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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 14, 1998
HF BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0576146
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
COMMISSION FILE NUMBER: 2-25722
445 E. FLORIDA AVENUE
HEMET, CALIFORNIA 92543
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (909) 658-4411
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not Applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not Applicable
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not Applicable
ITEM 5. OTHER EVENTS
On November 14, 1998, H.F. Bancorp, Inc. (the "Company") and its
subsidiary, Hemet Federal Savings & Loan Association (the "Bank"), entered into
an Agreement and Plan of Merger with Temple-Inland Inc., ("TI") and its
subsidiary Guaranty Federal Bank, F.S.B. ("Guaranty"), pursuant to which the
Company will merge with TI (or a TI subsidiary) and the Bank will be merged into
Guaranty. Company stockholders will receive $18.50 per share for their stock, in
cash, TI stock, or a combination of the two at the election of the stockholders,
subject to a maximum of approximately 1,216,470 shares of stock in the aggregate
to be issued in the transaction; provided, however, that if the transaction does
not qualify as a tax-deferred reorganization, all Company stockholders will
receive cash equal to $18.50 per share. The transaction, which is subject to
regulatory approval and approval by the stockholders of the Company, is
anticipated to close during the second quarter of calendar 1999.
In connection with the transaction, the Company granted TI an
option, exercisable under certain circumstances, to purchase up to approximately
1,272,665 shares of Company stock, representing about 19.9% of the shares
presently outstanding, at a price of $16.0625 per share.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not Applicable
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements
Not Applicable
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(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits
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99.1 Agreement And Plan Of Merger By And Among
Temple-Inland, Inc., HF Bancorp, Inc.,
Guaranty Federal Bank, F.S.B. And Hemet
Federal Savings & Loan Association.
99.2 Form of Agreement Of Bank Merger by and
between Hemet Federal Savings & Loan
Association and Guaranty Federal Bank,
F.S.B.
99.3 Form Of Affiliate Letter Addressed To
Temple-Inland, Inc.
99.4 Form Of Shareholder's Agreement by and
between Temple- Inland Inc., a Delaware
corporation and shareholder(s) of HF
Bancorp.
99.5 Stock Option Agreement dated as of November
14, 1998, between Temple-Inland Inc. and HF
Bancorp, Inc.
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ITEM 8. CHANGE IN FISCAL YEAR
Not Applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not Applicable
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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.
HF BANCORP, INC.
(Registrant)
Date: November 24, 1998 By /s/ Richard S. Cupp
--------------------------------
Richard S. Cupp
President and Chief Executive
Officer
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Exhibit Index
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99.1 Agreement And Plan Of Merger By And Among Temple-Inland, Inc., HF
Bancorp, Inc., Guaranty Federal Bank, F.S.B. And Hemet Federal
Savings & Loan Association.
99.2 Form of Agreement Of Bank Merger by and between Hemet Federal
Savings & Loan Association and Guaranty Federal Bank, F.S.B.
99.3 Form Of Affiliate Letter Addressed To Temple-Inland, Inc.
99.4 Form Of Shareholder's Agreement by and between Temple-Inland
Inc., a Delaware corporation and shareholder(s) of HF Bancorp.
99.5 Stock Option Agreement dated as of November 14, 1998, between
Temple-Inland Inc. and HF Bancorp, Inc.
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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TEMPLE-INLAND INC.,
HF BANCORP, INC.
GUARANTY FEDERAL BANK, F.S.B.
AND
HEMET FEDERAL SAVINGS & LOAN ASSOCIATION
NOVEMBER 14, 1998
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ARTICLE I
DEFINITIONS
ARTICLE II
THE MERGERS AND RELATED MATTERS
2.1 The Holding Company Merger-TI................................................10
2.2 The Holding Company Merger-TI Subsidiary.....................................10
2.3 Fractional Shares............................................................11
2.4 Treatment of HFB Options.....................................................11
2.5 Election and Proration Procedures............................................11
2.6 Computation and Confirmation of Certain Items................................14
2.7 Exchange Procedures..........................................................14
2.8 Dissenting Shares............................................................16
2.9 Adjustments for Dilution and Other Matters...................................17
2.10 Effect of the Holding Company Merger.........................................17
2.11 Name of Corporation Surviving the Holding Company Merger.....................18
2.12 Certificate of Incorporation and Bylaws of Corporation Surviving the
Holding Company Merger.......................................................18
2.13 Directors and Officers of Corporation Surviving the Holding Company
Merger.......................................................................18
ARTICLE III
THE CLOSING
3.1 Closing Date.................................................................19
3.2 Execution of Merger Documents................................................19
3.3 Documents to be Delivered....................................................19
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ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF HFB AND HEMET
4.1 Incorporation, Standing and Power............................................19
4.2 Capitalization...............................................................20
4.3 Subsidiaries.................................................................21
4.4 Financial Statements.........................................................21
4.5 Reports and Filings..........................................................21
4.6 Authority of HFB and Hemet...................................................22
4.7 Insurance....................................................................23
4.8 Title to Assets..............................................................23
4.9 Real Estate..................................................................23
4.10 Litigation...................................................................24
4.11 Taxes........................................................................24
4.12 Compliance with Laws and Regulations.........................................26
4.13 Performance of Obligations...................................................28
4.14 Employees....................................................................28
4.15 Registration Obligation......................................................28
4.16 Brokers and Finders..........................................................29
4.17 Material Contracts...........................................................29
4.18 Certain Material Changes.....................................................31
4.19 Licenses and Permits.........................................................31
4.20 Undisclosed Liabilities......................................................31
4.21 Employee Benefit Plans.......................................................32
4.22 Corporate Records............................................................35
4.23 Community Reinvestment Act...................................................35
4.24 Regulatory Actions...........................................................35
4.25 Insider Loans; Other Transactions............................................36
4.26 Accounting Records...........................................................36
4.27 Indemnification..............................................................36
4.28 Offices and ATMs.............................................................36
4.29 Loan Portfolio...............................................................37
4.30 Investment Securities........................................................37
4.31 Derivatives Contracts; Structured Notes; Etc.................................37
4.32 Power of Attorney............................................................38
4.33 Material Interests of Certain Persons........................................38
4.34 Tax Matters..................................................................38
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4.35 Facts Affecting Regulatory Approvals.........................................38
4.36 Disclosure Documents and Applications........................................38
4.37 Certain Regulatory Matters...................................................38
4.38 Corporate Approval...........................................................39
4.39 Intellectual Property........................................................39
4.40 Year 2000....................................................................39
4.41 Accuracy and Currentness of Information Furnished............................39
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TI AND GUARANTY
5.1 Incorporation, Standing and Power............................................40
5.2 Authority of TI and Guaranty.................................................40
5.3 Tax Representations..........................................................41
5.4 Disclosure Documents and Applications........................................41
5.5 Reports and Filings..........................................................42
5.6 Corporate Approval...........................................................42
5.7 Absence of Certain Changes or Events.........................................42
5.8 Access to Funds..............................................................42
5.9 Facts Affecting Regulatory Approvals.........................................42
5.10 Accuracy and Currentness of Information Furnished............................43
5.11 CRA..........................................................................43
ARTICLE VI
COVENANTS OF HFB AND HEMET
PENDING EFFECTIVE TIME OF THE MERGERS
6.1 Limitation on HFB's and Hemet's Conduct Prior to Effective Time..............43
6.2 Affirmative Conduct of HFB and Hemet Prior to Effective Time.................48
6.3 Access to Information........................................................50
6.4 Filings......................................................................50
6.5 Notices; Reports.............................................................51
6.6 HFB Stockholders' Meeting....................................................51
6.7 Bank Merger..................................................................51
6.8 Applications.................................................................52
6.9 Certain Loans and Other Extensions of Credit.................................52
6.10 Affiliates...................................................................53
6.11 Director Resignations........................................................53
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6.13 Accounting Accommodations....................................................53
ARTICLE VII
COVENANTS OF TI AND GUARANTY
PENDING EFFECTIVE TIME OF THE MERGERS
7.1 Limitation on TI's and Guaranty's Conduct Prior to Effective Time............53
7.2 Affirmative Conduct of TI and Guaranty Prior to Effective Time...............54
7.3 Applications.................................................................55
7.4 Blue Sky.....................................................................55
7.5 Notices; Reports.............................................................55
7.6 Indemnification..............................................................55
7.7 Removal of Conditions........................................................56
7.8 Fairness Opinion.............................................................56
ARTICLE VIII
ADDITIONAL COVENANTS
8.1 Commercially Reasonable Efforts..............................................56
8.2 Public Announcements.........................................................56
8.3 Cancellation of Stock Options and Termination of Stock Option Plans..........56
8.4 Employees and Employee Benefits..............................................57
8.5 Environmental Assessment.....................................................57
8.6 Execution of the Stock Option Agreement......................................58
ARTICLE IX
CONDITIONS PRECEDENT TO THE HOLDING COMPANY MERGER
9.1 Shareholder Approval.........................................................58
9.2 No Judgments or Orders.......................................................58
9.3 Regulatory Approvals.........................................................58
9.4 Securities Laws..............................................................58
9.5 Listing......................................................................59
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ARTICLE X
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF HFB AND HEMET
10.1 Representations and Warranties; Performance of Covenants.....................59
10.2 Officers' Certificate........................................................59
10.3 Fairness Opinion.............................................................59
10.4 Absence of Certain Changes...................................................59
ARTICLE XI
CONDITIONS PRECEDENT TO
OBLIGATIONS OF TI AND GUARANTY
11.1 Representations and Warranties: Performance of Covenants.....................60
11.2 Regulatory Approvals and Related Conditions..................................60
11.3 Third Party Consents.........................................................60
11.4 Absence of Certain Changes...................................................61
11.5 Officers' Certificate........................................................61
11.6 Stockholders' Agreements.....................................................61
11.7 HFB Options and Stock Option Plan............................................61
11.8 Loan Loss Reserve............................................................61
11.9 Resignations.................................................................61
ARTICLE XII
TERMINATION
12.1 Termination..................................................................62
12.2 Effect of Termination........................................................64
12.3 Force Majeure................................................................64
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses.....................................................................64
13.2 Notices......................................................................65
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13.3 Material Adverse Effect......................................................66
13.4 Successors and Assigns.......................................................67
13.5 Counterparts.................................................................67
13.6 Effect of Representations and Warranties.....................................67
13.7 Third Parties................................................................67
13.8 Lists; Exhibits; Integration.................................................67
13.9 Knowledge....................................................................67
13.10 Governing Law................................................................67
13.11 Captions.....................................................................68
13.12 Severability.................................................................68
13.13 Waiver and Modification; Amendment...........................................68
13.14 Attorneys' Fees..............................................................68
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered into
as of the 14th day of November, 1998 by and among Temple-Inland Inc., a Delaware
corporation ("TI"), HF Bancorp, Inc., a Delaware corporation ("HFB"), Guaranty
Federal Bank, F.S.B., a federally chartered savings bank ("Guaranty") and
indirect wholly owned subsidiary of TI, and Hemet Federal Savings & Loan
Association, a federally chartered savings association ("Hemet") and wholly
owned subsidiary of HFB.
RECITALS
WHEREAS, TI, HFB, Guaranty and Hemet desire to effect (i) the
acquisition of HFB by TI by means of a merger of HFB with and into TI in
accordance with the terms of this Agreement, or by means of a merger of a
subsidiary of TI with and into HFB as otherwise specified herein, and (ii)
immediately thereafter, the acquisition of Hemet by Guaranty by means of a
merger of Hemet with and into Guaranty in accordance with the terms of this
Agreement and the Agreement of Bank Merger (as defined herein);
WHEREAS, the parties intend that the Mergers (as defined herein) will be
treated for federal income tax purposes as tax-deferred reorganizations within
the meaning of Section 368 of the Code (as defined herein), except as otherwise
specified herein;
WHEREAS, as an inducement to TI to enter into this Agreement, HFB
desires to, and following the execution and delivery hereof will, grant TI a
stock option to purchase up to 19.9% of the outstanding shares of HFB, under
certain circumstances, and pursuant to that certain Stock Option Agreement
attached hereto as Exhibit A;
WHEREAS, the respective Boards of Directors of each of TI, HFB, Guaranty
and Hemet have determined that it is in the best interests of their respective
companies and stockholders to consummate the Holding Company Merger (as defined
herein) and the Bank Merger (as defined herein) provided for herein; and
WHEREAS, TI, HFB, Guaranty and Hemet desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement.
NOW, THEREFORE, on the basis of the foregoing recitals and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Except as otherwise expressly provided for in this Agreement, or unless
the context otherwise requires, as used throughout this Agreement the following
terms shall have the respective meanings specified below:
"Affiliate" of, or a Person "Affiliated" with, a specific Person
is a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
"Affiliated Group" means, with respect to any entity, a group of
entities required or permitted to file consolidated, combined, or unitary Tax
Returns.
"Agreement of Bank Merger" means the Agreement of Bank Merger to
be entered into between Guaranty and Hemet substantially in the form of Exhibit
B hereto, but subject to any changes that may be necessary to conform to any
requirements of any Governmental Entity having authority over the Bank Merger.
"Aggregate Deal Value" means the amount obtained by multiplying
the Price Per Share times the number of shares of HFB Stock issued and
outstanding immediately prior to the Effective Time of the Holding Company
Merger.
"Alternative Transaction Notice" shall have the meaning set forth
in Section 12.1(j).
"Bank Merger" means the merger of Hemet with and into Guaranty.
"Business Day" means any day other than Saturday, Sunday or any
other day which is not a day on which banking institutions in Texas or
California are authorized or obligated by law or executive order to close.
"Cash Amount" has the meaning set forth in Section 2.5(c).
"Cash and Stock Certificate" has the meaning set forth in
Section 2.6.
"Certificate" has the meaning set forth in Section 2.7(b).
"Certificate of Merger" means that certificate filed with the
Delaware Secretary pursuant to Section 252 of the Delaware General Corporation
Law to effect the Holding Company Merger.
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"Classified Credits" has the meaning set forth in Section 4.29.
"Closing" means the consummation of the Holding Company Merger
followed by consummation of the Bank Merger on the Closing Date at the offices
of Sullivan & Cromwell, 1888 Century Park East, Los Angeles, California, or at
such other place as the parties may agree upon.
"Closing Date" means the last Business Day of the month in which
the last of the following events occur: (i) the approval of this Agreement and
the transactions contemplated hereby by the stockholders of HFB, (ii) the
receipt of all permits, authorizations, approvals and consents specified in
Section 9.3 hereof, (iii) the expiration of all applicable waiting periods under
all laws, or such other date as the parties may agree upon and (iv) the
completion of the allocation required under Section 2.5(c).
"Code" means the Internal Revenue Code of 1986, as amended.
"Combination Cash Election" has the meaning set forth in
Section 2.5(a).
"Combination Stock Election" has the meaning set forth in
Section 2.5(a).
"Competing Transaction" has the meaning set forth in
Section 6.1(n).
"Computer System" has the meaning set forth in Section 4.40.
"Costs" has the meaning set forth in Section 7.6.
"Covered Person" has the meaning set forth in Section 4.27.
"Delaware Secretary" means the Secretary of State of Delaware.
"Deloitte & Touche" means Deloitte & Touche LLP, independent
accountants for HFB, or such other nationally recognized accounting firm as HFB
shall employ.
"Derivatives Contract" has the meaning set forth in Section 4.31.
"Dissenting Shares" means any shares of HFB Stock that are (i)
issued and outstanding immediately prior to the Effective Time of the Holding
Company Merger and (ii) with respect to which the holder thereof perfects such
holder's rights to dissent under Section 262 of the Delaware General Corporation
Law.
"Effective Time of the Bank Merger" means the date and time the
OTS specifies for the Bank Merger pursuant to the OTS Regulations.
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"Effective Time of the Holding Company Merger" means the date and
time specified in the Certificate of Merger as filed with the Delaware
Secretary.
"Election" has the meaning set forth in Section 2.5(a).
"Election Deadline" has the meaning set forth in Section 2.5(b).
"Election Form" has the meaning set forth in Section 2.5(a).
"Election Form Record Date" has the meaning set forth in
Section 2.5(a).
"Encumbrance" means any option, pledge, security interest, lien,
charge, encumbrance or restriction (whether on voting or disposition or
otherwise), whether imposed by agreement, law or otherwise.
"Environmental Regulations" has the meaning set forth in
Section 4.12(b).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Ernst & Young" means Ernst & Young, LLP, independent accountants
for TI, or such other nationally recognized accounting firm as TI shall employ.
"ESOP" means the Employee Stock Ownership Plan and Trust of
Hemet.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" means such entity selected by TI to effect the
exchange of HFB Stock for TI Stock and/or cash.
"Exchange Fund" has the meaning set forth in Section 2.7(a).
"Exchange Ratio" means the number (rounded to the nearest
ten-thousandth) obtained by dividing the Price Per Share by the Final TI Stock
Price.
"Expenses" has the meaning set forth in Section 13.1.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
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"Final TI Stock Price" means the average of the daily closing
prices of a share of TI Stock on the NYSE as reported in the Wall Street Journal
for the ten (10) consecutive trading days ending on the fourth trading day prior
to the Closing Date.
"Financial Statements of HFB" means (i) the audited consolidated
financial statements and notes thereto of HFB and the related opinions thereon
included in HFB's Annual Reports on Form 10-K for the years ended June 30, 1998
and 1997 and (ii) the unaudited consolidated interim financial statements and
notes thereto of HFB to be included in HFB's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998.
"Financial Statements of TI" means (i) the audited consolidated
financial statements and notes thereto of TI and the related opinions thereon
included in TI's Annual Reports on Form 10-K for the years ended January 3, 1998
and December 28, 1996 and (ii) the unaudited consolidated interim financial
statements and notes thereto of TI included in TI's Quarterly Report on Form
10-Q for the quarter ended July 4, 1998.
"Governmental Entity" means any court or tribunal in any
jurisdiction or any United States federal, state, municipal, foreign or other
administrative agency, authority or instrumentality.
"Guaranty Stock" means the common stock, par value $1 per share,
of Guaranty.
"Hazardous Materials" has the meaning set forth in
Section 4.12(b).
"Hemet Stock" means the common stock, $.01 par value per share,
of Hemet.
"HFB Award" means any award issued pursuant to the HFB Stock
Option Plan.
"HFB Branch List" has the meaning set forth in Section 6.1(g).
"HFB Conflicts and Consents List" has the meaning set forth in
Section 4.6.
"HFB Contract List" has the meaning set forth in Section 4.17.
"HFB Derivatives List" has the meaning set forth in Section 4.31.
"HFB Director Compensation List" has the meaning set forth in
Section 6.1(f).
"HFB Employee Plan List" has the meaning set forth in
Section 4.21.
"HFB Environmental Compliance List" has the meaning set forth in
Section 4.12.
"HFB Filings" has the meaning set forth in Section 4.5.
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"HFB Financial Statements List" has the meaning set forth in
Section 4.18
"HFB Indemnification List" has the meaning set forth in
Section 4.27.
"HFB Insurance List" has the meaning set forth in Section 4.7.
"HFB Intellectual Property List" has the meaning set forth in
Section 4.39.
"HFB Investment Securities List" has the meaning set forth in
Section 4.30.
"HFB List" means any list required to be furnished by HFB and/or
Hemet to TI and Guaranty under this Agreement including but not limited to the
HFB Branch List, the HFB Conflicts and Consents List, the HFB Contract List, the
HFB Derivatives List, the HFB Director Compensation List, the HFB Employee Plan
List, the HFB Environmental Compliance List, the HFB Financial Statements List,
the HFB Indemnification List, the HFB Insurance List, the HFB Intellectual
Property List, the HFB Investment Securities List, the HFB Litigation List, the
HFB Loan List, the HFB Material Adverse Effect List, the HFB Offices List, the
HFB Option List, the HFB Personal Property List, the HFB Real Property List, the
HFB Tax List and the HFB Undisclosed Liabilities List.
"HFB Litigation List" has the meaning set forth in Section 4.10.
