milwaukee WI 53223
Fax No: (414) 362-6195
with a copy to:
Quarles & Brady
Attention: James D. Friedman
411 East Wisconsin Avenue
Milwaukee WI 53202
Fax No: 414-277-5874
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IF TO FIRST FEDERAL: First Federal Bancshares of Eau Claire, Inc.
Attn: Donald T. Tietz
President and Chief Executive Officer
319 East Grand Avenue
Eau Claire WI 54710
Fax No: (715) 833-8997
with a copy to:
Michael Best & Friedrich
Attn: W. Charles Jackson
100 East Wisconsin Avenue
Milwaukee WI 53202
Fax No.: (414) 277-0656
8.9 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
8.10 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular,
and all words in any gender shall extend to and include all genders.
8.11 Severability. If any provision, clause, or part of this Agreement,
or the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.
8.12 Specific Performance. The parties agree that the assets and
business of First Federal as a going concern constitute unique property. There
is no adequate remedy at Law for the damage which any party might sustain for
failure of the other parties to consummate the Merger and the transactions
contemplated by this Agreement, and accordingly, each party shall be entitled,
at its option, to the remedy of specific performance to enforce the Merger
pursuant to this Agreement.
8.13 No Reliance. Except for the parties to this Agreement, any
Indemnified Parties under Section 3.5 of this Agreement and any assignees
permitted by Section 8.8 of this Agreement: (a) no Person is entitled to rely
on any of the representations, warranties and agreements of the parties
contained in this Agreement; and (b) the parties assume no liability to any
Person because of any reliance on the representations, warranties and agreements
of the parties contained in this Agreement.
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8.14 Further Assurances. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, properties, rights, privileges, powers and franchises
of either Merger Corp. or First Federal, the officers of the Surviving
Corporation are fully authorized to take any such action in the name of Merger
Corp. or First Federal.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
MUTUAL SAVINGS BANK
By: /s/ Michael T. Crowley, Jr.
-------------------------------------
Michael T. Crowley, Jr.
President and Chief Executive Officer
Attest:
/s/ P. Terry Anderegg
-----------------------------------------
P. Terry Anderegg, Senior Vice President
FIRST FEDERAL MERGER CORPORATION
By: /s/ Michael T. Crowley, Jr.
--------------------------------------
Michael T. Crowley, Jr.
President
FIRST FEDERAL BANCSHARES OF EAU
CLAIRE, INC.
By: /s/ Donald T. Tietz
---------------------------------------
Donald T. Tietz
President and Chief Executive Officer
Attest:
/s/ Jerome A. Reinecke
------------------------------------------
Jerome A. Reinecke, Secretary
54
<PAGE> 1
EXHIBIT 2.2
STOCK OPTION AGREEMENT,
DATED SEPTEMBER 16, 1996, BY AND BETWEEN
MUTUAL SAVINGS BANK AND FIRST FEDERAL BANCSHARES OF EAU CLAIRE, INC.
<PAGE> 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 16, 1996, by and between
Mutual Savings Bank, a mutual savings bank chartered under Chapter 214 of
Wisconsin Statutes ("Mutual"), and First Federal Bancshares of Eau Claire,
Inc., a Wisconsin corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, Mutual, and First Federal Merger Corporation, a
Wisconsin corporation ("Merger Corp."), are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, for the merger of Merger Corp. with and into the
Company (the "Merger"), upon the terms and subject to the conditions thereof.
WHEREAS, as a condition to Mutual's willingness to enter into the
Merger Agreement, Mutual has requested that the Company agree, and the Company
has so agreed, to grant to Mutual an option with respect to certain shares of
the Company's common stock, par value $.01 ("Common Stock"), on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, to induce Mutual to enter into the Merger Agreement,
and in consideration of the mutual covenants and agreements set forth herein
and in the Merger Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Company hereby grants to Mutual an irrevocable option (the
"Option") to purchase up to 1,364,220 shares of Common Stock (subject to
adjustment as set forth in Section 9 of this Agreement) (the "Option Shares")
at a per share purchase price of $15.75 (also subject to adjustment as set
forth in Section 9 of this Agreement) (the "Exercise Price"); provided,
however, that in no event shall the number of shares for which the Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock.