"HFB Loan List" has the meaning set forth in Section 4.29.
"HFB Material Adverse Effect List" has the meaning set forth in
Section 4.18.
"HFB Offices List" has the meaning set forth in Section 4.28.
"HFB Option" means any option issued pursuant to the HFB Stock
Option Plan.
"HFB Option List" has the meaning set forth in Section 4.2(a).
"HFB Personal Property List" has the meaning set forth in
Section 4.8.
"HFB Property" has the meaning set forth in Section 4.12(b).
"HFB Real Property List" has the meaning set forth in
Section 4.9.
"HFB Stockholders' Meeting" means the meeting of HFB's
stockholders referred to in Section 6.6 hereof.
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"HFB Stock Option Plan" means the Amended and Restated HF
Bancorp, Inc. Stock-Based Incentive Plan.
"HFB Stock" means the common stock, par value $.01 per share, of
HFB.
"HFB Subsidiary" means First Hemet Corporation, a California
corporation.
"HFB Tax List" has the meaning set forth in Section 4.11.
"HFB Undisclosed Liabilities List" has the meaning set forth in
Section 4.20.
"HOLA" means the Home Owners' Loan Act of 1933, as amended.
"Holding Company Merger" means the merger of HFB with and into TI
pursuant to this Agreement, if Section 2.1 is applicable, or the merger of the
TI Subsidiary with and into HFB pursuant to this Agreement, if Section 2.2 is
applicable.
"Immediate Family" has the meaning set forth in Rule 16a-l(e)
promulgated under the Exchange Act.
"Indemnified Parties" has the meaning set forth in Section 7.6.
"Investment Security" means any equity security or debt security
as defined in Statement of Financial Accounting Standards No. 115.
"IRS" means the Internal Revenue Service.
"List" means any one of the HFB Lists or the TI Lists.
"Mailing Date" has the meaning set forth in Section 2.5(a).
"Material Adverse Effect" has the meaning set forth in
Section 13.3.
"Mergers" means the Holding Company Merger and Bank Merger.
"NYSE" means the New York Stock Exchange, Inc.
"OTS" means the Office of Thrift Supervision.
"OTS Regulations" means the rules and regulations of the OTS
under HOLA.
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"Person" means any natural person, corporation, trust,
association, unincorporated body, partnership, limited liability company, joint
venture, other entity or Governmental Entity.
"Plans" has the meaning set forth in Section 4.21.
"Price Per Share" means $18.50.
"Proxy Statement" has the meaning set forth in Section 6.8.
"Related Group of Persons" means Affiliates, members of an
Immediate Family or Persons the obligations of whom would be attributed to
another Person pursuant to the regulations promulgated by the SEC.
"SAIF" means the Savings Association Insurance Fund of the FDIC.
"S-4 Registration Statement" means the Registration Statement on
Form S-4 including the Proxy Statement to be mailed to stockholders of HFB, to
vote upon the Holding Company Merger and to register the distribution of the
shares of TI Stock to be issued in the Holding Company Merger with the SEC.
"Scheduled Contracts" has the meaning set forth in Section 4.17.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Amount" means 1,216,470 shares of TI Stock.
"Stock Election" has the meaning set forth in Section 2.5(a).
"Stock Proration Factor" has the meaning set forth in
Section 2.5(c).
"Superior Proposal" has the meaning set forth in Section 6.1(n).
"Surviving Bank" means the federally chartered savings
association surviving the Bank Merger.
"Tank" has the meaning set forth in Section 4.12(b).
"Taxes" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock, license,
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withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property, corporation and estimated taxes, custom
duties, fees, assessments and charges of any kind whatsoever; (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any taxing
authority in connection with any item described in clause (i); and (iii) any
transferred liability in respect of any items described in clauses
(i) and/or (ii).
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"Tax Sharing Agreement" means an agreement (whether or not in
writing) pursuant to which tax losses of one entity are made available to
another entity of the Affiliated Group or Affiliates for purpose of Taxes.
"TI Conflicts and Consents List" has the meaning set forth in
Section 5.2.
"TI Filings" has the meaning set forth in Section 5.5.
"TI Material Adverse Effect List" has the meaning set forth in
Section 5.7.
"TI List" means any list required to be furnished by TI to HFB
and Hemet under this Agreement including but not limited to the TI Conflicts and
Consents List and the TI Material Adverse Effect List.
"TI Subsidiary" means a Delaware corporation to be newly formed
by TI or one of its subsidiaries for the purpose of effecting the Holding
Company Merger if Section 2.2 is applicable.
"TI Stock" means the common stock, par value $1 per share, of TI.
"Treasury Shares" means shares of HFB Stock held by (i) HFB or
any of its subsidiaries or (ii) TI or any of its subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously contracted
in good faith.
"Year 2000 Compliant" has the meaning set forth in Section 4.40.
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ARTICLE II
THE MERGERS AND RELATED MATTERS
2.1 The Holding Company Merger-TI. If Section 2.5(c)(iii) is not
applicable, the Holding Company Merger shall be effected in accordance with this
Section 2.1. The Holding Company Merger shall become effective upon the date
specified in the Certificate of Merger as filed with the Delaware Secretary in
accordance with the provisions of the Delaware General Corporation Law. At the
Effective Time of the Holding Company Merger, the following transactions will be
deemed to have occurred simultaneously:
(a) HFB shall be merged with and into TI and the separate
corporate existence of HFB shall cease.
(b) Each share of TI Stock issued and outstanding immediately
prior to the Effective Time of the Holding Company Merger shall remain an issued
and outstanding share of common stock of TI as of the Effective Time of the
Holding Company Merger and shall not be converted or otherwise affected by the
Holding Company Merger.
(c) Subject to the other provisions of this Article II, each
share of HFB Stock issued and outstanding immediately prior to the Effective
Time of the Holding Company Merger, other than Dissenting Shares and Treasury
Shares, shall, on and after the Effective Time of the Holding Company Merger, be
automatically canceled and cease to be an issued and outstanding share of HFB
Stock and shall be converted into the right to receive, at the election of the
holder thereof as of the Effective Time of the Holding Company Merger:
(i) a fraction of a share of TI Stock equal to the
Exchange Ratio; or
(ii) cash in the amount equal to the Price Per Share.
(d) Any Treasury Shares outstanding immediately prior to the
Effective Time of the Holding Company Merger shall be cancelled and retired and
no consideration shall be issued in exchange therefor.
2.2 The Holding Company Merger-TI Subsidiary. If Section 2.5(c)(iii) is
applicable, the Holding Company Merger shall be effected in accordance with this
Section 2.2. The Holding Company Merger shall become effective upon the date
specified in the Certificate of Merger as filed with the Delaware Secretary in
accordance with the provisions of the Delaware General Corporation Law. At the
Effective Time of the Holding Company Merger, the following transactions will be
deemed to have occurred simultaneously.
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(a) The TI Subsidiary shall be merged with and into HFB and the
separate corporate existence of the TI Subsidiary shall cease.
(b) Each share of stock of the TI Subsidiary issued and
outstanding immediately prior to the Effective Time of the Holding Company
Merger shall become and be converted into a share of HFB Stock as of the
Effective Time of the Holding Company Merger.
(c) Each share of HFB Stock issued and outstanding immediately
prior to the Effective Time of the Holding Company Merger, other than Dissenting
Shares and Treasury Shares, shall, on and after the Effective Time of the
Holding Company Merger, be automatically canceled and cease to be an issued and
outstanding share of HFB Stock and shall be converted into the right to receive
cash in the amount equal to the Price Per Share as of the Effective Time of the
Holding Company Merger.
(d) Any Treasury Shares outstanding immediately prior to the
Effective Time of the Holding Company Merger shall be cancelled and retired and
no consideration shall be issued in exchange therefor.
2.3 Fractional Shares. Notwithstanding any other provisions of this
Agreement, no fractional shares of TI Stock shall be issued in the Holding
Company Merger. In lieu thereof, each holder of HFB Stock who would otherwise be
entitled to receive a fractional share of TI Stock (after taking into account
all Certificates delivered by such holder) shall receive an amount in cash
(without interest), rounded to the nearest cent, equal to the product obtained
by multiplying (a) the Final TI Stock Price by (b) the fraction (calculated to
the nearest ten-thousandth) of the share of TI Stock to which such holder would
otherwise be entitled. No such holder shall be entitled to dividends or other
rights in respect of any such fractional shares.
2.4 Treatment of HFB Options. Unless exercised prior to the Effective
Time of the Holding Company Merger, each of the HFB Options shall be canceled by
HFB immediately prior to the Effective Time of the Holding Company Merger by a
cash payment to the holder of such HFB Option in an amount equal to the result
of multiplying (i) the excess, if any, between (a) the Price Per Share and (b)
the exercise price of such HFB Option by (ii) the number of shares of HFB Stock
subject to the HFB Option. Such payments shall take place only after the
satisfaction or fulfillment or waiver of the conditions to Closing contained in
Articles IX and XI of this Agreement.
2.5 Election and Proration Procedures.
(a) Election Forms and Types of Election. An election form and
other appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of HFB Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent in such form as TI and HFB
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shall mutually agree) ("Election Form") shall be mailed no less than forty-five
(45) days prior to the anticipated Effective Time of the Holding Company Merger
or on such other date as TI and HFB shall mutually agree ("Mailing Date") to
each holder of record of HFB Stock as of five Business Days prior to the Mailing
Date ("Election Form Record Date"). TI shall make available one or more Election
Forms as may be reasonably requested by all persons who become holders (or
beneficial owners) (the term "beneficial owner" and "beneficial ownership" for
purposes of this Agreement shall have the meaning set forth in Section 13(d) of
the Exchange Act) of HFB Stock after the Election Form Record Date and prior to
the Election Deadline, and HFB shall provide to the Exchange Agent all
information reasonably necessary for it to perform its obligations as specified
herein. Each Election Form shall permit the holder (or the beneficial owner
through appropriate and customary documentation and instructions) to elect (an
"Election") to receive either (i) TI Stock (a "Stock Election") with respect to
all of such holder's HFB Stock, or (ii) cash (a "Cash Election") with respect to
all of such holder's HFB Stock, or (iii) TI Stock for a specified number of
shares of HFB Stock (a "Combination Stock Election") and cash for the remaining
number of shares of HFB Stock held by such holder (a "Combination Cash
Election"). Any HFB Stock, other than Dissenting Shares and Treasury Shares,
with respect to which the Exchange Agent has not received an effective, properly
completed Election Form prior to the Election Deadline shall be deemed to be
"Undesignated Shares" hereunder.
(b) Proper and Timely Election. Any Election shall have been
properly made and effective only if the Exchange Agent shall have actually
received a properly completed Election Form which has not been revoked by 5:00
p.m., Pacific Time, by the 30th day following the Mailing Date (or such other
time and date as TI and HFB may mutually agree) (the "Election Deadline"). An
Election Form shall be deemed properly completed only if an Election is
indicated for each share of HFB Stock covered by such Election Form and if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of HFB Stock
covered by such Election Form, together with duly executed transmittal materials
included in or required by the Election Form. Any Election Form may be revoked
by the person submitting such Election Form at or prior to the Election
Deadline, provided that the Exchange Agent shall have actually received prior to
the Election Deadline a written notice revoking such Election Form and
specifying the shares of HFB Stock covered by such revoked Election Form. In the
event an Election Form is revoked prior to the Election Deadline, the shares of
HFB Stock representing such Election Form shall automatically become
Undesignated Shares unless and until a new Election is properly made with
respect to such shares on or before the Election Deadline, and HFB shall cause
the certificates representing such shares of HFB Stock to be promptly returned
without charge to the person submitting the revoked Election Form upon written
request to that effect from the holder who submitted such Election Form. Subject
to the terms of this Agreement and of the Election Form, the Exchange Agent
shall have reasonable discretion to determine whether any Election or revocation
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any decisions of HFB and TI required by the Exchange Agent
and made in good faith in determining
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such matters shall be binding and conclusive. Neither HFB nor the Exchange Agent
shall be under any obligation to notify any person of any defect in an Election
Form.
(c) Proration. As promptly as practicable but not later than
three (3) Business Days prior to the Closing Date, TI shall cause the Exchange
Agent to calculate the allocation among the holders of HFB Stock of rights to
receive TI Stock or cash in the Holding Company Merger in accordance with the
Election Forms as follows:
(i) if the aggregate number of shares of HFB Stock as to
which Stock Elections and Combination Stock Elections shall have effectively
been made times the Exchange Ratio exceeds the Stock Amount then:
(A) All Undesignated Shares shall be deemed to have
made Cash Elections; and
(B) A stock proration factor (the "Stock Proration
Factor") shall be determined by dividing the Stock
Amount by the product obtained by multiplying the
(y) total number of shares of HFB Stock with
respect to which effective Stock Elections and
Combination Stock Elections were made and (z) the
Exchange Ratio. Each holder of HFB Stock who made
an effective Stock Election and Combination Stock
Election shall be entitled to:
1) the number of shares of TI Stock equal to
the product of the (x) Exchange Ratio,
multiplied by (y) the number of shares of
HFB Stock covered by such Stock Election or
Combination Stock Election, multiplied by
(z) the Stock Proration Factor; and
2) cash in an amount equal to the product of
(x) the Price Per Share, multiplied by (y)
the number of shares of HFB Stock covered by
such Stock Election or Combination Stock
Election, multiplied by (z) one minus the
Stock Proration Factor.
(ii) if the aggregate number of shares of HFB Stock as to
which Stock Elections and Combination Stock Elections have been effectively made
times the Exchange Ratio shall be less than the Stock Amount, then the Exchange
Agent shall select by random such number of Undesignated Shares to receive TI
Stock as shall be necessary so that the number of such shares when added to the
number of shares for which a Stock Election and Combination Stock Election has
been made or is deemed to be made when multiplied by the Exchange Ratio shall
equal the Stock Amount, and all Undesignated Shares not so selected shall be
deemed to have made Cash Elections;
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provided, however, that if the aggregate number of shares of HFB Stock as to
which Stock Elections and Combination Stock Elections have been effectively
made, together with all Undesignated Shares, times the Exchange Ratio shall be
less than the Stock Amount, then all Undesignated Shares shall be deemed to have
made Stock Elections.
The pro rata allocation process or the random selection
process to be used by the Exchange Agent shall consist of such procedures as
shall be mutually determined by TI and HFB.
(iii) Notwithstanding anything to the contrary set forth
in paragraph (i) or paragraph (ii) above, if the opinion contemplated by Section
10.5 or the opinion contemplated by Section 11.10 cannot be given, then (I) the
Holding Company Merger shall be effected as set forth in Section 2.2, (II) the
conditions set forth in Sections 9.4, 9.5, 10.5 and 11.10 shall be deemed waived
by all parties with respect to the Holding Company Merger and (III) the
Certificate of Merger shall reflect the foregoing.
2.6 Computation and Confirmation of Certain Items.
(a) The Exchange Ratio and the Final TI Stock Price shall be
calculated by TI prior to the Effective Time of the Holding Company Merger and
shall be set forth in a certificate (the "Cash and Stock Certificate") executed
by an authorized executive officer of TI and furnished to HFB at least three (3)
Business Days prior to the Effective Time of the Holding Company Merger showing
the manner of calculation in reasonable detail.
(b) HFB and Deloitte & Touche shall be entitled to review and
approve the Cash and Stock Certificate from the time of delivery until the day
which is no later than one (1) Business Day prior to the Effective Time of the
Holding Company Merger. In the event of disagreement as to the information
contained in the Cash and Stock Certificate, the parties shall negotiate in good
faith to resolve any such disputed matters, and upon the failure to resolve any
such matters, such dispute shall be resolved by an independent accounting firm
of national standing mutually satisfactory to both TI and HFB.
2.7 Exchange Procedures.
(a) Deposit with Exchange Agent. As of the Effective Time of the
Holding Company Merger, TI or the TI Subsidiary, as the case may be, shall have
deposited with the Exchange Agent for the benefit of the holders of shares of
HFB Stock, for exchange in accordance with this Section 2.7, certificates
representing the shares of TI Stock and cash issuable pursuant to Section 2.1 or
Section 2.2, as the case may be in exchange for shares of HFB Stock outstanding
immediately prior to the Effective Time of the Holding Company Merger and funds
in an amount not less than the amount of cash payable in lieu of fractional
shares of TI Stock which would
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otherwise be issuable in connection with Section 2.1, but for the operation of
Section 2.3 of this Agreement (collectively, the "Exchange Fund").
(b) Exchange Procedures. After the Effective Time of the Holding
Company Merger, each holder of a certificate ("Certificate") formerly
representing HFB Stock (other than Dissenting Shares and Treasury Shares) who
surrenders or has surrendered such Certificate (or customary affidavits and
indemnification regarding the loss or destruction of such Certificate), together
with duly executed transmittal materials included in or required by the Election
Form, to the Exchange Agent, shall, upon acceptance thereof, be entitled to (i)
a certificate representing TI Stock and/or (ii) cash into which the shares of
HFB Stock shall have been converted pursuant to Section 2.1 or Section 2.2 and
Section 2.5, as well as cash in lieu of fractional shares of HFB Stock to which
such holder would otherwise be entitled, if applicable. Former stockholders of
record of HFB shall be entitled to vote after the Effective Time of the Holding
Company Merger at any meeting of TI stockholders the number of whole shares of
TI Stock into which their respective shares of HFB Stock are converted,
regardless of whether such holders have exchanged their Certificates
representing HFB Stock for certificates representing Tl Stock in accordance with
the provisions of this Agreement. The Exchange Agent shall accept such
Certificate upon compliance with such reasonable and customary terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal practices. Until surrendered as contemplated
by this Section 2.7, each Certificate representing HFB Stock shall be deemed
from and after the Effective Time of the Holding Company Merger to evidence only
the right to receive the consideration to which it is entitled hereunder upon
such surrender. TI shall not be obligated to deliver the consideration to which
any former holder of HFB Stock is entitled as a result of the Holding Company
Merger until such holder surrenders his Certificate or Certificates for exchange
as provided in this Section 2.7. If any certificate for shares of TI Stock, or
any check representing cash and/or declared but unpaid dividends, is to be
issued in a name other than that in which a Certificate surrendered for exchange
is issued, the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall affix any requisite stock transfer tax stamps to the Certificate
surrendered or provide funds for their purchase or establish to the satisfaction
of the Exchange Agent that such taxes are not payable.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time of
the Holding Company Merger with respect to TI Stock with a record date after the
Effective Time of the Holding Company Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of TI Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.3 until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of TI
Stock issued in exchange thereof, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of TI
Stock to which such holder is entitled pursuant to Section 2.3 and the amount of
dividends or other distributions with a record date after the Effective Time of
the Holding
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Company Merger theretofore paid with respect to such whole shares of TI Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time of the Holding Company
Merger but prior to surrender and a payment date subsequent to surrender payable
with respect to such whole shares of TI Stock.
(d) No Further Ownership Rights in HFB Stock. All cash and shares
of TI Stock issued upon the surrender for exchange of shares of HFB Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.3) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of HFB Stock, and there shall be no further
registration of transfers on the stock transfer books of TI, after the Holding
Company Merger, of the shares of HFB Stock which were outstanding immediately
prior to the Effective Time of the Holding Company Merger. If, after the
Effective Time of the Holding Company Merger, Certificates are presented to TI
for any reason, they shall be canceled and exchanged as provided in this
Agreement.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund, including any interest thereon, which remains undistributed to the
stockholders of HFB following the passage of twenty-four (24) months after the
Effective Time of the Holding Company Merger shall be delivered to TI, upon
demand, and any stockholders of HFB who have not theretofore complied with this
Section 2.7 shall thereafter look only to TI for payment of their claim for cash
and TI Stock, any cash in lieu of fractional shares of TI Stock and any
dividends or distributions with respect to TI Stock.
(f) No Liability. Neither HFB nor TI shall be liable to any
holder of shares of HFB Stock or TI Stock, as the case may be, for such shares
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) No Ownership Rights. The Exchange Agent shall not be entitled
to vote or exercise any rights of ownership with respect to the shares of TI
Stock held by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with respect to
such shares of TI Stock for the account of the Persons entitled thereto.
(h) Affiliates. Certificates surrendered for exchange by any
Person constituting an "Affiliate" of HFB for purposes of Rule 144(a) under the
Securities Act shall not be exchanged for certificates representing whole shares
of TI Stock until TI has received a written agreement from such person as
provided in Section 6.10.
2.8 Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement, any holder of HFB Stock who shall be entitled to be
paid the "fair value" of such holder's Dissenting Shares of HFB Stock, as
provided in Section 262 of the Delaware General Corporation Law, shall not be
entitled to the consideration to which such holder would otherwise have been
entitled pursuant to Section 2.1 or Section 2.2, as the case may be, unless and
until such
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holder shall have failed to perfect or withdrawn or lost such holder's rights
under Section 262 of the Delaware General Corporation Law, and shall be entitled
to receive only such payment provided for by Section 262 of the Delaware General
Corporation Law.
2.9 Adjustments for Dilution and Other Matters. If prior to the
Effective Time of the Holding Company Merger, (a) TI shall declare a stock
dividend or distribution on TI Stock with a record date prior to the Effective
Time of the Holding Company Merger, or subdivide, split up, reclassify or
combine TI Stock, or declare a dividend, or make a distribution, on the TI Stock
in any security convertible into TI Stock, in each case with a record date prior
to the Effective Time of the Holding Company Merger, or (b) the outstanding
shares of TI Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities, in each case
as a result of a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in TI's
capitalization, then a proportionate adjustment or adjustments will be made to
the Exchange Ratio, which adjustment or adjustments may include, as appropriate,
the issuance of securities, property or cash on the same basis as that on which
any of the foregoing shall have been issued, distributed or paid to holders of
TI Stock generally.
2.10 Effect of the Holding Company Merger.
(a) If the Holding Company Merger is effected in accordance with
Section 2.1, the effect of the Holding Company Merger shall be as provided in
this paragraph (a). By virtue of the Holding Company Merger and at the Effective
Time of the Holding Company Merger, all of the rights, privileges, powers and
franchises and all property and assets of every kind and description of HFB and
TI shall be vested in and be held and enjoyed by TI without further act or deed,
and all the estates and interests of every kind of HFB and TI, including all
debts due to either of them, shall be as effectively the property of TI, as they
were of HFB, and the title to any real estate vested by deed or otherwise in
either HFB or TI shall not revert or be in any way impaired by reason of the
Holding Company Merger; and all rights of creditors and liens upon any property
of HFB and TI shall be preserved unimpaired and all the liabilities and duties
of HFB and TI shall be debts, liabilities and duties of TI and may be enforced
against it to the same extent as if such debts, liabili ties and duties had been
incurred or contracted by it, and none of such debts, liabilities or duties
shall be expanded, increased, broadened or enlarged by reason of the Holding
Company Merger.
(b) If the Holding Company Merger is effected in accordance with
Section 2.2, the effect of the Holding Company Merger shall be as provided in
this paragraph (b). By virtue of the Holding Company Merger and at the Effective
Time of the Holding Company Merger, all of the rights, privileges, powers and
franchises and all property and assets of every kind and description of HFB and
the TI Subsidiary shall be vested in and be held and enjoyed by HFB, without
further act or deed, and all the estates and interests of every kind of HFB and
the TI Subsidiary, including all debts due to either of them, shall be as
effectively the property of HFB, as they were of the TI Subsidiary, and the
title to any real estate vested by deed or otherwise in either HFB or the TI
Subsidiary shall not revert or be in any way impaired by reason of the Holding
Company Merger;
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and all rights of creditors and liens upon any property of HFB and the TI
Subsidiary shall be preserved unimpaired and all the liabilities and duties of
HFB and the TI Subsidiary shall be debts, liabilities and duties of HFB and may
be enforced against it to the same extent as if such debts, liabilities and
duties had been incurred or contracted by it, and none of such debts,
liabilities or duties shall be expanded, increased, broadened or enlarged by
reason of the Holding Company Merger.
2.11 Name of Corporation Surviving the Holding Company Merger.
(a) If the Holding Company Merger is effected in accordance with
Section 2.1, the name of the corporation surviving the Holding Company Merger
shall be "Temple-Inland Inc."
(b) If the Holding Company Merger is effected in accordance with
Section 2.2, the name of the corporation surviving the Holding Company Merger
shall be "HF Bancorp, Inc."
2.12 Certificate of Incorporation and Bylaws of Corporation Surviving
the Holding Company Merger.
(a) If the Holding Company Merger is effected in accordance with
Section 2.1, the Certificate of Incorporation and Bylaws of TI, as in effect
immediately prior to the Effective Time of the Holding Company Merger shall be
the Certificate of Incorporation and Bylaws of TI after the Holding Company
Merger.
(b) If the Holding Company Merger is effected in accordance with
Section 2.2, the Certificate of Incorporation and Bylaws of the TI Subsidiary,
as in effect immediately prior to the Effective Time of the Holding Company
Merger shall be the Certificate of Incorporation and Bylaws of HFB after the
Holding Company Merger.
2.13 Directors and Officers of Corporation Surviving the Holding
Company Merger.
(a) If the Holding Company Merger is effected in accordance with
Section 2.1, the directors and officers of the corporation surviving the Holding
Company Merger shall be as provided in this paragraph (a). At the Effective Time
of the Holding Company Merger, the then directors of TI shall be the directors
of TI, until their successors have been chosen and qualified in accordance with
the Certificate of Incorporation and Bylaws of TI. The officers of TI,
immediately prior to the Effective Time of the Holding Company Merger shall be
the officers of TI, until they resign or are replaced or terminated by the Board
of Directors of TI, or otherwise in accordance with the Certificate of
Incorporation and Bylaws of TI.
(b) If the Holding Company Merger is effected in accordance with
Section 2.2, the directors and officers of the corporation surviving the Holding
Company Merger shall be as provided in this paragraph (b). At the Effective Time
of the Holding Company Merger, the then
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directors of the TI Subsidiary shall be the directors of HFB, until their
successors have been chosen and qualified in accordance with the Certificate of
Incorporation and Bylaws of HFB. The officers of the TI Subsidiary, immediately
prior to the Effective Time of the Holding Company Merger shall be the officers
of HFB, until they resign or are replaced or terminated by the Board of
Directors of HFB, or otherwise in accordance with the Certificate of
Incorporation and Bylaws of HFB.
ARTICLE III
THE CLOSING
3.1 Closing Date. The Closing shall take place on the Closing Date.
3.2 Execution of Merger Documents. Prior to the Closing, the Certificate
of Merger shall be executed by TI, if Section 2.1 is applicable, or by HFB, if
Section 2.2 is applicable, and the Agreement of Bank Merger shall be executed by
Guaranty and Hemet. On or before the Closing Date, the Certificate of Merger
shall be duly filed with the Delaware Secretary as required by applicable laws
and regulations to render the Holding Company Merger effective as of the Closing
Date.
3.3 Documents to be Delivered. At the Closing, the parties hereto shall
deliver, or cause to be delivered, such documents or certificates as may be
necessary, in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF HFB AND HEMET
HFB and Hemet, jointly and severally, represent and warrant to TI and
Guaranty as follows, provided that to the extent any representation or warranty
relates to HFB, Hemet does not make any representations to such extent:
4.1 Incorporation, Standing and Power. HFB is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly registered as a savings and loan holding company under
HOLA. Hemet is a federal savings association duly organized, validly existing
and in good standing under the laws of the United States and is authorized by
the OTS to conduct a federal savings association business. The HFB Subsidiary is
duly organized, validly existing and in good standing under the laws of its
state of incorporation. The Certificates of Incorporation and Bylaws of each of
HFB and the HFB Subsidiary, and the Federal Stock Charter and Bylaws of Hemet,
all as amended to date, are in full force and effect. Hemet's
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deposits are insured by the FDIC through the SAIF in the manner and to the
fullest extent provided by law. HFB, Hemet and the HFB Subsidiary have all
requisite corporate power and authority to own, lease and operate their
respective properties and assets and to carry on their respective businesses as
presently conducted and HFB and Hemet have the corporate power and authority to
execute and deliver this Agreement and the Agreement of Bank Merger, as the case
may be, and to perform their respective obligations hereunder and thereunder, as
the case may be, and to consummate the transactions contemplated hereby and
thereby, as the case may be. Neither the scope of the business of HFB, Hemet or
the HFB Subsidiary nor the location of any of their respective properties
requires that HFB, Hemet or the HFB Subsidiary be licensed to do business in any
jurisdiction other than the State of California where the failure to be so
licensed would, individually or in the aggregate, have a Material Adverse
Effect.
4.2 Capitalization.
(a) As of the date of this Agreement, the authorized capital
stock of HFB consists of 15,000,000 shares of HFB Stock, of which 6,395,303
shares are outstanding, and 2,000,000 shares of serial preferred stock of which
no shares are outstanding. All of the outstanding shares of HFB Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and
subject to no preemptive rights (and were not issued in violation of any
preemptive rights). As of the date of this Agreement, except for HFB Options
covering 587,010 shares of HFB Stock granted pursuant to the HFB Stock Option
Plan and options to be granted to TI pursuant to the Stock Option Agreement
attached hereto as Exhibit A, there are no outstanding options, warrants or
other rights in or with respect to the unissued shares of HFB Stock nor any
securities convertible into such stock, and HFB is not obligated to issue any
additional shares of its common stock or any additional options, warrants or
other rights in or with respect to the unissued shares of such stock or any
other securities convertible into such stock. HFB has furnished TI a list (the
"HFB Option List") setting forth the name of each holder of an HFB Option or HFB
Award, the number of shares of HFB Stock covered by each such HFB Option or HFB
Award, the vesting schedule of such HFB Option or HFB Award, and the exercise
price per share and the expiration date of each such HFB Option or HFB Award, as
applicable.
(b) As of the date of this Agreement, the authorized capital
stock of Hemet consists of 15,000,000 shares of Hemet Stock, of which 1,000
shares are outstanding and owned of record and beneficially by HFB free and
clear of any Encumbrance and 2,000,000 shares of serial preferred stock of which
no shares are outstanding . The outstanding shares of Hemet Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and subject
to no preemptive rights (and were not issued in violation of any preemptive
rights). There are no contracts, commitments, understandings or arrangements
relating to HFB's rights to vote or to dispose of such securities. There are no
outstanding options, warrants or other rights in or with respect to the unissued
shares of Hemet Stock or any other securities convertible into such stock, and
Hemet is not obligated to issue any additional shares of its common stock or any
options, warrants or other rights
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in or with respect to the unissued shares of its common stock or any other
securities convertible into such stock.
(c) As of the date of this Agreement, the authorized capital
stock of the HFB Subsidiary consists of 25,000 shares of common stock, of which
504 shares are outstanding and owned of record and beneficially by Hemet free
and clear of any Encumbrance. The outstanding shares of common stock of the HFB
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). There are no contracts, commitments,
understandings or arrangements relating to Hemet's rights to vote or to dispose
of such securities. There are no outstanding options, warrants or other rights
in or with respect to the unissued shares of such common stock or any other
securities convertible into such stock, and the HFB Subsidiary is not obligated
to issue any additional shares of its common stock or any options, warrants or
other rights in or with respect to the unissued shares of its common stock or
any other securities convertible into such stock.
4.3 Subsidiaries. Except for Hemet and the HFB Subsidiary, HFB does not
own, directly or indirectly, the outstanding stock or equity or other voting
interest in any corporation, partnership, joint venture or other entity except
for 100 shares of Class A Common Stock, of The Clearinghouse Community
Development Financial Institution. Except for the HFB Subsidiary, Hemet does not
own, directly or indirectly, the outstanding stock or equity or other voting
interest in any corporation, partnership, joint venture or other entity, except
for the shares of capital stock, par value $100 per share, of the FHLBSF and 100
shares of Class A Common Stock, of The Clearinghouse Community Development
Financial Institution.
4.4 Financial Statements. HFB has previously furnished to TI a copy of
the Financial Statements of HFB. The Financial Statements of HFB: (a) present
fairly the consolidated financial condition of HFB as of the respective dates
indicated and its consolidated results of operations and changes in cash flows,
for the respective periods then ended, subject, in the case of the unaudited
consolidated interim financial statements, to normal recurring adjustments; (b)
have been prepared in accordance with generally accepted accounting principles
and/or applicable regulatory accounting principles or banking regulations
consistently applied; (c) set forth as of the respective dates indicated
adequate reserves for loan and lease losses and other contingencies; and (d) are
based upon the books and records of HFB, Hemet and the HFB Subsidiary. Hemet's
allowance for loan and lease losses as of October 31, 1998 was $6,557,000.
4.5 Reports and Filings. HFB, Hemet and the HFB Subsidiary have filed
all reports, returns, registrations and statements (such reports and filings
referred to as "HFB Filings"), together with any amendments required to be made
with respect thereto, that were required to be filed with (a) the SEC, (b) the
OTS, (c) the FDIC and (d) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
Material Adverse Effect. No material adverse
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administrative actions have been taken or orders issued in connection with such
HFB Filings. As of their respective dates, each of such HFB Filings (y) complied
in all material respects with all applicable laws and regulations (or was
amended so as to be in compliance promptly following discovery of any such
noncompliance); and (z) with respect to the HFB Filings made with the SEC did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Any
financial statements contained in any of such HFB Filings fairly presented, as
of their respective dates or for their respective periods, the financial
position, results of operations and changes in cash flows, as the case may be,
of HFB, Hemet or the HFB Subsidiary and were prepared in accordance with
generally accepted accounting principles and/or applicable regulatory accounting
principles or banking regulations consistently applied, except as stated
therein, during the periods involved. HFB has furnished TI with true and correct
copies of all HFB Filings filed by HFB or Hemet with the SEC, OTS, FDIC and any
other federal or state securities or banking authority since January 1, 1995.
4.6 Authority of HFB and Hemet. The execution and delivery by HFB and
Hemet of this Agreement and by Hemet of the Agreement of Bank Merger, subject to
the requisite approval of the stockholders of HFB and the sole shareholder of
Hemet, and the consummation of the transactions contemplated hereby and thereby,
have been duly and validly authorized by all necessary corporate action on the
part of HFB and Hemet, and this Agreement is and the Agreement of Bank Merger
will be, upon due execution and delivery by the respective parties thereto, a
valid and binding obligation of HFB or Hemet or both of them, as the case may
be, enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, liquidation, receivership,
conservatorship, insolvency, moratorium or other similar laws affecting the
rights of creditors generally and by general equitable principles and by Section
8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1818(b)(6)(D). Except as set forth in a list furnished by HFB and Hemet to TI
(the "HFB Conflicts and Consents List"), neither the execution and delivery by
HFB and Hemet of this Agreement or by Hemet of the Agreement of Bank Merger, the
consummation of the Holding Company Merger or Bank Merger or the transactions
contemplated herein or therein, nor compliance by HFB and Hemet with any of the
provisions hereof or thereof, will: (a) conflict with or result in a breach of
any provision of the respective Certificates of Incorporation, as amended, or
Bylaws, as amended, of HFB or the HFB Subsidiary or the Federal Stock Charter or
Bylaws of Hemet; (b) constitute a breach of or result in a default (or give rise
to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which HFB, Hemet or the HFB
Subsidiary is a party, or by which HFB, Hemet or the HFB Subsidiary or any of
their respective properties or assets is bound, except as would not,
individually or in the aggregate, have a Material Adverse Effect; (c) result in
the creation or imposition of any Encumbrance on any of the properties or assets
of HFB, Hemet or the HFB Subsidiary, except for Encumbrances that do not
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby; (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to HFB,
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Hemet or the HFB Subsidiary or any of their respective properties or assets.
Except as set forth in the HFB Conflicts and Consents List, no consent of,
approval of, notice to or filing with any Governmental Entity, and no consent
of, approval of or notice to any other Person, is required in connection with
the execution and delivery by HFB and Hemet of this Agreement or by Hemet of the
Agreement of Bank Merger, the consummation by HFB and Hemet of the Holding
Company Merger or Bank Merger or the transactions contemplated hereby or
thereby, except (i) the approval of this Agreement, the Agreement of Bank Merger
and the Holding Company Merger and the transactions contemplated hereby and
thereby by the stockholders of HFB and the sole shareholder of Hemet; (ii) such
approvals or nonobjections as may be required by the OTS and the FDIC; (iii) the
filing and declaration of effectiveness of the S-4 Registration Statement with
the SEC; and (iv) the filing of the Certificate of Merger and the Agreement of
Bank Merger with the Delaware Secretary and the OTS, respectively.
4.7 Insurance. Except as set forth in a list furnished by HFB and Hemet
to TI, (the "HFB Insurance List"): (a) HFB, Hemet and the HFB Subsidiary have,
and have had since July 1, 1995, policies of insurance and bonds with respect to
their respective assets and businesses against such casualties and contingencies
and in such amounts, types and forms as are customary for their respective
businesses, operations, properties and assets; (b) no insurer under any policy
or bond maintained by HFB, Hemet or the HFB Subsidiary has canceled or indicated
an intention to cancel or not to renew any such policy or bond or generally
disclaimed liability thereunder and all such policies and bonds are in full
force and effect; and (c) none of HFB, Hemet or the HFB Subsidiary is in default
under any such policy or bond and all material claims thereunder have been filed
in a timely fashion. Set forth in the HFB Insurance List is a list of all
policies of insurance carried and owned by HFB, Hemet and the HFB Subsidiary,
showing, as of September 30, 1998, the name of the insurance company, the nature
of the coverage, the policy limit, the annual premiums and the expiration dates.
There has been delivered to TI a copy of each such policy of insurance.
4.8 Title to Assets. HFB, Hemet and the HFB Subsidiary have good and
marketable title to all their respective material, non-real estate, properties
and assets, owned or stated to be owned by HFB, Hemet or the HFB Subsidiary,
free and clear of all Encumbrances except: (a) as set forth in the Financial
Statements of HFB; (b) for Encumbrances for current Taxes not yet due; (c) for
Encumbrances incurred in the ordinary course of business; (d) for Encumbrances
that are not substantial in character, amount or extent and that do not
materially detract from the value, or interfere with present use, of the
property subject thereto or affected thereby, or otherwise materially impair the
conduct of business of HFB on a consolidated basis; or (e) as set forth in a
list furnished by HFB and Hemet to TI (the "HFB Personal Property List.")
4.9 Real Estate. HFB and Hemet have furnished TI a list (the "HFB Real
Property List") of real property, including leaseholds and all other interests
in real property (other than security interests), owned by HFB, Hemet or the HFB
Subsidiary. HFB has duly recorded or caused to be recorded, in the appropriate
county, all recordable interests in such real property. HFB, Hemet or the HFB
Subsidiary have good and marketable title to the real property, and valid
leasehold interests in
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the leaseholds, described in the HFB Real Property List, free and clear of all
Encumbrances, except: (a) for rights of lessors, co-lessees or sublessees in
such matters that are reflected in the lease; (b) for Taxes not yet due; (c) for
such Encumbrances, if any, as do not materially detract from the value of or
materially interfere with the present use of such property; and (d) as described
in the HFB Real Property List. HFB has furnished TI with true and correct copies
of all leases included in the HFB Real Property List, all title insurance
policies and all documents evidencing HFB's or Hemet's interest in real property
included in the HFB Real Property List.
4.10 Litigation. Except as set forth in the HFB Filings or in a list
furnished by HFB and Hemet to TI (the "HFB Litigation List"), there is no
private or governmental suit, claim, action or proceeding pending, nor to HFB's
or Hemet's knowledge, threatened, against HFB, Hemet or the HFB Subsidiary or
against any of their respective directors, officers or employees relating to the
performance of their duties in such capacities or against or affecting any
properties of HFB, Hemet or HFB Subsidiary. Also, except as disclosed in the HFB
Filings or in the HFB Litigation List, there are no material judgments, decrees,
stipulations or orders against HFB, Hemet or the HFB Subsidiary or enjoining any
of them or any of their respective directors, officers or employees in respect
of, or the effect of which is to prohibit, any business practice or the
acquisition of any property or the conduct of business in any area.