2. EXERCISE OF OPTION. (a) Conditions to Exercise. If the Merger
Agreement has not been terminated by the Company pursuant to Section 8.1(c)
thereof, Mutual may exercise the Option, in whole or in part, at any time and
from time to time, if, but only if both a Triggering Event (as defined below)
and an Exercise Event (as defined below) shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined below). Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time,
(ii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of a Triggering
Event; or (iii) the passage of 12 months after termination of the Merger
Agreement if such termination follows the occurrence of a Triggering Event,
provided that if a Triggering Event continues or occurs beyond such
termination, the Exercise Termination Event shall be 12 months from the
occurrence of the Last Triggering Event but in no event more than 18 months
after such occurrence. The "Last Triggering Event" shall mean the latest
Triggering Event to occur. Mutual's rights under Section 6 shall not terminate
upon expiration of the right to exercise the Option pursuant to this Section 2,
but shall continue until such rights may otherwise
<PAGE> 3
terminate in accordance with the terms of Section 6. Any date Mutual exercises
its rights under Section 6 shall be referred to herein as an "Election Date."
Notwithstanding the expiration of the Option, Mutual shall be entitled to
purchase those Option Shares with respect to which it has exercised the Option
in accordance with the terms hereof prior to the occurrence of an Exercise
Termination Event. Any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law, including the Home Owners' Loan Act
of 1933 and the Regulations of the Office of Thrift Supervision ("OTS")
promulgated thereunder (together, "HOLA").
(b) Triggering Event. The term "Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
(i) The Company or its wholly-owned subsidiary, First
Federal Savings Bank of Eau Claire, a federally chartered savings bank ("First
Federal"), without having received Mutual'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 shall have the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, and the rules and regulations thereunder) other
than Mutual or any of its affiliates, or the Board of Directors of the Company
shall have recommended that the shareholders of the Company approve or accept
any Acquisition Transaction other than as contemplated by the Merger Agreement.
For purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger, consolidation, share exchange, or similar business combination
transaction, involving the Company or First Federal, (y) a purchase, lease or
other acquisition of 10% or more of the assets of the Company or First Federal,
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 the Company or First Federal; provided that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only the Company and/or First Federal.
(ii) Any person other than Mutual or an affiliate of Mutual
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or commenced a tender offer or exchange offer for, 10% or more
of the outstanding shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in Section 13(d)
of the Exchange Act, and the rules and regulations thereunder);
(iii) Any person other than Mutual or an affiliate of Mutual
shall have made a bona fide proposal to the Company or First Federal by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(iv) After a proposal is made by a third party to the Company
or First Federal to engage in an Acquisition Transaction, the Company shall
have breached any covenant or obligation contained in the Merger Agreement
and such breach (x) would
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<PAGE> 4
entitle Mutual to terminate the Merger Agreement and (y) shall not have been
cured prior to the Notice Date (as defined below); or
(v) Any person other than Mutual or an affiliate of Mutual,
other than in connection with a transaction to which Mutual has given its prior
written consent, shall have filed an application or notice with the OTS or the
Federal Deposit Insurance Corporation ("FDIC") or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) Exercise Event. The term "Exercise Event" shall mean either of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person, other than Mutual or an
affiliate of Mutual, of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) shall be 20%.
(d) Notice by Company of Triggering and Exercise Events. The
Company shall notify Mutual promptly in writing of the occurrence of any
Triggering Event or Exercise Event, it being understood that the giving of such
notice by the Company shall not be a condition to the right of Mutual to
exercise the Option.