4.11 Taxes.
(a) Except as set forth in a list furnished by HFB and Hemet to
TI (the "HFB Tax List"), (A) all material Tax Returns required to be filed by or
on behalf of HFB, the HFB Subsidiary, Hemet or the Affiliated Group(s) of which
any of them is or was a member, have been duly and timely filed with the
appropriate taxing authorities in all jurisdictions in which such Tax Returns
are required to be filed (after giving effect to any valid extensions of time in
which to make such filings), and all such Tax Returns were true, complete and
correct in all material respects; (B) all Taxes payable by or on behalf of HFB,
Hemet or the HFB Subsidiary, either directly, as part of an Affiliated Group Tax
Return, or otherwise, have been fully and timely paid, except to the extent
adequately reserved therefor in accordance with generally accepted accounting
principles and/or applicable regulatory accounting principles or banking
regulations consistently applied on the HFB balance sheet, and adequate reserves
or accruals for Taxes have been provided in the HFB balance sheet with respect
to any period through the date thereof for which Tax Returns have not yet been
filed or for which Taxes are not yet due and owing; and (C) no agreement, waiver
or other document or arrangement extending or having the effect of extending the
period for assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitation) has been executed or filed with any taxing
authority by or on behalf of HFB, Hemet or the HFB Subsidiary. or any Affiliated
Group(s) of which any of them is or was a member.
(b) HFB, Hemet and the HFB Subsidiary have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes and have duly and timely withheld from
employee salaries, wages and other compensation and have paid
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over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods under all applicable laws.
(c) TI has received complete copies of (i) all material income or
franchise Tax Returns of HFB, Hemet and the HFB Subsidiary relating to the
taxable periods since July 1, 1995 and (ii) any audit report issued within the
last three years relating to any material Taxes due from or with respect to HFB,
Hemet or the HFB Subsidiary, with respect to their respective income, assets or
operations.
(d) Except as set forth in the HFB Tax List, no claim has been
made by a taxing authority in a jurisdiction where HFB, Hemet or the HFB
Subsidiary do not file an income or franchise Tax Return such that HFB, Hemet or
the HFB Subsidiary are or may be subject to taxation by that jurisdiction.
(e) Except as set forth in the HFB Tax List: (i) all deficiencies
asserted or assessments made as a result of any examinations by any taxing
authority of the Tax Returns of or covering or including HFB, Hemet and/or the
HFB Subsidiary have been fully paid, and there are no other audits or
investigations by any taxing authority in progress, nor have HFB, Hemet or the
HFB Subsidiary received any notice from any taxing authority that it intends to
conduct such an audit or investigation; (ii) no requests for a ruling or a
determination letter are pending with any taxing authority; and (iii) no issue
has been raised in writing by any taxing authority in any current or prior
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency against HFB, Hemet or
any HFB Subsidiary for any subsequent taxable period that could be material.
(f) Except as set forth in the HFB Tax List, none of HFB, Hemet
or the HFB Subsidiary nor any other Person on behalf of HFB, Hemet or the HFB
Subsidiary has (i) filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by HFB, Hemet or the HFB Subsidiary, (ii) agreed to or is required to make
any adjustments pursuant to Section 481 (a) of the Code or any similar provision
of state, local or foreign law by reason of a change in accounting method
initiated by HFB, Hemet or the HFB Subsidiary or has any knowledge that the
Internal Revenue Service has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of HFB, Hemet or the HFB Subsidiary, or (iii) executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law with respect to HFB, Hemet or the HFB Subsidiary.
(g) Except as set forth in the HFB Tax List, no property owned by
HFB, Hemet or the HFB Subsidiary is (i) property required to be treated as being
owned by another Person pursuant to provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and
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in effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax exempt use property" within the meaning of Section 168(h)(1) of
the Code or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code.
(h) Neither HFB (except with HFB Subsidiary or Hemet) nor the HFB
Subsidiary nor Hemet (except with HFB or one another) is a party to any Tax
Sharing Agreement or similar agreement or arrangement (whether written or not
written) pursuant to which it will have any obligation to make any payments
after the Closing.
(i) Except as set forth in the HFB Tax List, there is no
contract, agreement, plan or arrangement covering any Person that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible by HFB, Hemet, the HFB Subsidiary or their respective affiliates by
reason of Section 280G of the Code, or would constitute compensation in excess
of the limitation set forth in Section 162(m) of the Code.
(j) There are no liens as a result of any unpaid Taxes upon any
of the assets of HFB, Hemet or the HFB Subsidiary.
(k) Except as set forth in the HFB Tax List, HFB, Hemet and the
HFB Subsidiary have no elections in effect for federal income tax purposes under
Sections 108, 168, 338, 441, 472, 1017, 1033, or 4977 of the Code.
(l) Except as set forth in the HFB Tax List, none of the members
of HFB's Affiliated Group has any net operating loss carryovers.
(m) HFB and Hemet agree to cooperate, and to cause the HFB
Subsidiary to cooperate, with tax counsel in furnishing reasonable and customary
written tax representations to tax counsel for purposes of supporting tax
counsel's opinion that the Holding Company Merger and the Bank Merger both
qualify as reorganizations within the meaning of Section 368(a) of the Code as
contemplated in Sections 10.5 and 11.10 hereof. Such Persons acknowledge that
their inability or unwillingness to provide such reasonable and customary
written representations could preclude tax counsel from rendering such opinion,
with consequences specified elsewhere herein.
4.12 Compliance with Laws and Regulations.
(a) None of HFB, Hemet or the HFB Subsidiary is in default under
or in breach or violation of (i) any provision of their respective Certificate
of Incorporation, as amended, Federal Stock Charter, Articles of Incorporation,
as amended, or Bylaws, as amended, or (ii) any law, ordinance, rule or
regulation promulgated by any Governmental Entity, except, with respect to this
clause (ii), for such violations as would not have, individually or in the
aggregate, a Material Adverse Effect. The properties and operations of HFB,
Hemet and the HFB Subsidiary are and have
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been maintained and conducted, in all material respects, in compliance with all
applicable laws and regulations.
(b) Except as set forth on a list furnished by HFB and Hemet to
TI (the "HFB Environmental Compliance List"), to HFB's and Hemet's knowledge (or
actual knowledge, as the case may be): (i) HFB, Hemet and the HFB Subsidiary are
in compliance with all Environmental Regulations in all material respects; (ii)
there are no Tanks on, under or above HFB Property; (iii) there are no Hazardous
Materials on, below or above the surface of, or migrating from HFB Property that
would reasonably expect to give rise to a Material Adverse Effect; (iv) to HFB's
and Hemet's actual knowledge, HFB and Hemet have no loans outstanding secured by
real property of which the real property is not in compliance with Environmental
Regulations or which has a Tank or upon which there are Hazardous Materials or
from which Hazardous Materials are migrating; and (v) without limiting Section
4.10 or the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action, suit,
or proceeding or notice thereof before any Governmental Entity pending against
HFB, Hemet or the HFB Subsidiary or, to HFB's and Hemet's actual knowledge,
concerning property securing HFB or Hemet loans and there is no outstanding
judgment, order, writ, injunction, decree, or award against or affecting HFB
Property or, to HFB's and Hemet's actual knowledge, property securing HFB or
Hemet loans, relating to the foregoing representations (i) - (iv). For purposes
of this Section 4.12(b), the term "Environmental Regulations" shall mean all
applicable statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises, and similar
items, of all Governmental Entities and all applicable judicial, administrative,
and regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation: all
requirements, including, but not limited to those pertaining to reporting,
licensing, permitting, investigation, and remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials or wastes
whether solid, liquid, or gaseous in nature, into the air, surface water,
groundwater, or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the public. "HFB Property" shall mean real estate owned, leased, or otherwise
used by HFB, Hemet or the HFB Subsidiary, or in which HFB, Hemet or the HFB
Subsidiary has an investment (by sale and lease-back or otherwise) in each case,
which real estate is owned, leased, or otherwise used on the date of this
Agreement, including, without limitation, properties under foreclosure and
properties held by HFB, Hemet or the HFB Subsidiary in its capacity as a trustee
or otherwise. "Tank" shall mean treatment or storage tanks, sumps, gas or oil
wells and associated piping transportation devices. "Hazardous Materials" shall
mean any substance the presence of which requires investigation or remediation
under any federal, state or local statute, regulation, ordinance, order action,
policy or common law; or which is defined as a hazardous waste, hazardous
substance, hazardous material, used oil, pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental
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Response, Compensation and Liability Act (42 U.S.C. Section 9601, et seq.); the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); the
Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. Section 1251, et seq. ); the Toxic
Substances Control Act, as amended (15 U.S.C. Section 9601, et seq.); the
Occupational Safety and Health Act, as amended (29 U.S.C. Section 651 et seq. );
the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C.
Section 11001, et seq.); the Mine Safety and Health Act of 1977, as amended (30
U.S.C. Section 801, et seq. ); the Safe Drinking Water Act (42 U.S.C. Section
300f, et seq.); and all comparable state and local laws, including without
limitation, the Carpenter-Presley-Tanner Hazardous Substance Account Act (State
Superfund), the Porter-Cologne Water Quality Control Act, Section 25140,
25501(j) and (k), 25501.1, 25281 and 25250.1 of the California Health and Safety
Code and/or Article I of Title 22 of the California Code of Regulations,
Division 4, Chapter 30; or the presence of which causes or threatens to cause a
nuisance, trespass or other common law tort upon real property or adjacent
properties or poses or threatens to pose a hazard to the health or safety of
persons or which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), asbestos or ureaformaldehyde foam insulation.
(c) HFB and Hemet have provided to TI phase I environmental
assessments with respect to each interest in real property set forth on the HFB
Real Property List as to which such a phase I environmental investigation has
been prepared by or on behalf of HFB or Hemet. The HFB Real Property list
discloses each such property as to which such an assessment has not been
prepared on behalf of HFB, Hemet or the HFB Subsidiary.
4.13 Performance of Obligations. HFB, Hemet and the HFB Subsidiary have
performed in all material respects all of the obligations required to be
performed by them to date of any covenant, contract, lease, indenture or any
other covenant to which any of them is a party, or to which any of them or any
of their respective properties is subject or by which any of them or any of
their respective properties are otherwise bound, and none of them are in default
under or in breach of any term or provision of any such covenant, contract,
lease, indenture or any other such covenant, and no event has occurred that,
with the giving of notice or the passage of time or both, would constitute such
default or breach, where such defaults and breaches would, individually or in
the aggregate, have a Material Adverse Effect. Except for loans and leases made
by Hemet in the ordinary course of business, to HFB's or Hemet's knowledge, no
other party to any such covenant, contract, lease or indenture or any other
covenant is in material default or breach thereunder.
4.14 Employees. Except as set forth in the HFB Litigation List, there
are no material controversies pending or threatened between HFB, Hemet or the
HFB Subsidiary and any of their respective employees. None of HFB, Hemet or the
HFB Subsidiary is a party to any collective bargaining agreement with respect to
any of their respective employees or any labor organization to which their
respective employees or any of them belong.
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4.15 Registration Obligation. None of HFB, Hemet or the HFB Subsidiary
is under any obligation, contingent or otherwise, to register any of their
respective securities under the Securities Act.
4.16 Brokers and Finders. Except for the obligation to Keefe, Bruyette &
Woods, Inc. as set forth in a letter agreement, dated June 26, 1998, a copy of
which has been delivered to TI, none of HFB, Hemet or the HFB Subsidiary is a
party to or obligated under any agreement with any broker or finder relating to
the transactions contemplated hereby, and neither the execution of this
Agreement nor the consummation of the transactions provided for herein or
therein will result in any liability to any broker or finder.
4.17 Material Contracts. Except as set forth in a list furnished by HFB
and Hemet to TI (the "HFB Contract List") (all items listed or required to be
listed in such HFB Contract List being referred to herein as "Scheduled
Contracts"), none of HFB, Hemet or the HFB Subsidiary is party to, nor are any
of HFB, Hemet or the HFB Subsidiary or any of their respective properties
subject to, nor or any of them or any of their respective properties bound by,
any of the following:
(a) any employment, deferred compensation, bonus or consulting
contract that (i) has a remaining term, as of the date of this Agreement, of
more than one year in length of obligation on the part of HFB, Hemet or the HFB
Subsidiary and is not terminable by HFB, Hemet or the HFB Subsidiary within one
year without penalty or (ii) requires payment by HFB, Hemet or the HFB
Subsidiary of $50,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract requiring payment by HFB,
Hemet or the HFB Subsidiary of $50,000 or more per annum;
(c) any contract or agreement that restricts HFB, Hemet or the
HFB Subsidiary (or would restrict any Affiliate of any of them (including TI and
its subsidiaries) after the Effective Time of the Holding Company Merger) from
competing in any line of business with any Person or using or employing the
services of any Person;
(d) any lease of real or personal property providing for annual
lease payments by or to HFB, Hemet or the HFB Subsidiary in excess of $50,000
per annum other than (A) financing leases entered into in the ordinary course of
business in which HFB, Hemet or the HFB Subsidiary is lessor and (B) leases of
real property presently used by Hemet as banking or loan production offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of HFB, Hemet or the HFB Subsidiary (other than as mortgagor or pledgor in the
ordinary course of their banking business or as mortgagee,
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secured party or deed of trust beneficiary in the ordinary course of their
business) in personal property having a value of $50,000 or more;
(f) other than as described in the HFB Filings or as set forth in
the HFB Employee Plan List, any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of HFB, Hemet or the HFB Subsidiary;
(g) any agreement to acquire equipment or any commitment to make
capital expenditures of $50,000 or more other than as indicated in the HFB
Branch List;
(h) other than agreements entered into in the ordinary course of
business, including sales of other real estate owned, any agreement for the sale
of any property or assets in which HFB, Hemet or the HFB Subsidiary has an
ownership interest or for the grant of any preferential right to purchase any
such property or asset;
(i) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of their banking
business and reflected in the financial records of HFB, Hemet or the HFB
Subsidiary);
(j) any restrictive covenant contained in any deed to or lease of
real property owned or leased by HFB, Hemet or the HFB Subsidiary (as lessee)
that materially restricts the use, transferability or value of such property;
(k) any guarantee or indemnification which involves the sum of
$50,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
(l) any supply, maintenance or landscape contracts not terminable
by HFB, Hemet or the HFB Subsidiary without penalty on thirty (30) days or less
notice and which provides for payments in excess of $50,000 per annum;
(m) other than as disclosed with reference to subparagraph (k) of
this Section 4.17, any material agreement which would be terminable other than
by HFB, Hemet or the HFB Subsidiary as a result of the consummation of the
transactions contemplated by this Agreement;
(n) any contract of participation with any other financial
institution in any loan in excess of $50,000 or any sales of assets of HFB or
Hemet with recourse of any kind to HFB or Hemet except the sale of mortgage
loans, servicing rights, repurchase or reverse repurchase agreements, securities
or other financial transactions in the ordinary course of business;
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(o) any agreement providing for the sale or servicing of any loan
or other asset which constitutes a "recourse arrangement" under applicable
regulation or policy promulgated by a Governmental Entity (except for agreements
for the sale of guaranteed portions of loans guaranteed in part by the U. S.
Small Business Administration and related servicing agreements);
(p) any contract relating to the provision of data processing
services to HFB, Hemet or the HFB Subsidiary;
(q) any other agreement of any other kind which involves future
payments or receipts or performances of services or delivery of items requiring
payment of $50,000 or more to or by HFB, Hemet or the HFB Subsidiary other than
payments made under or pursuant to loan agreements, participation agreements and
other agreements for the extension of credit in the ordinary course of their
business.
True copies of all Scheduled Contracts, including all amendments and
supplements thereto, have been delivered to TI.
4.18 Certain Material Changes. Except as set forth in a list delivered
by HFB and Hemet to TI (the "HFB Material Adverse Effect List") or in the
financial statements and notes thereto to be included in HFB's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998 in the form delivered by
HFB to TI (the "HFB Financial Statements List"), since June 30, 1998, there has
not been, occurred or arisen any of the following (whether or not in the
ordinary course of business unless otherwise indicated):
(a) Any change in any of the assets, liabilities, permits,
methods of accounting or accounting practices, business, or manner of conducting
business, of HFB, Hemet or the HFB Subsidiary, or any other event or development
that has had or may reasonably be expected to have a Material Adverse Effect;
(b) Any event or circumstance that, individually or taken
together with all other events and circumstances, has had or may reasonably be
expected to have a Material Adverse Effect; or
(c) Any direct or indirect redemption, purchase or other
acquisition by HFB, Hemet or the HFB Subsidiary of any equity securities or any
declaration, setting aside or payment of any dividend or other distribution on
or in respect of HFB Stock whether consisting of money, other personal property,
real property or other things of value.
4.19 Licenses and Permits. HFB, Hemet and the HFB Subsidiary have all
material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in full force and effect. The
respective properties, assets, operations and businesses of
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HFB, Hemet and the HFB Subsidiary are and have been maintained and conducted, in
all material respects, in compliance with all applicable licenses and permits.
4.20 Undisclosed Liabilities. None of HFB, Hemet or the HFB Subsidiary
has any liabilities or obligations, either accrued or contingent, that are
material to HFB on a consolidated basis and that have not been: (a) reflected or
disclosed in the Financial Statements of HFB; (b) disclosed in a list furnished
by HFB and Hemet to TI (the "HFB Undisclosed Liabilities List") or on any other
HFB List; or (c) incurred in the ordinary course of business consistent with
past practices, which incurrence would not give rise, individually or in the
aggregate, to a Material Adverse Effect. None of HFB, Hemet or the HFB
Subsidiary knows of any reasonable basis for the assertion against any of them
of any liability, obligation or claim (including, without limitation, that of
any regulatory authority) that is likely to result in or cause a Material
Adverse Effect that is not accurately reflected in the Financial Statements of
HFB or otherwise disclosed in this Agreement.
4.21 Employee Benefit Plans.
(a) Existence of Plans. For purposes of this Agreement, the term
"Plans" shall mean (i) all "employee benefit plans" (as such term is defined in
Section 3(3) of ERISA) of which HFB or any member of the same controlled group
of corporations, trades or businesses as HFB within the meaning of Section 4001
(a)(14) of ERISA, including, but not limited to, Hemet and HFB Subsidiary (for
purposes of this Section, an "ERISA Affiliate") is a sponsor or participating
employer or as to which HFB or any of its ERISA Affiliates makes contributions
or is required to make contributions and (ii) any employment, severance or other
agreement, plan, arrangement or policy of HFB or of any of its ERISA Affiliates
(whether written or oral) providing for insurance coverage (including
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits, or
for profit sharing, deferred compensation, bonuses, stock options, stock
appreciation, stock awards, stock based com pensation or other forms of
incentive compensation or post-termination insurance, compensation or benefits.
Except as set forth in the list delivered by HFB and Hemet to TI (the "HFB
Employee Plan List"), (i) neither HFB nor any of its ERISA Affiliates maintains
or sponsors, or makes or is required to make contributions to, any Plans, (ii)
none of the Plans is a "multiemployer plan," as defined in Section 3(37) of
ERISA, (iii) none of the Plans is a "defined benefit pension plan" within the
meaning of Section 3(35) of ERISA, and (iv) each of the Plans has been
administered and maintained, and is, in material compliance with, all provisions
of ERISA, the Code, the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and all other applicable laws. Notwithstanding any statement or
indication in this Agreement to the contrary, and except as disclosed in the HFB
Employee Plan List there are no Plans as to which HFB or its ERISA Affiliates
will be required to make any contributions, whether on behalf of any of the
current employees of HFB, its ERISA Affiliate or on behalf of any other person,
after the Closing. With respect to each of such Plans, at the Closing there will
be no unrecorded liabilities with respect to the establishment, implementation,
operation, administration or termination of any such Plan, or the termination of
the participation in any such Plan by the HFB or any of its ERISA Affiliates.
Neither HFB nor any
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ERISA Affiliate has any formal plan or commitment, whether legally binding or
not, to create any additional Plan, or modify or change any existing Plan that
would affect any employee or terminated employee of HFB or any ERISA Affiliate,
except as set forth in the HFB Employee Plan List. Except as set forth in the
HFB Employee Plan List, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any employees of HFB, Hemet or the HFB
Subsidiaries to severance pay, (ii) accelerate the funding, time of payment or
vesting or trigger any payment of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Plans or (iii) result in any breach or violation of, or default under, any of
the Plans. HFB has delivered to TI true and complete copies of: (i) each of the
Plans and any related funding and service agreements thereto (including
insurance contracts, investment managing agreements, subscription and
participation agreements and recordkeeping contracts) including all amendments,
all of which are legally valid and binding and in full force and effect and
there are no defaults thereunder, (ii) the currently effective summary plan
description, summary of material modifications and all material employee
communications pertaining to each of the Plans, (iii) the three most recent
annual reports for each of the Plans (including all relevant schedules), (iv)
the most recently filed PBGC Form 1 (if applicable); and (v) the most recent
Internal Revenue Service determination letter for each Plan which is intended to
constitute a qualified plan under Section 401 of the Code and each amendment to
each of the foregoing documents and any requests for rulings, determinations, or
opinions pending with the Internal Revenue Service or any other governmental
agency.
(b) Present Value of Benefits. The present value of all "benefit
liabilities", as defined in Section 4001(a)(16) of ERISA, under any Plan subject
to Title IV of ERISA (as determined on the basis of the actuarial assumptions
contained in the Plan's most recent actuarial valuation) shall not, as of the
Closing Date, exceed the value of the assets of such Plan allocated to such
benefit liabilities. With respect to each Plan that is subject to Title IV of
ERISA (i) no amount is due or owing from HFB or its ERISA Affiliates to the
Pension Benefit Guaranty Corporation or to any "multiemployer plan" as defined
in Section 3(37) of ERISA on account of any withdrawal therefrom and (ii) no
such Plan has been terminated other than in accordance with ERISA or at a time
when the Plan was not sufficiently funded. The transactions contemplated
hereunder, including without limitation the termination of the Plans at or prior
to the Closing, shall not result in any such withdrawal or other liability under
any applicable laws.
(c) Penalties; Reportable Events. None of the Plans, nor any
trust created thereunder nor any trustee, fiduciary or administrator thereof,
has engaged in any transaction which might subject HFB, Hemet or the HFB
Subsidiary to any tax or penalty on prohibited transactions imposed by Section
4975 of the Code or Section 406 of ERISA or to any civil penalty imposed by
Section 502 of ERISA. None of the Plans subject to Title IV of ERISA has been
completely or partially terminated nor has there been any "reportable event," as
such term is defined in Section 4043(b) of ERISA, with respect to any of such
Plans within the 12 month period ending on the date hereof for which the 30-day
reporting requirement has not been waived, nor has any notice of intent to
terminate been filed or given with respect to any such Plan. There has been no
(i) withdrawal by
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HFB or any of its ERISA Affiliates that is a substantial employer from a
single-employer plan which is a Plan and which has two or more contributing
sponsors at least two of whom are not under common control, as referred to in
Section 4063(b) of ERISA, or (ii) cessation by HFB or any of its ERISA
Affiliates of operations at a facility causing more than 20% of Plan
participants to be separated from employment, as referred to in Section 4062(f)
of ER1SA.
(d) Deficiencies; Qualification. None of the Plans nor any trust
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in Section 412 of the Code, whether or not waived. Furthermore,
neither HFB nor any of its ERISA Affiliates has any provided or is required to
provide security to any Plan pursuant to Section 401(a)(29) of the Code. Each of
the Plans which is intended to be a qualified plan under Section 401 (a) of the
Code has received a favorable determination letter from the Internal Revenue
Service and HFB does not know of any fact which could adversely affect the
qualified status of any such Plan. All contributions required to be made to each
of the Plans under the terms of the Plan, ERISA, the Code, or any other
applicable laws have been timely made. The Financial Statements properly reflect
all amounts required to be accrued as liabilities to date under each of the
Plans. Except as set forth in the HFB Employee Plan List, there is no Plan or
other contract, agreement or benefit arrangement covering any employee of HFB or
Hemet which, individually or collectively, could give rise to the payment of any
amount which would constitute an "excess parachute payment" (as defined in
Section 280G of the Code).
(e) Litigation. There have occurred and there exists (i) no
pending litigation or controversies against the Plans or against HFB or any of
its ERISA Affiliates as the "employer" or "sponsor" under the Plans or against
the trustee, fiduciaries or administrators of any of the Plans and (ii) no
pending or, to HFB's knowledge, threatened investigations, proceedings,
lawsuits, disputes, actions or controversies involving the Plans, the
administrator or trustee of any of the Plans with any of the Internal Revenue
Service, Department of Labor, Pension Benefit Guaranty Corporation, any
participant in the Plans or any other person whatsoever. Without limiting the
generality of the foregoing, there are no lawsuits or other claims, pending or,
to HFB's knowledge, threatened (other than routine claims for benefits under a
Plan) against (i) any Plan, or (ii) any "fiduciary" of such Plan (within the
meaning of Section 3(21)(a) of ERISA) brought on behalf of any participant,
beneficiary or fiduciary thereunder.
(f) None of HFB, Hemet, the HFB Subsidiary or any of their ERISA
Affiliates has used the services of (i) workers who have been provided by a
third party contract labor supplier for more than six months or who may
otherwise be eligible to participate in any of the Plans or to an extent that
would reasonably be expected to result in the disqualification of any of the
Plans or the imposition of penalties or excise taxes with respect to the IRS,
the Department of Labor, the Pension Benefit Guaranty Corporation or any other
Governmental Entity, (ii) temporary employees who have worked for any of HFB,
Hemet, the HFB Subsidiary or any of their ERISA Affiliates for more than six
months or who may otherwise be eligible to participate in any of the Plans or to
an extent that would reasonably be expected to result in the disqualification of
any of the Plans or the
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imposition of penalties or excise taxes with respect to the IRS, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other Governmental
Entity, (iii) individuals who have provided services to HFB, Hemet, the HFB
Subsidiary or any of their ERISA Affiliates as independent contractors for more
than six months or who may otherwise be eligible to participate in the Plans or
to an extent that would reasonably be expected to result in the disqualification
of any of the Plans or the imposition of penalties or excise taxes with respect
to the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation or
any other Governmental Entity or (iv) leased employees, as that term is defined
in section 414(n) of the Code.
(g) Except as set forth in the HFB Employee Plan List, with
respect to each Plan that is funded wholly or partially through an insurance
policy, there will be no liability of HFB, Hemet, the HFB Subsidiary or any of
their ERISA Affiliates, as of the Closing Date, under any such insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
4.22 Corporate Records. The minute books of HFB, Hemet and the HFB
Subsidiary, accurately reflect all actions taken to this date by the respective
stockholders, boards of directors and committees of HFB, Hemet and the HFB
Subsidiary. True and complete copies of HFB's, Hemet's and the HFB Subsidiary's
Certificates of Incorporation, as amended, Federal Stock Charter, Articles of
Incorporation, as amended, Bylaws, as amended, and other charter documents, and
all amendments thereto, have been delivered to TI on or before the date hereof.
4.23 Community Reinvestment Act. Hemet received a rating of
"Satisfactory" in its most recent examination or interim review with respect to
the Community Reinvestment Act. Neither HFB nor Hemet have been advised of any
supervisory concerns regarding any of Hemet's compliance with the Community
Reinvestment Act.
4.24 Regulatory Actions.
(a) As of the date hereof, and to HFB's and Hemet's knowledge,
HFB and Hemet are in compliance in all material respects with all applicable
material federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Bank Secrecy Act, the Fair Housing Act, the
Community Reinvestment Act, the Home Mortgage Disclosure Act, the Americans with
Disabilities Act, and all other applicable fair lending laws or other laws
relating to discrimination, and to HFB's and Hemet's actual knowledge, neither
HFB nor Hemet is the subject of a referral to either the United States
Department of Justice or the Department of Housing and Urban Development for
alleged violations of the Fair Lending Acts.
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(b) Except as set forth in a list (the "HFB Regulatory Actions
List"), each material violation, criticism, or exception by any Governmental
Entity with respect to any examinations of HFB or Hemet has been responded to or
is in the process of being responded to, and neither HFB nor Hemet has been
advised by any Governmental Entity that its response is inadequate.
(c) Neither HFB, Hemet nor the HFB Subsidiary is a party to any
cease and desist order, written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of, any
Governmental Entity nor has it been advised by any Governmental Entity that it
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written agreement, memorandum
of understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
4.25 Insider Loans; Other Transactions. HFB has previously provided TI
with a listing, current as of November 10, 1998, of all extensions of credit
made by HFB, Hemet and the HFB Subsidiary to each of its and their executive
officers and directors and their related interests (all as defined under Federal
Reserve Board Regulation O), all of which have been made in compliance with
Regulation O, which listing is true, correct and complete in all material
respects. Neither HFB, Hemet nor the HFB Subsidiary owes any amount to, or has
any contract or lease with or commitment to, any of the present executive
officers or directors of HFB, Hemet or the HFB Subsidiary (other than for
compensation for current services not yet due and payable, reimbursement of
expenses arising in the ordinary course of business, options or awards available
under the HFB Stock Option Plan, or any amounts due pursuant to HFB's Plans).
4.26 Accounting Records. HFB, Hemet and the HFB Subsidiary maintain
accounting records which fairly and accurately reflect, in all material
respects, their transactions and accounting controls exist sufficient to provide
reasonable assurances that such transactions are, in all material respects, (i)
executed in accordance with their management's general or specific
authorization, and (ii) recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting procedures
and/or applicable regulatory accounting principles or banking regulations
consistently applied. Such records, to the extent they contain important
information pertaining to HFB, Hemet and the HFB Subsidiary which is not
easily and readily available elsewhere, have been stored and maintained in
compliance with OTS Regulations.
4.27 Indemnification. Other than pursuant to the provisions of its
charter or bylaws, none of HFB, Hemet or the HFB Subsidiary is a party to any
indemnification agreement with any of its present directors, officers,
employees, agents or other persons who serve or served in any other capacity
with any other enterprise at the request of HFB (a "Covered Person"), and to the
knowledge of HFB, there are no claims for which any Covered Person would be
entitled to indemnification under Section 7.6 if such provisions were deemed in
effect, except as set forth in a list furnished by HFB and Hemet to TI (the "HFB
Indemnification List").
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4.28 Offices and ATMs. HFB and Hemet have furnished to TI a list (the
"HFB Offices List") setting forth the headquarters of Hemet (identified as such)
and each of the offices and automated teller machines ("ATMs") maintained and
operated by Hemet (including, without limitation, representative and loan
production offices and operations centers) and the location thereof. Except as
set forth on the HFB Offices List, Hemet maintains no other office or ATM and
conducts business at no other location, and Hemet has not applied for nor
received permission to open any additional branch nor operate at any other
location.
4.29 Loan Portfolio.
(a) HFB and Hemet have furnished to TI a list (the "HFB Loan
List") that sets forth as of September 30, 1998 a description of (a) each loan,
lease, other extension of credit or commitment to extend credit by Hemet in
excess of $25,000; (b) all loans, leases, other extensions and commitments to
extend credit by Hemet of $25,000 or more, that have been classified by any bank
regulatory authority or any unit of HFB or Hemet or by any other Person as
"Criticized," "Specially Mentioned," "Watch List," "Substandard," "Doubtful,"
"Loss" or any comparable classification ("Classified Credits"); and (c) all
consumer loans due to Hemet as to which any payment of principal, interest or
any other amount is ninety (90) days or more past due. There is no material
disagreement with any regulatory agency as to any classification referred to
herein.
(b) Each loan, other than loans the aggregate amount of which to
any one borrower and its related interests reflected as an asset on HFB's most
recent balance sheet does not exceed $25,000, and each balance sheet date
subsequent thereto (i) is evidenced by notes, agreements or other evidence of
indebtedness which are true, genuine and what they purport to be, and (ii) is
the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. All such loans and
extensions of credit that have been made by Hemet and that are subject to
Section 11 of HOLA comply therewith.
4.30 Investment Securities. HFB and Hemet have furnished to TI a list
(the "HFB Investment Securities List") setting forth a description of each
Investment Security held by HFB, Hemet or the HFB Subsidiary on October 31,
1998. The HFB Investment Securities List sets forth, with respect to each such
Investment Security: (i) the issuer thereof; (ii) the outstanding balance or
number of shares; (iii) the maturity, if applicable; (iv) the title of issue;
and (v) the classification under SFAS No. 115. None of HFB, Hemet or the HFB
Subsidiary holds any Investment Security classified as trading.
4.31 Derivatives Contracts; Structured Notes; Etc. Except as set forth
in a list furnished by HFB and Hemet to TI, (the "HFB Derivatives List") none of
HFB, Hemet or the HFB Subsidiary is a party to or has agreed to enter into an
exchange traded or over-the-counter equity, interest rate,
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foreign exchange or other swap, forward, future, option, cap, floor or collar or
any other contract that is not included on the balance sheet and is a derivative
contract (including various combinations thereof) (each, a "Derivatives
Contract") or owns securities that are referred to generically as "structured
notes," "high risk mortgage derivatives," "capped floating rate notes," or
"capped floating rate mortgage derivatives."
4.32 Power of Attorney. None of HFB, Hemet or the HFB Subsidiary has
granted any Person a power of attorney or similar authorization that is
presently in effect or outstanding.
4.33 Material Interests of Certain Persons. Except as disclosed in HFB's
proxy statement for its 1998 annual meeting of stockholders, no officer or
director of HFB, or any associate thereof (as such term is defined in Rule 12b-2
under the Exchange Act), has any material interest in any material contract or
property (real or personal) tangible or intangible, used in or pertaining to the
business of HFB, Hemet or the HFB Subsidiary.
4.34 Tax Matters. Except as expressly contemplated by Sections 2.2 and
2.5(c)(iii), none of HFB, Hemet or the HFB Subsidiary, nor, to the knowledge of
HFB or Hemet, any of their respective Affiliates, has taken or agreed to take
any action that would prevent the business combinations to be effected by the
Mergers from qualifying as reorganizations under Section 368(a) of the Code.
4.35 Facts Affecting Regulatory Approvals. To the knowledge of HFB and
Hemet, there is no fact, event or condition applicable to HFB, Hemet or the HFB
Subsidiary which will, or reasonably could be expected to, adversely affect the
likelihood of securing the requisite approvals or consents of any Governmental
Entity to the Mergers and other transactions contemplated by this Agreement.
4.36 Disclosure Documents and Applications. None of the information
supplied or to be supplied by or on behalf of HFB or Hemet ("HFB Supplied
Information") for inclusion or incorporation by reference in (a) the Proxy
Statement to be mailed to the stockholders of HFB in connection with obtaining
the approval of the stockholders of HFB of this Agreement, the Holding Company
Merger and the other transactions contemplated hereby, or any amendment or
supplement thereto, and (b) any other documents to be filed with the SEC, the
OTS, the FDIC or any other Governmental Entity in connection with the
transactions contemplated in this Agreement, will, at the respective times such
documents are filed or become effective, or with respect to the Proxy Statement
when mailed, 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 were
made, not misleading.
4.37 Certain Regulatory Matters.
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(a) Hemet is a qualified thrift lender under Section 10(m) of the
HOLA and is a member in good standing of the FHLBSF; and
(b) Hemet has not paid any dividends to HFB that (i) caused the
regulatory capital of Hemet to be less than the amount then required by
applicable law or (ii) exceeded any other limitation on the payment of dividends
imposed by law, agreement or regulatory policy. Other than as required by
applicable law or OTS Regulations, there are no restrictions on the payment of
dividends by Hemet or HFB.
4.38 Corporate Approval.
(a) The affirmative vote of the holders of a majority of the
outstanding shares of HFB Stock is required to adopt this Agreement and approve
the Holding Company Merger and the other transactions contemplated hereby. No
other vote of the stockholders of HFB is required by law, the Certificate of
Incorporation or Bylaws of HFB or otherwise to adopt this Agreement and approve
the Holding Company Merger and the other transactions contemplated hereby; and
(b) At a duly constituted meeting of the Board of Directors of
HFB and Hemet, the respective directors unanimously authorized HFB's and Hemet's
entry into this Agreement and the transactions contemplated hereby.
4.39 Intellectual Property. Except as set forth in a list furnished by
HFB and Hemet to TI (the "HFB Intellectual Property List"), HFB, Hemet and the
HFB Subsidiary own or possess valid and binding licenses and other rights to use
without payment all material patents, copyrights, trade secrets, trade names,
service marks and trademarks used in their respective businesses; and none of
HFB, Hemet or the HFB Subsidiary have received any notice with respect thereto
that asserts the rights of others. HFB, Hemet and the HFB Subsidiary have in all
material respects performed all the obligations required to be performed by
them, and are not in default in any material respect under any license,
contract, agreement, arrangement or commitment relating to any of the foregoing.
4.40 Year 2000. To the knowledge of HFB and Hemet, the mission critical
computer software operated by HFB and Hemet is currently capable of providing,
or is being adapted to provide, uninterrupted millennium functionality to
record, store, process and present calendar dates falling on or after January 1,
2000 in substantially the same manner and with the same functionality as such
mission critical software records, stores, processes and presents such calendar
dates falling on or before December 31, 1999. To the knowledge of HFB and Hemet,
the costs of the adaptations referred to in this clause will not have a Material
Adverse Effect. Neither Hemet nor HFB has received, or reasonably expects to
receive, a "Year 2000 Deficiency Notification Letter" (as such term is employed
by the OTS). Hemet and HFB have disclosed to TI a complete and accurate copy of
their plan, including an estimate of the anticipated associated costs, for
addressing the issues set forth in all Federal Financial Institutions
Examination Council Interagency Statements as such issues
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affect HFB and Hemet. Between the date of this Agreement and the Effective Time,
HFB and Hemet shall use commercially practicable efforts to implement such plan.
4.41 Accuracy and Currentness of Information Furnished. The
representations and warranties made by HFB and Hemet hereby or in the Lists or
schedules hereto do not contain any untrue statement of a material fact or omit
to state any material fact which is necessary under the circumstances under
which they were made to prevent the statements contained herein or in such Lists
or schedules from being misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TI AND GUARANTY
TI and Guaranty, jointly and severally, represent and warrant to HFB and
Hemet as follows:
5.1 Incorporation, Standing and Power. TI is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted and to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby,
and is duly registered as a savings and loan holding company under HOLA.
Guaranty is a federal savings bank duly incorporated, validly existing and in
good standing under the laws of the United States and is authorized by the OTS
to conduct a federal savings bank business. Prior to the Closing, the TI
Subsidiary will be a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and will have all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business. The Certificate of Incorporation and Bylaws
of TI and the Federal Stock Charter and Bylaws of Guaranty, each as amended to
date, are in full force and effect, and prior to the Closing the Certificate of
Incorporation and Bylaws of TI Subsidiary will be in full force and effect.
Guaranty's deposits are insured by the FDIC through the SAIF in the manner and
to the fullest extent provided by law. Each of TI and Guaranty is, and prior to
the Closing the TI Subsidiary will be, duly qualified and in good standing as a
foreign corporation, and authorized to do business, in all states or other
jurisdictions in which such qualification or authorization is necessary, except
where the failure to be so qualified or authorized would not, individually or in
the aggregate, have a Material Adverse Effect.