(e) Exercise Procedures and Closing. In the event Mutual wishes to
exercise the Option, it shall send to the Company a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 30
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that, if the closing of the purchase and sale
pursuant to the Option (the "Closing") cannot be consummated by reason of any
applicable judgment, decree, order, law or regulation, the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which such restriction or consummation has expired or been terminated; and
provided further, without limiting the foregoing, that if prior notification to
or approval of the OTS, the FDIC or any other regulatory authority is required
in connection with such purchase, Mutual shall promptly file the required
notice or application for approval and shall expeditiously process the same
(and the Company shall fully cooperate with Mutual in the filing of any such
notice or application and the obtaining of any such approval), and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which, as the case may be, (i) any required notification
period has expired or been terminated or (ii) such approval has been obtained,
and in either event, any requisite waiting period has passed.
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<PAGE> 5
(f) Termination of Exercise Election. Notwithstanding Section
2(e), in no event shall any Closing Date be more than 18 months after the
related Notice Date, and if the Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, the exercise of the Option effected on the Notice Date shall
be deemed to have expired. In the event (i) Mutual receives official notice
that an approval of the OTS, the FDIC or any other regulatory authority
required for the purchase of Option Shares would not be issued or granted or
(ii) a Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, Mutual
shall be entitled to exercise its rights as set forth in Section 6 or to
exercise the Option in connection with the resale of Common Stock or other
securities pursuant to a registration statement as provided in Section 7.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) Payment of Exercise
Price. On each Closing Date, Mutual shall pay to the Company in immediately
available funds by wire transfer to a bank account designated by the Company an
amount equal to the Exercise Price multiplied by the number of Option Shares to
be purchased on such Closing Date.
(b) Issuance of Certificates. At each Closing, simultaneously with
the delivery of immediately available funds as provided in Section 3(a), the
Company shall deliver to Mutual a certificate or certificates representing the
Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever, except as provided by Section 180.0622(2)(b) of the WBCL, and
Mutual shall deliver to the Company a letter, in customary form, agreeing that
Mutual shall not offer to sell or otherwise dispose of such Option Shares in
violation of applicable law or the provisions of this Agreement.
(c) Certificate Legend. Certificates for the Option Shares
delivered at each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
SEPTEMBER 16, 1996. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY SELLER OR A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Mutual shall have delivered
to the Company a copy of a letter from the staff to the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to the Company and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
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<PAGE> 6
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Mutual that:
(a) Corporate Status and Authority. The Company is a corporation
duly organized, validly existing and in current status under the laws of the
State of Wisconsin and has the corporate power and authority to enter into this
Agreement, and subject to any regulatory approvals referred to herein (and,
with respect to Section 6 of this Agreement only, to the provisions of Section
180.0640 of the Wisconsin Business Corporation Law ("WBCL"), if applicable), to
consummate the transactions contemplated hereby.
(b) Due Authorization. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or any of the
transactions contemplated hereby.
(c) Enforceability. This Agreement has been duly executed and
delivered by the Company, constitutes a valid and binding obligation of the
Company and, assuming this Agreement constitutes a valid and binding
obligation of Mutual, is enforceable against the Company in accordance with its
terms, subject to any approvals required by any governmental authority, and
except as enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought,
notwithstanding the express agreement of the parties regarding specific
performance set forth in Section 11 of this Option Agreement.
(d) Authority and Validity of Option Shares. The Company has taken
all necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Option, and at all times from the date
hereof through the expiration of the Option will have reserved, authorized and
unissued shares of Common Stock equal to the number of outstanding Option
Shares as adjusted pursuant to Section 9 hereof, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, except as provided in Section
180.0622(2)(b) of the WBCL.
(e) Absence of Liens on Option Shares. Upon delivery of the Option
Shares to Mutual upon the exercise of the Option, Mutual will acquire the Option
Shares free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever.
(f) No Conflict. The execution and delivery of this Agreement
by the Company does not, and the consummation by the Company of the
transactions contemplated hereby will not, violate, conflict with, or result in
a breach of any provision of, or constitute a default (with or without notice
or lapse of time, or both) under, or result
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<PAGE> 7
in the termination of, or accelerate the performance required by, or result in
a right of termination, cancellation, or acceleration of any obligation or the
loss of a material benefit under or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") of the Company or any of its Subsidiaries.