5.2 Authority of TI and Guaranty. The execution and delivery by TI and
Guaranty of this Agreement and by Guaranty of the Agreement of Bank Merger, and
subject to the requisite approval of the shareholder of Guaranty of this
Agreement and the transactions contemplated hereby, the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of TI and Guaranty, and
this Agreement is and the Agreement of Bank Merger will be upon execution by all
parties, a valid and binding
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obligation of TI or Guaranty or both of them, enforceable in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium
or other similar laws affecting the rights of creditors generally and by general
equitable principles and by Section 8(b)(6)(D) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1818(b)(6)(D). All of the TI Shares to be issued pursuant
to the Holding Company Merger will be duly authorized, validly issued, fully
paid and nonassessable and are not, or will not be, subject to any preemptive
rights. Except as set forth in a list furnished by TI to HFB (the "TI Conflicts
and Consents List"), neither the execution and delivery by TI or Guaranty of
this Agreement or the Agreement of Bank Merger, as the case may be, the
consummation of the transactions contemplated herein or thereby by TI, Guaranty
or the TI Subsidiary, as the case may be, nor compliance by TI or Guaranty with
any of the provisions hereof or thereof, will (a) conflict with or result in a
breach of any provision of the Certificate of Incorporation or Bylaws, as
amended, of TI or the TI Subsidiary or the Federal Stock Charter or Bylaws, as
amended, of Guaranty; (b) constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which TI, Guaranty or the TI
Subsidiary is a party, or by which Tl, Guaranty or the TI Subsidiary or any of
their respective properties or assets is bound, except as would not,
individually or in the aggregate, have a Material Adverse Effect; (c) result in
the creation or imposition of any Encumbrance on any of the properties or assets
of Tl, Guaranty or the TI Subsidiary, except for Encumbrances that do not
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to TI, Guaranty or
the TI Subsidiary or any of their respective properties or assets. Except as set
forth in the TI Conflicts and Consents List, no consent of, approval of, notice
to or filing with any Governmental Entity having jurisdiction over any aspect of
the business or assets of TI, and no consent or approval of any other Person, is
required in connection with the execution and delivery by TI of this Agreement,
or the consummation by Tl of the transactions contemplated hereby or thereby,
except (i) the approval of this Agreement and the transactions contemplated
hereby by the shareholder of Guaranty; (ii) such approvals as may be required by
the OTS and the FDIC; (iii) filing of the Certificate of Merger with the
Delaware Secretary pursuant to the Delaware General Corporation Law; (iv) the
declaration of effectiveness by the SEC of the S-4 Registration Statement; and
(v) such approvals as may be required by the NYSE to approve for inclusion on
the NYSE any TI Stock to be issued in the Holding Company Merger.
5.3 Tax Representations. TI, Guaranty and their Affiliates agree to
cooperate with tax counsel by furnishing reasonable and customary written
representations to tax counsel for purposes of supporting tax counsel's opinion
that the Holding Company Merger and the Bank Merger both qualify as
reorganizations within the meaning of Section 368(a) of the Code as contemplated
in Sections 10.5 and 11.10 hereof.
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5.4 Disclosure Documents and Applications. None of the information
supplied or to be supplied by or on behalf of TI for inclusion or incorporation
by reference in (a) the S-4 Registration Statement, and (b) any other documents
to be filed with the OTS, the FDIC or any other Governmental Entity in
connection with the transactions contemplated in this Agreement will, at the
respective times such documents are filed or become effective, or with respect
to the S-4 Registration Statement when mailed, 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 were made, not misleading.
5.5 Reports and Filings. TI and Guaranty have filed all reports,
returns, registrations and statements (such reports and filings referred to as
"TI Filings"), together with any amendments required to be made with respect
thereto, that were required to be filed with (a) the SEC, (b) the OTS, (c) the
FDIC and (d) any other applicable Governmental Entity, including taxing
authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a
Material Adverse Effect. No material adverse administrative actions have been
taken or orders issued in connection with such TI Filings. As of their
respective dates, each of such TI Filings (y) complied in all material respects
with all applicable laws and regulations (or was amended so as to be in
compliance promptly following discovery of any such noncompliance); and (z) with
respect to the TI Filings made with the SEC did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statements contained in any of such TI Filings fairly presented, as of their
respective dates or for their respective periods, the consolidated financial
position, consolidated results of operations and consolidated changes in cash
flows, as the case may be, of TI and were prepared in accordance with generally
accepted accounting principles and/or applicable regulatory accounting
principles or banking regulations consistently applied, except as stated
therein, during the periods involved. TI has furnished HFB with true and correct
copies of all TI Filings filed by TI with the SEC, OTS, and the FDIC since
January 1, 1995.
5.6 Corporate Approval. At a duly constituted meeting of the Board of
Directors of Guaranty, directors constituting at least two-thirds of the
directors then in office authorized Guaranty's entry into this Agreement and the
transactions contemplated hereby, and, at a duly constituted meeting of the
Board of Directors of TI, directors constituting at least a majority of the
directors then in office authorized TI's entry into this Agreement and the
transactions contemplated hereby.
5.7 Absence of Certain Changes or Events. Except as may be set forth in
a list furnished by TI to HFB (the "TI Material Adverse Effect List"), or as
otherwise contemplated by this Agreement, since January 3, 1998, there has not
been, occurred or arisen any event or circumstance that, individually or taken
together with all other events and circumstances, has had or may reasonably be
expected to have a Material Adverse Effect.
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5.8 Access to Funds. TI has, and on the Closing Date will have, a
sufficient number of authorized shares of TI Stock and all funds necessary to
consummate the Holding Company Merger.
5.9 Facts Affecting Regulatory Approvals. To the knowledge of TI and
Guaranty, there is no fact, event or condition applicable to TI or Guaranty or
any of their respective subsidiaries which will, or reasonably could be expected
to, adversely affect the likelihood of securing the requisite approvals or
consents of any Governmental Entity to the Mergers and transactions contemplated
by this Agreement.
5.10 Accuracy and Currentness of Information Furnished. The
representations and warranties made by TI and Guaranty hereby or in the Lists or
schedules hereto do not contain any untrue statement of material fact or omit to
state any material fact which is necessary under the circumstances to prevent
the statements contained herein or in such Lists or schedules from being
misleading.
5.11 CRA. Guaranty received a rating of "outstanding" in its most recent
examination or interim review with respect to the Community Reinvestment Act. To
TI's and Guaranty's actual knowledge, neither TI nor Guaranty or any of their
respective subsidiaries is the subject of a referral to either the United States
Department of Justice or the Department of Housing and Urban Development for
alleged violations of the federal fair lending acts.
ARTICLE VI
COVENANTS OF HFB AND HEMET
PENDING EFFECTIVE TIME OF THE MERGERS
HFB and Hemet covenant and agree with TI and Guaranty as follows:
6.1 Limitation on HFB's and Hemet's Conduct Prior to Effective Time.
Between the date hereof and the Effective Time of the Holding Company Merger,
except as contemplated by this Agreement and subject to requirements of law and
regulation generally applicable to federally chartered savings associations and
savings and loan holding companies, HFB and Hemet agree to conduct, and agree to
cause the HFB Subsidiary to conduct, their respective businesses in the ordinary
course in substantially the manner heretofore conducted and in accordance with
sound banking practices, and HFB, Hemet and the HFB Subsidiary shall not,
without prior written consent of TI (which consent shall not be unreasonably
withheld and which consent shall be deemed granted if within five (5) Business
Days (or two (2) Business Days with respect to Section 6.1(i)) of TI's receipt
of written notice of a request for prior written consent, written notice of
objection is not received by HFB):
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(a) issue, sell or grant any HFB Stock (except pursuant to the
exercise of HFB Options outstanding as of the date hereof), HFB preferred stock,
Hemet Stock, any other securities (including long term debt) of HFB, Hemet or
the HFB Subsidiary or any rights, options or securities to acquire any HFB Stock
(except pursuant to the Stock Option Agreement attached hereto as Exhibit A),
HFB preferred stock, Hemet Stock, or any other securities (including long term
debt) of HFB or Hemet or the HFB Subsidiary;
(b) declare, set aside or pay any dividend or make any other
distribution upon or adjust, split, combine or reclassify any shares of capital
stock or other securities of HFB, Hemet or the HFB Subsidiary; provided,
however, that the HFB Subsidiary may declare, set aside and pay any dividend to
Hemet and Hemet may do likewise to HFB; provided further, that no such action
would have any material negative impact on the bad debt reserves of HFB, Hemet
or the HFB Subsidiary;
(c) purchase, redeem or otherwise acquire any capital stock or
other securities of HFB, Hemet or the HFB Subsidiary or any rights, options, or
securities to acquire any capital stock or other securities of HFB, Hemet or the
HFB Subsidiary; provided, however, that HFB may cancel outstanding HFB Options
and pay the holders of such HFB Options an amount not greater than an amount of
cash computed in accordance with Section 2.4;
(d) amend their Certificate of Incorporation, Federal Stock
Charter, Articles of Incorporation or Bylaws;
(e) grant any general or uniform increase in the rate of pay of
employees or employee benefits, except to provide merit increases to employees
whose regularly scheduled performance review date falls before the Closing Date
and to provide for promotional increases to employees if such promotion occurs
before the Closing Date; provided, however, that said increases shall not exceed
5% for merit increases and 4% for promotional increases;
(f) grant any: (i) bonus, incentive compensation or related
employee benefits to any Person except for those (A) of a nondiscretionary
nature granted in the ordinary course of business or (B) consistent with past
practices or (C) or as required by an existing written employment agreement or
other Plan; (ii) increase in salary except as set forth in Section 6.1(e)
hereof; or (iii) compensation or other benefits to any director in excess of the
amounts previously disclosed to TI and Guaranty and as identified on a list
delivered by HFB to TI (the "HFB Director Compensation List");
(g) make any capital expenditure or commitments with respect
thereto in excess of $50,000 in the aggregate for any specific project or
purpose, except for ordinary repairs, renewals and replacements or with respect
to the planned relocation of existing branches or establishment of new branch
offices as set forth in the HFB Branch List;
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(h) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in Taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency, or file or amend any federal, foreign, state or local tax return, or
make any tax election;
(i) grant or commit to grant any extension of credit if such
extension of credit, together with all other credit then outstanding to the same
Person and all Affiliated Persons: (i) if unsecured, would exceed $50,000, or,
(ii) if secured by a lien on real estate (excluding any government insured
loans), would exceed $1,250,000 or have a loan-to-value ratio in excess of 80%
(unless insured by private mortgage insurance);
(j) change any method or period of accounting unless and until
required by generally accepted accounting principles or a Governmental Entity;
(k) grant or commit to grant any extension of credit or amend the
terms of any such credit outstanding on the date hereof to any Executive
Officer, director or holder of ten percent (10%) or more of the outstanding HFB
Stock, or any Affiliate of such Person, if such credit would exceed $25,000;
(l) except as provided in the HFB Branch List, close any offices
at which business is conducted or open any new offices;
(m) adopt or enter into any new employment agreement or other
employee benefit plan or arrangement or amend or modify any employment agreement
or employee benefit plan or arrangement of any such type except for such
amendments as are required by law and except as otherwise permitted by this
Agreement;
(n) initiate, solicit, or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any Competing Transaction (as such term is defined
below), or negotiate with any person in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors, or employees
or any investment banker, financial advisor, attorney, accountant, or other
representative retained by HFB, Hemet or any of their Affiliates to take any
such action, and HFB shall promptly notify TI (orally and in writing) of all of
the material facts relating to all inquiries and proposals which it may receive
relating to any of such matters. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving HFB or Hemet: any merger,
consolidation, share exchange or other business combination; a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets of HFB or
Hemet representing ten percent (10%) or more of the consolidated assets of HFB;
a sale of shares of capital stock (or securities convertible or exchangeable
into or otherwise evidencing, or any agreement or instrument
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evidencing, the right to acquire capital stock), representing ten percent (10%)
or more of the voting power of HFB; a tender offer or exchange offer for at
least ten percent (10%) of the outstanding shares of HFB; a solicitation of
proxies in opposition to approval of the Holding Company Merger by HFB's
shareholders; or a public announcement of a bona fide proposal, plan, or
intention to do any of the foregoing. HFB, Hemet and the HFB Subsidiary will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties (other than TI and Guaranty)
conducted heretofore with respect to any of the foregoing. HFB and Hemet shall
take the necessary steps to inform promptly the appropriate individuals or
entities referred to above of the obligations undertaken in this Section. HFB
and Hemet agree that they shall notify TI and Guaranty immediately if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussion are sought to be
initiated or continued with HFB, Hemet or the HFB Subsidiary. HFB and Hemet also
agree that they shall promptly request each other person, other than TI and
Guaranty, that has heretofore executed a confidentiality agreement in connection
with its consideration of acquiring HFB, Hemet or the HFB Subsidiary to return
all confidential information heretofore furnished to such person by or on behalf
of HFB, Hemet or any of the HFB Subsidiary and enforce any such confidentiality
agreements. Notwithstanding any other provision in this Section 6.1(n), nothing
in this Agreement shall prevent HFB from (i) engaging in any discussions or
negotiations with, or providing any information to, any Person in response to an
unsolicited bona fide written proposal concerning a Competing Transaction by any
such Person or (ii) recommending such an unsolicited bona fide written proposal
concerning a Competing Transaction to the holders of HFB Stock if and only if,
prior to participating in any of the foregoing, (A) the Board of Directors of
HFB concludes in good faith that the Competing Transaction, if consummated,
would result in a transaction more favorable to holders of HFB Stock than the
transaction contemplated by this Agreement (any such more favorable Competing
Transaction being referred to in this Agreement as a "Superior Proposal"); (B)
the Board of Directors of HFB determines in good faith based upon the advice of
outside counsel that participating in any such action is necessary for it to act
in a manner not inconsistent with its fiduciary duties under applicable law; and
(C) at least forty-eight (48) hours prior to providing any information or data
to any person or entering into discussions or negotiations with any Person, the
Board of Directors of HFB notifies TI and Guaranty of such inquiries, proposals
or offers received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or continued with HFB or any
subsidiary thereof.
(o) other than in the ordinary course of business, consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other person;
(p) change any of HFB's or Hemet's basic policies and practices
with respect to liquidity management and cash flow planning, marketing, deposit
origination, lending, budgeting, profit and tax planning, personnel practices or
any other material aspect of HFB's business or operations on a consolidated
basis;
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(q) grant any Person a power of attorney or similar authority;
(r) make any investment by purchase of stock (except required
purchases of stock, if any, of the FHLBSF) or securities (including an
Investment Security), contributions to capital, property transfers or otherwise
in any other Person, except (i) federal funds sold, not to exceed $10 million
cumulatively at any point in time, to any one counterparty and for a term not to
exceed 30 days, (ii) obligations, as a direct issuer or explicit guarantor,
including Mortgage Backed Securities passthroughs and Real Estate Mortgage
Investment Conduits/Collateralized Mortgage Obligations, with a legal final
maturity not to exceed two years, of the following entities: (A) United States
Treasury (including the Government National Mortgage Association), (B) the
Federal National Mortgage Association, (C) Federal Home Loan Mortgage
Corporation or (D) Federal Home Loan Bank, and (iii) repurchase agreement with a
final maturity not to exceed one year, and collateralized only by obligations
listed in (ii) above; provided, however, that in each case all transactions must
be consistent with Hemet's investment policy, undertaken in the ordinary course
of business consistent with past practices and concern assets which are not
designated as trading account assets under generally accepted accounting
principles;
(s) settle any claim, action or proceeding involving any
liability of HFB, Hemet or the HFB Subsidiary for money damages in excess of
$75,000 exclusive of insurance coverage, or involving restrictions upon the
operations of HFB or any of Hemet or the HFB Subsidiary;
(t) terminate, amend or modify any Scheduled Contract or enter
into any agreement or contract that would be a Scheduled Contract under Section
4.17, except as otherwise permitted by this Agreement;
(u) waive or release any material right or collateral or cancel
or compromise any extension of credit or other debt or claim, except for actions
taken in the resolution of extensions of credit or other debts or claims that do
not result in a reduction in excess of $50,000 of the amount HFB is otherwise
entitled to pursuant to such right, collateral, credit or other debt or claim,
and in a manner consistent with past practice;
(v) enter into any new activities or lines of business, or cease
to conduct any material activities or lines of business that it conducts on the
date hereof, or conduct any material business activity not consistent with past
practice except for (i) the issuance of debit cards and (ii) the establishment
of internet banking facilities, as previously disclosed to TI;
(w) sell, transfer, mortgage, encumber or otherwise dispose of
any assets or release or waive any claim, except in the ordinary course of
business and consistent with past practices;
(x) take any action which would or is reasonably likely to (i)
adversely affect the ability of TI or Guaranty to obtain any necessary approval
of any Governmental Entity required for
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the transactions contemplated hereby; (ii) adversely affect HFB's or Hemet's
ability to perform its covenants and agreements under this Agreement; or (iii)
result in any of the conditions to the performance of HFB's or Hemet's
obligations hereunder, as set forth in Articles IX or X herein not being
satisfied;
(y) make any special or extraordinary payments to any Person,
except as otherwise permitted by this Agreement;
(z) reclassify any Investment Security from hold-to-maturity or
available for sale to trading;
(aa) sell any security other than in the ordinary course of
business;
(bb) take title to any real property without conducting prior
thereto an environmental investigation (which at a minimum shall consist of a
phase I environmental report), which investigation shall disclose the absence of
any suspected environmental contamination, except with respect to real property
on which there is located a 1-4 family residence (unless HFB or Hemet has
reasonable cause to believe any Hazardous Materials may exist on such property);
(cc) to the extent applicable, other than as expressly set forth
herein, take or cause to be taken any action which would disqualify the Mergers
as "tax-deferred reorganizations" within the meaning of Section 368(a) of the
Code; or
(dd) agree or make any commitment to take any actions prohibited
by this Section 6.1.
6.2 Affirmative Conduct of HFB and Hemet Prior to Effective Time.
Between the date hereof and the Effective Time of the Holding Company Merger,
HFB and Hemet shall, and HFB shall cause Hemet and the HFB Subsidiary to:
(a) use their respective commercially reasonable efforts
consistent with this Agreement to maintain and preserve intact their respective
present business organizations and to maintain and preserve their respective
relationships and goodwill with account holders, borrowers, employees and others
having business relationships with HFB, Hemet or the HFB Subsidiary;
(b) except as set forth in the HFB Branch List, use their
respective commercially reasonable efforts to keep in full force and effect all
of the existing material permits and licenses of HFB, Hemet or the HFB
Subsidiary;
(c) use their respective commercially reasonable efforts to
maintain insurance coverage at least equal to that now in effect on all
properties for which they are responsible and on their respective business
operations;
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(d) perform their respective material contractual obligations and
not become in material default on any such obligations;
(e) duly observe and conform to all lawful requirements
applicable to their respective businesses in all material respects;
(f) maintain their respective assets and properties in good
condition and repair, normal wear and tear excepted;
(g) promptly advise TI in writing of any event or any other
transaction within HFB's or Hemet's knowledge whereby any Person or Related
Group of Persons acquires, directly or indirectly, record or beneficial
ownership or control (as defined in Rule 13d-3 promulgated by the SEC under the
Exchange Act) of five percent (5%) or more of the outstanding HFB Stock prior to
the record date fixed for the HFB Stockholders' Meeting or any adjourned meeting
thereof to approve this Agreement and the transactions contemplated herein;
(h) promptly notify TI regarding receipt from any tax authority
of any notification of the commencement of an audit, any request to extend the
statute of limitations, any statutory notice of deficiency, any revenue agent's
report, any notice of proposed assessment, or any other similar notification of
potential adjustments to the tax liabilities of HFB, or the HFB Subsidiary or
Hemet, or any actual or threatened collection enforcement activity by any tax
authority with respect to tax liabilities of HFB, Hemet or the HFB Subsidiary,
and make available to TI the calculation work papers for federal income tax
estimated payments;
(i) make available to TI monthly unaudited consolidated balance
sheets and consolidated income statements of HFB within twenty-five (25) days
after the close of each calendar month;
(j) not later than the 20th day of each calendar month, amend or
supplement the HFB Lists prepared and delivered pursuant to Article IV to ensure
that the information set forth in the HFB Lists accurately reflects the
then-current status of the information provided therein, and deliver such
amendments or supplements to Tl no later than the 20th day of each calendar
month. HFB shall further amend or supplement the HFB Lists as of the Closing
Date if necessary to reflect any additional information that needs to be
included in the HFB Lists. No amendment or supplement to the HFB Lists needs to
be provided to the extent there has been no change or update in such HFB List;
(k) use their respective commercially reasonable efforts to
obtain any third party consent with respect to any contract, agreement, lease,
license, amendment, permit or release that is material to the business of HFB on
a consolidated basis or that is contemplated in this Agreement as required in
connection with the Holding Company Merger or Bank Merger; and
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(l) maintain an allowance for loan and lease losses consistent
with practices and methodology as in effect on the date of the execution of this
Agreement.