5. REPRESENTATIONS AND WARRANTIES OF MUTUAL. Mutual represents and
warrants to the Company that:
(a) Corporate Status and Authority. Mutual is a mutual savings
bank duly organized, validly existing and in good standing under Chapter 214 of
the Wisconsin Statutes and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder.
(b) Due Authorization. The execution and delivery of this Agreement
by Mutual and the consummation by Mutual of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Mutual and no other corporate proceedings on the part of Mutual are necessary
to authorize this Agreement or any of the transactions contemplated hereby.
(c) Enforceability. This Agreement has been duly executed and
delivered by Mutual and constitutes a valid and binding obligation of Mutual,
and, assuming this Agreement constitutes a valid and binding obligation of the
Company, is enforceable against Mutual in accordance with its terms.
6. TERMINATION ELECTION BY MUTUAL.
(a) Termination Fee. At the request of Mutual at any time (i)
commencing upon the first occurrence of an Exercise Event and ending upon the
occurrence of an Exercise Termination Event or (ii) prior to or on the
thirtieth (30th) business day following the occurrence of either of the events
set forth in clauses (i) and (ii) of Section 2(f), the right to exercise the
Option pursuant to Section 2 hereof, to the extent not exercised, shall
terminate and the Company (or any successor entity thereof) shall pay to Mutual
the Termination Fee. The Termination Fee (the "Termination Fee") shall be
equal to the excess, if any, of (x) the Applicable Price (as defined below) for
each share of Common Stock over (y) the Exercise Price, multiplied by the
number of Option Shares with respect to which the Option has not been exercised
and, where the Option has been exercised, in whole or in part, but the Closing
Date has not occurred, the number of Option Shares which would have been
distributed at the Closing Date.
(b) Payment of Termination Fee. If Mutual exercises its rights
under this Section 6, the Company shall, within 20 business days after such
Election Date, pay the Termination Fee to Mutual in immediately available
funds, and, as of the date of and upon such payment, the right to exercise the
Option pursuant to Section 2 hereof shall terminate. Notwithstanding the
foregoing, to the extent that prior notification to or approval of the OTS, the
FDIC or other regulatory authority is required in connection with the payment
of
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<PAGE> 8
all or any portion of the Termination Fee, the Company shall deliver from time
to time that portion of the Termination Fee that it is not then so prohibited
from paying and shall promptly file the required notice or application for
approval and shall expeditiously process the same (and Mutual shall cooperate
with the Company in the filing of any such notice or application and the
obtaining of any such approval), and the period of time that otherwise would
run pursuant to the preceding sentence for the payment of the portion of the
Termination Fee requiring such notification or approval shall run instead from
the date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained and, in
either event, any requisite waiting period shall have expired. If the OTS, the
FDIC or any other regulatory authority prohibits payment of any part of the
Terminate Fee, the Company shall promptly give notice of such fact to Mutual
and Mutual shall thereafter have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at such Election
Date less the number of shares as to which a Termination Fee has been delivered
pursuant to Section 6(a); provided that, if the Option shall have expired
pursuant to Section 2 hereof prior to the date of such notice or shall be
scheduled to expire at any time before the expiration of a period ending on the
thirtieth (30th) business day after such date, Mutual shall nonetheless have
the right so to exercise the Option pursuant to Section 2 hereof until the
expiration of such period of 30 business days.
(c) Applicable Price. For purposes of this Agreement, the
"Applicable Price" means the highest of (i) the highest price per share at
which a tender or exchange offer has been made for shares of Common Stock after
the date of this Agreement and on or prior to such Election Date, (ii) the
price per share to be paid by any third party for shares of Common Stock or the
consideration per share to be received by holders of Common Stock, in each case
pursuant to an agreement for a merger or other business combination transaction
with the Company entered into on or prior to such Election Date or (iii) the
highest bid price per share as quoted on the NASDAQ/NMS (or, if the shares of
Common Stock are no longer quoted thereon, on the principal trading market on
which such shares are traded as reported by a recognized source) during the 30
business days preceding such Election Date. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an investment banking firm selected by Mutual and
reasonably acceptable to the Company, which determination shall be conclusive
for all purposes of this Agreement.