6.3 Access to Information.
(a) HFB and Hemet shall afford, and HFB shall cause the HFB
Subsidiary to afford, upon reasonable notice, to TI and its representatives,
counsel, accountants, agents and employees reasonable access during normal
business hours to all of their respective businesses, operations, properties,
books, files and records and shall do everything reasonably necessary to enable
TI and its representatives, counsel, accountants, agents and employees to make a
complete examination of the financial statements, businesses, assets and
properties of HFB, the HFB Subsidiary and Hemet and the condition thereof and to
update such examination at such intervals as TI shall deem appropriate. Such
examination shall be conducted in cooperation with the officers of HFB, the HFB
Subsidiary and Hemet and in such a manner as to minimize any disruption of, or
interference with, the normal business operations of HFB, the HFB Subsidiary and
Hemet. Upon the request of TI, HFB will request Deloitte & Touche to provide
reasonable access by Ernst & Young to auditors' work papers with respect to the
businesses and properties of HFB, Hemet and the HFB Subsidiary, including tax
accrual work papers prepared for HFB and/or Hemet during the preceding sixty
(60) months or any future completed audits or completed reviews of HFB or Hemet,
other than (i) books, records and documents covered by the attorney-client
privilege, or that are attorneys' work product, and (ii) books, records and
documents that HFB, Hemet and the HFB Subsidiary are legally obligated to keep
confidential. No examination or review conducted under this section shall
constitute a waiver or relinquishment on the part of TI of the right to rely
upon the representations and warranties made by HFB and Hemet herein.
(b) TI and Guaranty shall be authorized and permitted to review
each loan, lease, or other credit funded or renewed by HFB or Hemet after the
date hereof, and all information associated with such loan, lease or other
credit within three (3) Business Days of such funding or renewal, such review to
take place, if possible, on Hemet's premises.
(c) A representative of TI, selected by TI in its sole
discretion, shall be permitted by HFB and Hemet to attend all regular and
special Board of Directors' and committee meetings of HFB and Hemet from the
date hereof until the Effective Time of the Holding Company Merger; provided,
however, that the attendance of such representative shall not be permitted at
any meeting, or portion thereof, where the sole purpose of the meeting or such
portion is the discussion of the transactions contemplated by this Agreement or
the obligations of HFB or Hemet under this Agreement, or information covered by
the attorney-client privilege;
6.4 Filings. HFB and Hemet agree that through the Effective Time of the
Holding Company Merger, each of their respective reports, registrations,
statements and other filings required to be filed with any applicable
Governmental Entity shall comply in all material respects with all
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applicable statutes, rules and regulations and none shall, as of their filing or
effective date or, in the case of the Proxy Statement, the mailing date, contain
any untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statement contained in any such report, registration, statement or other filing
that is intended to present the financial position, results of operations or
changes in cash flows, as the case may be, of the entity or entities to which it
relates will fairly present the financial position, results of operations or
changes in cash flows, as the case may be, of such entities or entity and will
be prepared in accordance with generally accepted accounting principles and/or
applicable regulatory accounting principles or banking regulations consistently
applied during the periods involved.
6.5 Notices; Reports. HFB and Hemet will promptly notify TI and Guaranty
of any event of which HFB or Hemet obtains knowledge which has had or may have a
Material Adverse Effect or in the event that HFB or Hemet determines that either
is unable to fulfill any of the conditions to the performance of TI's or
Guaranty's obligations hereunder, as set forth in Articles IX or XI herein, and
HFB and Hemet will furnish TI (i) as soon as available, and in any event within
ten (10) days after it is prepared, any report by HFB or Hemet for submission to
the Board of Directors of HFB or Hemet or committee thereof, except to the
extent such report (or, in the case of a portion of a report, the relevant
portion thereof) has been prepared for the sole purpose of discussing the
transactions contemplated by this Agreement or the obligations of HFB or Hemet
under this Agreement or information covered by the attorney-client privilege,
provided, however, that this exception shall not excuse any of HFB's or Hemet's
other obligations under this Agreement; (ii) as soon as available, all proxy
statements, information statements, financial statements, reports, letters and
communications sent by HFB to its stockholders or other security holders, and
all reports filed by HFB or Hemet with, or received by HFB or Hemet from, the
SEC, OTS, FDIC or any other Governmental Entity; and (iii) such other existing
reports as Tl may reasonably request relating to HFB or Hemet.
6.6 HFB Stockholders' Meeting. HFB will take action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders to consider and vote upon this
Agreement and the transactions contemplated hereby. The Board of Directors of
HFB shall, subject to its fiduciary duties, recommend that its stockholders
approve this Agreement and the transactions contemplated hereby, and the Board
of Directors of HFB shall, subject to its fiduciary duties, use its best efforts
to obtain the affirmative vote of the holders of the largest possible percentage
of the outstanding HFB Stock to approve this Agreement and the transactions
contemplated hereby.
6.7 Bank Merger. HFB and Hemet shall, at the request of TI (i) take all
necessary corporate and other action, to adopt and approve the Bank Merger; (ii)
execute, deliver and, where appropriate, file any and all documents necessary or
desirable to permit the Bank Merger immediately following consummation of the
Holding Company Merger; and (iii) take and cause to be taken any other action to
permit the consummation of any transactions contemplated in
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connection with the Bank Merger. Neither HFB nor Hemet shall take any action
that would prevent performance of the Agreement of Bank Merger or any other
transactions contemplated in connection with the Bank Merger. TI and Guaranty
may at any time prior to the Effective Time of the Bank Merger change the method
of effecting the combination of Guaranty with Hemet (including, without
limitation, this Section 6.7) if and to the extent it deems such change to be
necessary, appropriate or desirable; provided, however, that no such change
shall (i) alter or change the amount or kind of consideration to be issued to
the holders of HFB Stock as provided for in this Agreement (the "Holding Company
Merger Consideration"), (ii) adversely affect the tax treatment of HFB's
stockholders as a result of receiving the Holding Company Merger Consideration
or (iii) materially impede or delay consummation of the transactions
contemplated by this Agreement.
6.8 Applications. HFB and Hemet will cooperate with TI in the
preparation of the S-4 Registration Statement, including the proxy statement to
be mailed to HFB stockholders to vote upon the Holding Company Merger (the
"Proxy Statement"), and the statements or applications to be filed to obtain the
necessary regulatory approvals to consummate the transactions contemplated by
this Agreement and HFB agrees to file the Proxy Statement in preliminary form
with the SEC as promptly as reasonably practicable. With TI, HFB agrees to use
reasonable best efforts to cause the S-4 Registration Statement to be declared
effective under the Securities Act as promptly as practicable after filing
thereof. After the S-4 Registration Statement is declared effective under the
Securities Act, HFB shall thereafter promptly mail the Proxy Statement to its
stockholders. HFB and Hemet covenant and agree that all information furnished by
HFB or Hemet for inclusion or incorporation by reference in the S-4 Registration
Statement and in all applications or statements filed with the appropriate
regulatory authorities for approval of, or consent to, the Holding Company
Merger and Bank Merger will comply in all material respects with the provisions
of applicable law, and will not, as of their respective filing or effective
dates and, in the case of the Proxy Statement, as of its mailing date, contain
any untrue statement of material fact or omit to state material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
6.9 Certain Loans and Other Extensions of Credit. Hemet will promptly
inform TI of the amounts and categories of any Classified Credits. Hemet will
furnish TI, as soon as practicable, and in any event within twenty (20) days
after the end of each calendar month, schedules including the following: (a)
Classified Credits (including with respect to each credit its classification
category and the originating unit); (b) nonaccrual credits (including the
originating unit); (c) accrual exception credits that are delinquent ninety (90)
or more days and have not been placed on nonaccrual status (including its
originating unit); (d) credits delinquent as to payment of principal or interest
(including its originating unit), including an aging into current-to-29, 30-59,
60-89, and 90+ day categories; (e) participating loans and leases, stating, with
respect to each, whether it is purchased or sold and the originating unit; (f)
loans or leases (including any commitments) by HFB or Hemet to any HFB or Hemet
director, officer at or above the senior vice president level, or shareholder
holding ten percent (10%) or more of the capital stock of HFB, including with
respect to each such loan or lease the identity and, to the knowledge of HFB,
the relation of the borrower to HFB or Hemet, and the
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outstanding and undrawn amounts; (g) letters of credit (including the
originating unit); (h) loans or leases wholly or partially charged off during
the previous month (including with respect to each loan or lease, the
originating amount, the write-off amount and its originating unit); and (i)
other real estate or assets acquired in satisfaction of debt.
6.10 Affiliates. Within fifteen (15) days of the date of this Agreement,
and again on the date this Agreement is submitted for approval to the
stockholders of HFB, HFB shall deliver to TI a letter identifying all persons
who are "affiliates" of HFB for purposes of Rule 145 under the Securities Act.
HFB shall use commercially reasonable efforts to cause each such affiliate to
deliver to TI no less than thirty (30) days prior to the Effective Time of the
Holding Company Merger a written "Affiliates" agreement, in the form attached
hereto as Exhibit D, providing that such person shall dispose of the TI Stock to
be received by such person in the Holding Company Merger only in accordance with
applicable law.
6.11 Director Resignations. HFB and Hemet shall use all commercially
reasonable efforts to deliver or cause to be delivered to TI at the Closing, the
resignations of the members of the Board of Directors of HFB, Hemet and the HFB
Subsidiary effective at the Closing.
6.12 Accountants' Letters. HFB shall use its commercially reasonable
efforts to cause to be delivered to TI a letter of Deloitte & Touche dated (a)
the date on which the S-4 Registration Statement shall become effective and (b)
a date shortly prior to the Effective Time of the Holding Company Merger, in
form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Accounting Standards No. 72.
6.13 Accounting Accommodations. On a basis mutually satisfactory to HFB
and TI, HFB and Hemet shall take any charge-offs or additions to the allowance
for loan loss or other financial adjustments made at the reasonable request of
TI and for the convenience of TI so as to permit treatment on a basis consistent
with that of TI; provided, however, that the taking of any such charge-offs,
additions or adjustments shall not cause any representation or warranty to
become untrue or the failure of any condition, in each case as a result of the
taking of such action.
ARTICLE VII
COVENANTS OF TI AND GUARANTY
PENDING EFFECTIVE TIME OF THE MERGERS
TI and Guaranty covenant and agree with HFB and Hemet as follows:
7.1 Limitation on TI's and Guaranty's Conduct Prior to Effective Time.
Between the date hereof and the Effective Time of the Holding Company Merger,
except as contemplated by this Agreement and subject to requirements of law and
regulation generally applicable to federally
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chartered savings banks and savings and loan holding companies, TI and Guaranty
shall not, without prior written consent of HFB, (which consent shall not be
unreasonably withheld, and which consent shall be deemed granted if within five
(5) Business Days of HFB's receipt of written notice of a request for prior
written consent, written notice of objection is not received by TI):
(a) take any action which would or is reasonably likely to (i)
adversely affect the ability of TI or Guaranty to obtain any necessary approval
of any Governmental Entity required for the transactions contemplated hereby;
(ii) adversely affect TI's or Guaranty's ability to perform its covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
performance of TI's or Guaranty's obligations hereunder, as set forth in
Articles IX or XI herein not being satisfied;
(b) other than as expressly set forth herein, take or cause to be
taken any action which would disqualify the Mergers as "tax-deferred
reorganizations" within the meaning of Section 368(a) of the Code.
(c) amend TI's Certificate of Incorporation or Bylaws in any
respect which would materially and adversely affect the rights and privileges
attendant to the TI Stock;
(d) enter into any agreement to acquire, merge or consolidate
with another entity which transaction any Governmental Entity advises TI in
writing would result in the disapproval of the transactions contemplated in this
Agreement or the delay thereof until after July 31, 1999; or
(e) agree or make any commitment to take any actions prohibited
by this Section 7.1.
7.2 Affirmative Conduct of TI and Guaranty Prior to Effective Time.
Between the date hereof and the Effective Time of the Holding Company Merger, TI
and Guaranty shall:
(a) duly observe and conform to all lawful requirements
applicable to their respective businesses in all material respects;
(b) use their respective commercially reasonable efforts to
obtain any third party consent with respect to any contract, agreement, lease,
license, arrangement, permit or release that is material to the business of TI
on a consolidated basis or that is contemplated in this Agreement as required in
connection with the Holding Company Merger and the Bank Merger; and
(c) not later than the 20th day of each calendar month, amend or
supplement the TI Lists prepared and delivered pursuant to Article V to ensure
that the information set forth in the TI Lists accurately reflects the
then-current status of the information provided therein, and deliver such
amendments or supplements to HFB no later than the 20th day of the each calendar
month. TI shall further amend or supplement the TI Lists as of the Closing Date
if necessary to reflect any
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additional information that needs to be included in the TI Lists. No amendment
or supplement to the TI Lists needs to be provided to the extent there has been
no change or update in such TI List.
7.3 Applications. TI and Guaranty will promptly prepare and file or
cause to be prepared and filed (i) an application for approval of the Holding
Company Merger and Bank Merger with the OTS, and (ii) with HFB, after the filing
of the Proxy Statement in preliminary form and resolving any comments of the SEC
with respect thereto, the S-4 Registration Statement, including the Proxy
Statement, to be mailed to HFB Stockholders to vote upon the Holding Company
Merger with HFB, TI agrees to use reasonable best efforts to cause the S-4
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after filing thereof. TI shall afford HFB a reasonable
opportunity to review the S-4 Registration Statement and all such applications
(except the confidential portions thereof relating to TI or its subsidiaries)
and all amendments and supplements thereto before the filing thereof. TI
covenants and agrees that the S-4 Registration Statement and all applications to
the appropriate regulatory agencies for approval or consent to the Holding
Company Merger and Bank Merger will comply in all material respects with the
provisions of applicable law, and will not, as of their respective filing or
effective dates, contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. TI and Guaranty will use their respective
commercially reasonable efforts to obtain all regulatory approvals or consents
necessary to effect the Holding Company Merger and Bank Merger.
7.4 Blue Sky. TI agrees to use commercially reasonable efforts to comply
with all applicable notice provisions of the securities laws of each
jurisdiction in which stockholders of HFB reside in connection with the issuance
of TI Stock in the Holding Company Merger.
7.5 Notices; Reports. TI and Guaranty will promptly notify HFB and Hemet
of any event of which TI or Guaranty obtains knowledge which has had or may have
a Material Adverse Effect or in the event that TI or Guaranty determines that it
is unable to fulfill any of the conditions to the performance of HFB's and
Hemet's obligations hereunder, as set forth in Articles IX or X herein.
7.6 Indemnification. TI agrees that following consummation of the
Holding Company Merger (a) to the greatest extent permitted by Delaware law or
the banking laws and regulations applicable to, and organizational documents or
bylaws of, HFB or Hemet as in effect on the date hereof, or, to the extent that
any amendment to such law or regulation may expand such indemnification rights,
as hereinafter in effect, it shall indemnify, defend and hold harmless
individuals who were officers and directors of HFB or Hemet as of the date
hereof or immediately prior to the Effective Time of the Holding Company Merger
for any claim or loss arising out of their actions while a director or officer,
including any acts relating to this Agreement, and shall pay the expenses,
including reasonable attorneys' fees, of such individuals in advance of the
final resolution of any claim, provided such individuals shall first execute an
undertaking acceptable to TI to return such advances in the event it is finally
concluded such indemnification is not allowed under
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applicable law; and (b) TI shall ensure that such individuals shall be covered
by directors' and officers' liability insurance for a period of four (4) years
following the Holding Company Merger covering acts or omissions occurring prior
to the Effective Time of the Holding Company Merger which is no less protective
in terms of coverage or limitations than that now possessed by HFB or Hemet and
which shall include coverage for actions related to this Agreement; provided,
however, that the annual premiums for such coverage will not exceed 150% of the
annual premiums currently paid by HFB or Hemet for such coverage. To the extent
that the cost of the insurance coverage to be obtained by TI exceeds 150% of the
annual premium amount currently paid by HFB or Hemet, TI will use its best
efforts to obtain the maximum amount of coverage that may be purchased for a
price equal to 150% of the current annual premium amount. The provision of
insurance coverage described herein is not intended to alter or reduce the right
of indemnity in favor of the directors and officers, of HFB and Hemet as
provided in their respective charters, bylaws, indemnification agreements or
otherwise in effect as of the date hereof.
7.7 Removal of Conditions. In the event of the imposition of a condition
to any regulatory approval which TI deems to materially adversely affect it or
to be materially burdensome as provided in Section 11.2 hereof, TI shall use its
commercially reasonable efforts for purposes of obtaining the removal of such
condition.
7.8 Fairness Opinion. TI will provide Keefe, Bruyette & Woods, Inc. with
such information as is reasonably requested to permit Keefe, Bruyette & Woods,
Inc. to confirm its fairness opinion as of the date of mailing of the Proxy
Statement.
ARTICLE VIII
ADDITIONAL COVENANTS
The parties hereto hereby mutually covenant and agree with each other as
follows:
8.1 Commercially Reasonable Efforts. Subject to the terms and conditions
of this Agreement, each party will use its commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement as promptly as
practical.
8.2 Public Announcements. No press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated hereby
shall be made by TI or Guaranty, on the one hand, or HFB or Hemet, on the other
hand, unless the other parties shall have provided their prior consent to the
form and substance thereof; provided, however, that nothing herein shall be
deemed to prohibit any party hereto from making any disclosure which its counsel
deems necessary or advisable in order to fulfill such party's disclosure
obligations imposed by law.
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8.3 Cancellation of Stock Options and Termination of Stock Option Plans.
HFB agrees to use its commercially reasonable efforts to cause each holder of an
HFB Option to enter into an agreement pursuant to which such holder will agree
to cancel each HFB Option held by such holder in exchange for a cash payment to
the holder of the HFB Option in an amount equal to the result of multiplying (i)
the excess, if any, between (a) the Price Per Share and (b) the exercise price
of the HFB Option by (ii) the number of shares of HFB Stock subject to the HFB
Option and HFB shall terminate the HFB Stock Option Plan, effective at the
Effective Time of the Holding Company Merger.
8.4 Employees and Employee Benefits. Guaranty agrees that the employees
of HFB or Hemet who are retained by Guaranty after the consummation of the Bank
Merger will be provided with benefits under employee benefit plans (other than
plans involving the issuance of securities of HFB or TI) which in the aggregate
are substantially comparable to those currently provided by Guaranty to its
current employees. Guaranty will cause each employee benefit plan of Guaranty in
which employees of HFB or Hemet are eligible to participate to take into account
for purposes of eligibility and vesting thereunder the service of such employees
with HFB or Hemet as if such service were with Guaranty, to the same extent that
such service was credited under a comparable plan of HFB or Hemet. Guaranty will
honor in accordance with their terms all employee benefit obligations to current
and former employees and directors of HFB and Hemet accrued as of the Effective
Time of the Holding Company Merger. HFB and its ERISA Affiliates shall take any
actions necessary (to the extent permissible under the Plans and applicable laws
and regulations) or reasonably requested by Guaranty to cause, as of the Closing
Date, the termination of all of the Plans (as the term is defined in Section
4.21 of the Agreement) maintained by HFB or any ERISA Affiliate which cover
employees and directors of HFB and its ERISA Affiliates; provided, however, that
HFB 401(k) Plan shall not be terminated but shall be merged with the Guaranty
401(k) Plan as soon as administratively practicable after the Closing Date.