7. REGISTRATION RIGHTS. The Company shall, if requested by Mutual at
any time and from time to time (a) within three years of the first exercise of
the Option or (b) for 30 business days following the occurrence of either of
the events set forth in clauses (i) and (ii) of Section 2(f) or receipt by
Mutual of official notice that an approval of the OTS, the FDIC or any other
regulatory authority required to complete the transactions contemplated by
Section 6 hereof would not be issued or granted, as expeditiously as possible
prepare and file up to two registration statements under the Securities Act if
such registration is necessary in order to permit the sale or other disposition
of any or all shares of Common Stock or other securities that have been
acquired by or are issuable to Mutual upon exercise of the Option in accordance
with the intended method of sale or other disposition stated
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<PAGE> 9
by Mutual, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and the Company shall use its best
efforts to qualify such shares or other securities under any applicable state
securities laws. Mutual agrees to use all reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition to cause, any sale or
other disposition pursuant to such registration statement to be effected on a
widely distributed basis so that upon consummation thereof no purchaser or
transferee shall own beneficially 5% or more of the then outstanding voting
power of the Company. The Company shall use all reasonable efforts to cause
each such registration statement to become effective, to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective for such period not in excess of 120 days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. In the event
that Mutual requests the Company to file a registration statement following the
failure to obtain a required approval for an exercise of the Option as
described in Section 2(f), the closing of the sale or other disposition of
Common Stock or other securities pursuant to such registration statement shall
occur substantially simultaneously with the exercise of the Option. The
obligations of the Company hereunder to file a registration statement and to
maintain its effectiveness may be suspended for one or more periods of time not
exceeding 90 days in the aggregate if the Board of Directors of the Company
shall have determined that the filing of such registration statement or the
maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect the Company, provided
that the option/exercise period shall be extended during any such period. Any
registration statement prepared and filed under this Section 7, and any sale
covered thereby, shall be at the Company's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursement of
Mutual's counsel related thereto. Mutual shall provide all information
reasonably requested by the Company for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section 7, the Company effects a registration under the
Securities Act of Common Stock for its own account or for any other
shareholders of the Company (other than on Form S-4 or Form S-8, or any
successor form), it shall allow Mutual the right to participate in such
registration, and such participation shall not affect the obligation of the
Company to effect two registration statements for Mutual under this Section 7;
provided that, if the managing underwriters of such offering advise the Company
in writing that in their opinion the number of shares of Common Stock requested
to be included in such registration exceeds the number which can be sold in
such offering, the Company shall include the shares requested to be included
therein by Mutual only to the extent permitted by the managing underwriters
consistent with the financing requirements of the Company. In connection with
any registration pursuant to this Section 7, the Company and Mutual shall
provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification and contribution in
connection with such registration.
8. RIGHTS OF OPTION SHARES. Except to the extent Mutual exercises the
Option to purchase Option Shares, Mutual shall have no rights to vote or
receive dividends or have any other rights as a shareholder with respect to the
shares of Common Stock subject to the Option.
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<PAGE> 10
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without limitation to
any restriction on the Company contained in this Agreement or in the Merger
Agreement, in the event of any change in Common Stock by reason of stock
dividends, splitups, mergers (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, or the sale of Common Stock or
the grant of any option for the purchase of Common Stock to anyone other than
Mutual, the type and number of shares or securities subject to the Option, and
the Exercise Price provided in Section 1, shall be adjusted appropriately to
restore to Mutual its rights hereunder, including the right to purchase from
the Company (or its successors) shares of Common Stock representing 19.9% of
the outstanding Common Stock for the aggregate price calculated as of the date
of this Agreement by multiplying the number of Option Shares set forth in
Section 1 by the per share Exercise Price set forth in Section 1.
10. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement or the Merger Agreement, neither this Agreement
nor the rights or the obligations of either party hereto are assignable, except
by operation of law, or with the written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
Option Shares sold by Mutual in compliance with the provisions of Section 7
shall, upon consummation of such sale, be free of the restrictions imposed with
respect to such shares by this Agreement.
11. SPECIFIC PERFORMANCE. The parties recognize and agree that if for
any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate or
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
12. ENTIRE AGREEMENT. This Agreement and the Merger Agreement
(including the exhibits and schedules thereto) constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
thereof.
13. FURTHER ASSURANCES. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary or in order to consummate the transactions contemplated hereby.
14. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this
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<PAGE> 11
Agreement, which shall remain in full force and effect. In the event any court
or other competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Agreement in order, as nearly as
possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
If for any reason such court or regulatory agency determines that the Option
does not permit Mutual to acquire, or does not require the Company to comply
with Section 6 hereof with respect to the full number of shares of Common Stock
as provided in Sections 2 and 6 (as adjusted pursuant to Section 9), it is the
express intention of the Company to allow Mutual to acquire or require the
Company to comply with Section 6 hereof with respect to such lessor number of
shares as may be permissible without any amendment or modification hereof.
Each party agrees that, should any court or other competent authority hold any
provision of this Agreement or part hereof to be null, void or unenforceable,
or order any party to take any action inconsistent herewith, or not take any
action required herein, the other party shall not be entitled to specific
performance of such provision or part hereof or to any other remedy, including
but not limited to money damages, for breach hereof or of any other provision
of this Agreement or part hereof as the result of such holding or order.
15. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if (i) delivered personally, or (ii) sent
by reputable overnight courier service, or (iii) telecopies (which is
confirmed), or (iv) five days after being mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
A. If to Mutual, to:
Mutual Savings Bank
Attn: Michael T. Crowley, Jr.
President and Chief Executive Officer
4949 West Brown Deer Road
Milwaukee, WI 53223
Fax No.: (414) 362-6195
with a copy to:
Quarles & Brady
Attn: James D. Friedman, Esq.
411 East Wisconsin Avenue
Milwaukee, WI 53202-4497
Fax No.: (414) 271-3552
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B. If to the Company, to:
First Federal Bancshares of Eau Claire, Inc.
Attn: Donald T. Tietz
President and Chief Executive Officer
319 East Grand Avenue
Eau Claire, WI 54710
Fax No.: (715) 833-8997
with a copy to:
Michael Best & Friedrich
Attn: W. Charles Jackson, Esq.
100 East Wisconsin Avenue
Milwaukee, WI 53202
Fax No.: (414) 277-0656
16. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be governed
by and construed in accordance with the laws of the State of Wisconsin
applicable to agreements made and to be performed within such State.
17. INTERPRETATION. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Capitalized terms used in this Agreement
which are not specifically defined herein shall have the meanings ascribed to
them in the Merger Agreement.
18. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement or herein, all costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
19. EXTENSION OF TIME PERIODS. The time periods for exercise of
certain rights under the Agreement shall be extended to the extent necessary to
avoid any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
20. REPLACEMENT OF OPTION. Upon receipt by the Company of evidence
reasonably satisfactory to it on 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, the Company will execute and deliver a new Agreement
of like tenor and date.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
MUTUAL SAVINGS BANK
By: /s/ Michael T. Crowley, Jr.
-------------------------------------
Michael T. Crowley, Jr.
President and Chief Executive Officer
Attest:
/s/ P. Terry Anderegg
-----------------------------------------
P. Terry Anderegg, Senior Vice President
FIRST FEDERAL BANCSHARES OF EAU
CLAIRE, INC.
By: /s/ Donald T. Tietz
--------------------------------------
Donald T. Tietz
President and Chief Executive Officer
Attest:
/s/ Jerome A. Reinecke
-----------------------------------------
Jerome A. Reinecke
Secretary
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