Guaranty also agrees that any pre-existing condition limitation or exclusion in
its health plans shall not apply to the employees of HFB or Hemet who are
retained by Guaranty after the consummation of the Bank Merger or their spouses
and dependents who are covered under similar health plans of HFB, Hemet and its
ERISA Affiliates on the Closing Date and who change coverage to Guaranty's
health plans at the time such employees are first given the option to enroll in
Guaranty's health plans.
8.5 Environmental Assessment. TI may cause to be prepared at TI's sole
cost and expense within sixty (60) days of the date of this Agreement one or
more phase I environmental investigations with respect to any property on the
HFB Real Property List. In the event any such phase I environmental
investigation report, or any similar report submitted to TI pursuant to Section
4.12(c) of this Agreement, or any information from a Governmental Entity
discloses facts which, in the sole discretion of TI, warrant further
investigation, TI shall provide written notice to HFB and Hemet, and HFB and
Hemet shall use commercially reasonable efforts to cause to be completed within
sixty (60) days of such written notice, at the sole cost and expense of TI, a
phase II environmental investigation and report with respect to such property.
TI agrees to keep confidential
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and not to disclose any nonpublic information obtained in the course of such
environmental investigation relating to environmental contamination or suspected
contamination of any property on the HFB Real Property List, except as required
by law.
8.6 Execution of the Stock Option Agreement. Promptly following the
execution of this Agreement, HFB and TI shall have executed and delivered a
stock option agreement (the "Stock Option Agreement") which grants to TI an
option to acquire up to 19.9% of the issued and outstanding shares of HFB Stock
upon the occurrence of certain circumstances, substantially in the form attached
hereto as Exhibit A.
ARTICLE IX
CONDITIONS PRECEDENT TO THE HOLDING COMPANY MERGER
The obligations of each of the parties hereto to consummate the
transactions contemplated herein are subject to the satisfaction or waiver by
each of the parties, on or before the Closing Date, of the following conditions:
9.1 Shareholder Approval. The Agreement and the transactions
contemplated hereby shall have received all requisite approvals of the
stockholders of HFB.
9.2 No Judgments or Orders. No judgment, decree, injunction, order or
proceeding shall be outstanding or threatened by any Governmental Entity which
prohibits the effectuation of, or threatens to invalidate or set aside, the
Holding Company Merger or Bank Merger substantially in the form contemplated by
this Agreement, or would have a Material Adverse Effect, unless counsel to the
party against whom such action or proceeding was instituted or threatened
renders to the other parties hereto a favorable opinion that such judgment,
decree, injunction, order or proceeding is without merit.
9.3 Regulatory Approvals. To the extent required by applicable law or
regulation, all approvals or consents or non-objections of any Governmental
Entity, including, without limitation, those of the OTS and FDIC, shall have
been obtained or granted for the Holding Company Merger and Bank Merger and the
transactions contemplated hereby and the applicable waiting period under all
laws shall have expired. All other statutory or regulatory requirements for the
valid completion of the transactions contemplated hereby shall have been
satisfied and no statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated, interpreted, applied or enforced by any
Governmental Entity which prohibits or makes illegal the consummation of the
Holding Company Merger or Bank Merger or any other transaction contemplated by
this Agreement, or would have a Material Adverse Effect.
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9.4 Securities Laws. The S-4 Registration Statement shall have been
declared effective by the SEC and no stop order suspending the effectiveness of
such S-4 Registration Statement shall have been issued and no proceedings for
that purpose shall have been initiated.
9.5 Listing. The Tl Stock issuable in the Holding Company Merger shall
have been included for listing on the NYSE, subject to official notice of
issuance.
ARTICLE X
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF HFB AND HEMET
All of the obligations of HFB and Hemet to effect the transactions
contemplated hereby shall be subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in writing
by HFB or Hemet:
10.1 Representations and Warranties; Performance of Covenants. All
covenants and agreements herein to be complied with and performed by TI and
Guaranty at or before the Closing Date shall have been complied with and
performed in all material respects. Each of the representations and warranties
of TI and Guaranty contained in Article V hereof shall have been true and
correct in all respects on and as of the date of this Agreement and on and as of
the Closing Date (except to the extent such representations and warranties speak
as of an earlier date) with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except where the failure
of a representation or warranty to be true and correct in all respects does not
cause a Material Adverse Effect. It is understood and acknowledged that the
representations being made on and as of the Closing Date shall be made without
giving effect to any update with respect to the TI Lists in accordance with
Section 7.2(c).
10.2 Officers' Certificate. There shall have been delivered to HFB and
Hemet on the Closing Date a certificate executed by an authorized executive
officer of TI and Guaranty, respectively, certifying, to their knowledge,
compliance with all of the provisions of Sections 10.1 and 10.4, if applicable.
10.3 Fairness Opinion. HFB shall have received a letter from Keefe,
Bruyette & Woods, Inc., dated as of a date within five (5) Business Days of the
mailing of the Proxy Statement to the stockholders of HFB, to the effect that
the proposed consideration in the Holding Company Merger is fair from a
financial point of view to the stockholders of HFB.
10.4 Absence of Certain Changes. If TI Stock is included in the
consideration to be paid to holders of HFB Stock in the Holding Company Merger,
between the date of this Agreement and the Effective Time of the Holding Company
Merger, there shall not have occurred any event that has
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had or could reasonably be excepted to have a Material Adverse Effect, whether
or not such event, change or effect is reflected in the TI Lists as amended or
supplemented after the date of this Agreement.
10.5 Tax Opinion. If TI Stock is included in the consideration to be
paid to holders of HFB Stock in the Holding Company Merger, HFB shall have
received an opinion of Manatt, Phelps & Phillips, LLP, dated the Effective Time
of the Holding Company Merger, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Holding
Company Merger constitutes a reorganization within the meaning of Section 368 of
the Code and (ii) no gain or loss will be recognized by stockholders of HFB who
receive shares of TI Stock in exchange for shares of HFB Stock, except with
respect to cash received pursuant to Article II of this Agreement. In rendering
its opinion, Manatt, Phelps & Phillips, LLP may require and rely upon
representations contained in letters from HFB, TI and stockholders of HFB.
ARTICLE XI
CONDITIONS PRECEDENT TO
OBLIGATIONS OF TI AND GUARANTY
All of the obligations of TI and Guaranty to effect the transactions
contemplated hereby shall be subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in writing
by TI and Guaranty:
11.1 Representations and Warranties: Performance of Covenants. All
covenants and agreements herein to be complied with and performed by HFB or
Hemet at or before the Closing Date shall have been complied with and performed
in all material respects. Each of the representations and warranties of HFB and
Hemet contained in Article IV hereof shall have been true and correct in all
respects on and as of the date of this Agreement and on and as of the Closing
Date (except to the extent such representations and warranties speak as of an
earlier date) with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except where the failure of a
representation or warranty to be true and correct in all respects does not cause
a Material Adverse Effect. It is understood and acknowledged that the
representations being made on and as of the Closing Date shall be made without
giving effect to any update with respect to the HFB Lists in accordance with
Section 6.2(j).
11.2 Regulatory Approvals and Related Conditions. Any governmental and
regulatory approvals and consents which are referred to in this Agreement and
are required to consummate the Holding Company Merger and Bank Merger shall have
been granted without the imposition of conditions that are or would have become
applicable to TI and that TI, in its reasonable opinion, concludes would have a
Material Adverse Effect.
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11.3 Third Party Consents. HFB and Hemet shall have obtained all
consents of other parties to their respective material mortgages, notes, leases,
franchises, agreements, licenses and permits as may be necessary to permit the
Holding Company Merger and Bank Merger and the transactions contemplated herein
to be consummated without a material default, acceleration, breach or loss of
rights or benefits thereunder.
11.4 Absence of Certain Changes. Between the date of this Agreement and
the Effective Time of the Holding Company Merger and the Effective Time of the
Bank Merger, there shall not have occurred any event that has had or could
reasonably be expected to have a Material Adverse Effect, whether or not such
event, change or effect is reflected in the HFB Lists as amended or supplemented
after the date of this Agreement.
11.5 Officers' Certificate. There shall have been delivered to Tl on the
Closing Date a certificate executed by an authorized executive officer of each
of HFB and Hemet, respectively, certifying, to their knowledge, compliance with
all of the provisions of Sections 11.1, 11.3 and 11.4.
11.6 Stockholders' Agreements. Concurrently with the execution of this
Agreement, the directors of HFB and Hemet shall have executed and delivered to
TI agreements substantially in the form of Exhibit C agreeing to vote their
shares of HFB in favor of the Agreement and the transactions contemplated
hereby.
11.7 HFB Options and Stock Option Plan. All HFB Options shall have
either been exercised, canceled or cashed out and the HFB Stock Option Plan
shall have been terminated.
11.8 Loan Loss Reserve. HFB shall have in effect on the Closing Date an
allowance for loan and lease losses in an amount not less than the amount
determined by the method customarily utilized by HFB.
11.9 Resignations. There shall have been delivered to TI and Guaranty
resignations of the directors of HFB and Hemet effective as of the Closing.
11.10 Opinion of TI's Counsel. If TI Stock is included in the
consideration to be paid to holders of HFB Stock in the Holding Company Merger,
TI shall have received an opinion of Sullivan & Cromwell, counsel to TI, dated
the Effective Time of the Holding Company Merger, to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion, the
Holding Company Merger constitutes a reorganization under Section 368 of the
Code. In rendering its opinion, Sullivan & Cromwell may require and rely upon
representations contained in letters from HFB, TI and stockholders of HFB.
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ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Holding Company Merger upon the occurrence of any of
the following:
(a) By mutual agreement of the parties, in writing;
(b) By HFB (unless HFB's Board of Directors shall have withdrawn
or modified (in a manner adverse to TI in any respect) its recommendation of the
Holding Company Merger and Merger Agreement to the holders of HFB Stock) or TI
immediately upon the failure of the stockholders of HFB to give the requisite
approval of this Agreement and the transactions contemplated hereby;
(c) By HFB or Hemet immediately upon expiration of twenty (20)
days from delivery of written notice by HFB or Hemet to TI or Guaranty of TI's
or Guaranty's breach of or failure to satisfy any covenant or agreement
contained herein resulting in a reduction in the benefits of the transactions
contemplated by the Agreement in so significant a manner that HFB and Hemet, in
their reasonable, good faith judgment, would not have entered into the Agreement
had the inability of TI or Guaranty to satisfy such covenant or agreement been
known at the time hereof (provided that such breach has not been waived by HFB
and Hemet or cured by TI or Guaranty prior to expiration of such twenty (20) day
period);
(d) By TI or Guaranty immediately upon expiration of twenty (20)
days from delivery of written notice by TI or Guaranty to HFB or Hemet of HFB's
or Hemet's breach of or failure to satisfy any covenant or agreement contained
herein resulting in a reduction in the benefits of the transactions contemplated
by the Agreement in so significant a manner that TI and Guaranty, in their
reasonable, good faith judgment, would not have entered into the Agreement had
the inability of HFB or Hemet to satisfy such covenant or agreement been known
at the time hereof (provided that such breach has not been waived by TI or
Guaranty or cured by HFB or Hemet, as the case may be, prior to expiration of
such twenty (20) day period);
(e) By HFB or TI upon the expiration of thirty (30) days after
any Governmental Entity denies or refuses to grant any approval, consent or
authorization required to be obtained in order to consummate the transactions
contemplated by this Agreement unless, within said thirty (30) day period after
such denial or refusal, all parties hereto agree to resubmit the application to
the regulatory authority that has denied, or refused to grant the approval,
consent or qualification requested;
(f) By HFB or TI if any condition set forth in Article IX shall
not have been met by July 31, 1999, provided, however, that this Agreement shall
not be terminated pursuant to this
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Section 12.1(f) if the relevant condition shall have failed to occur as a result
of any act or omission by the party seeking to terminate;
(g) By HFB if any of the conditions set forth in Article X (with
the exception of those provided in Section 10.5) shall not have been met, or by
TI if any of the conditions set forth in Article XI (with the exception of those
provided in Section 11.10) shall not have been met, by July 31, 1999, provided,
however, that this Agreement shall not be terminated pursuant to this Section
12.1(g) if the relevant condition shall have failed to occur as a result of any
act or omission by the party seeking to terminate;
(h) By TI if HFB or Hemet shall have breached any of the
obligations contained in Section 6. l(n);
(i) by TI, if (i) HFB shall have exercised a right specified in
the last sentence of Section 6.1(n) with respect to any Superior Proposal and
shall, directly or through agents or representatives, continue any discussions
with any third party concerning such Superior Proposal for more than ten (10)
Business Days after the date of receipt of such Superior Proposal; or (ii) a
Superior Proposal that is publicly disclosed shall have been commenced, publicly
proposed or communicated to HFB which contains a proposal as to price (without
regard to the specificity of such price proposal) and HFB shall not have
rejected such proposal within ten (10) Business Days of receipt of the date its
existence first becomes publicly disclosed, if earlier;
(j) by HFB, if (i) HFB is not in material breach of the terms of
this Agreement, (ii) the Board of Directors of HFB authorizes HFB, subject to
complying with the terms of this Agreement, to enter into a binding written
agreement concerning a transaction that is a Superior Proposal and HFB notifies
TI in writing that it intends to enter into such an agreement, attaching the
most current version of such agreement to such notice, (iii) TI does not make,
prior to ten (10) Business Days after receipt of HFB's written notification of
its intention to enter into a binding written agreement for a Superior Proposal
(the "Alternative Transaction Notice"), an offer that the Board of Directors of
HFB determines, in good faith after consultation with its financial advisors, is
at least as favorable as the Superior Proposal, taking into account the
long-term prospects and interests of HFB and its stockholders and (iv) HFB prior
to such termination pays to TI in immediately available funds the fees, if any,
required to be paid pursuant to Section 13.1(c). Without limiting the foregoing,
HFB agrees and acknowledges (y) that it cannot terminate this Agreement pursuant
to this Section 12.2(j) in order to enter into a binding written agreement
referred to in clause (ii) above until at least ten (10) Business Days after
receipt by TI of the Alternative Transaction Notice and (z) to notify TI
promptly if its intention to enter into a written agreement referred to in its
Alternative Transaction Notice shall change at any time after giving such
notification; or
(k) by TI, if at December 31, 1998, any holder of an HFB Option
shall not have entered into the agreement contemplated by Section 8.3, unless
prior to the date that TI gives notice
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of termination pursuant to this Section 12.1(k) all holders of HFB Options shall
have entered into the agreement contemplated by Section 8.3 or the HFB Options
not theretofore canceled shall expire by their terms prior to the Closing Date.
12.2 Effect of Termination. In the event of termination of this
Agreement by either HFB, Hemet, Guaranty or TI as provided in Section 12.1,
neither HFB, Hemet, Guaranty nor TI shall have any further obligation or
liability to the other party except (a) with respect to the last sentence of
Section 8.5 and the Confidentiality Agreement, dated August 20, 1998; (b) with
respect to Section 13.l; (c) to the extent such termination results from a
party's willful and material breach of the warranties and representations made
by it, or willful and material failure in performance of any of its covenants,
agreements or obligations hereunder; and (d) as described in the Stock Option
Agreement attached hereto as Exhibit A, which is governed by its own terms as to
termination.
12.3 Force Majeure. HFB, TI, Guaranty and Hemet agree that,
notwithstanding anything to the contrary in this Agreement, in the event this
Agreement is terminated as a result of a failure of a condition, which failure
is due to a natural disaster or other act of God, or an act of war, and provided
neither party has failed to observe the material obligations of such party under
this Agreement, neither party shall be obligated to pay to the other party to
this Agreement any expenses or otherwise be liable hereunder.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses.
(a) HFB hereby agrees that if the Agreement is terminated (i) by
TI or by HFB pursuant to Section 12.1(b) with respect to the failure of HFB
stockholders to approve the Agreement and the transactions contemplated hereby,
or (ii) by TI pursuant to Section 12.1(d), Section 12.1(h) or Section 12.1(k),
HFB shall promptly and in any event within ten (10) days after such termination
pay TI all Expenses of TI and Guaranty, but not to exceed (x) $1,000,000 if the
Agreement is so terminated prior to December 31, 1998, (y) other than as set
forth in subclause (z) $1,500,000 if the Agreement is so terminated thereafter
or (z) $1,000,000 if the Agreement is terminated pursuant to Section 12.1(k) at
any time.
(b) TI hereby agrees that if the Agreement is terminated by HFB
pursuant to Section 12.1(c), TI shall promptly and in any event within ten (10)
days after such termination pay HFB all Expenses of HFB and Hemet, but not to
exceed $1,000,000 if the Agreement is so terminated prior to December 31, 1998
and $1,500,000 if the Agreement is so terminated thereafter.
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(c) HFB hereby agrees that: in the event that this Agreement is
terminated (i) by TI pursuant to Section 12.1(i) or (ii) by HFB pursuant to
Section 12.1(j), then HFB shall, not later than immediately prior to the time of
such termination (in the case of clause (ii)) or not later than ten (10) days
after such termination but in no event later than the time immediately prior to
the entering into of an agreement concerning a Competing Transaction (in the
case of clause (i)), pay TI $4,866,128 in immediately available funds.
Notwithstanding anything to the contrary in this Agreement, any amount payable
to TI under Section 13.1(c) shall be reduced dollar-for-dollar by the Notional
Total Profit or Total Profit (each as defined in the Stock Option Agreement)
attributable to or received by, respectively, TI and any assignees in the
aggregate under the Stock Option Agreement.
(d) Except as otherwise provided herein, all Expenses incurred by
TI, HFB, Hemet and Guaranty in connection with or related to the authorization,
preparation and execution of this Agreement, the solicitation of shareholder
approvals and all other matters related to the closing of the transactions
contemplated hereby, including, without limitation of the generality of the
foregoing, all fees and expenses of agents, representatives, counsel and
accountants employed by either such party or its affiliates, shall be borne
solely and entirely by the party which has incurred the same. Notwithstanding
the foregoing, TI and HFB shall share equally the cost of filing and printing
the Proxy Statement and the S-4 Registration Statement.
(e) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the party and its
Affiliates) incurred by the party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
13.2 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another shall be in writing and delivered
personally or by confirmed facsimile transmission or sent by overnight courier,
registered or certified mail, postage prepaid, with return receipt requested,
addressed as follows:
To TI or Guaranty: Temple-Inland Inc.
303 South Temple Drive
Diboll, Texas 75941
Attention: M. Richard Warner
Facsimile Number: (409) 829-3333
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Kenneth R. Dubuque
Facsimile Number: (512) 434-8289
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With a copy to: Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Stanley F. Farrar
Facsimile Number: (310) 712-8800
To HFB or Hemet: HF Bancorp, Inc.
445 E. Florida Avenue
Hemet, California 92543
Attention: Richard Cupp
Facsimile Number: (909) 658-8461
With a copy to: Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90067
Attention: William T. Quicksilver
Facsimile Number: (310) 312-4224
Any such notice, request, instruction or other document shall be deemed
received on the date delivered personally or delivered by confirmed facsimile
transmission, or on the third Business Day after it was sent by registered or
certified mail, postage prepaid. Any of the persons shown above may change its
address for purposes of this section by giving notice in accordance herewith.
13.3 Material Adverse Effect. For purposes of this Agreement, the term
"Material Adverse Effect" shall mean an effect which (i) is material and adverse
to the business, financial condition, results of operations or prospects of TI,
Guaranty, and their respective subsidiaries taken as a whole, on the one hand,
and HFB, Hemet and their respective subsidiaries taken as a whole, on the other
hand, as the context may dictate; (ii) significantly and adversely affects the
ability of TI, Guaranty, HFB or Hemet, or any of them, to consummate the Mergers
by July 31, 1999 or to perform their respective material obligations hereunder;
or (iii) enables any Person to prevent consummation by July 31, 1999 of the
Mergers; provided, however, that in determining whether a Material Adverse
Effect has occurred there shall be excluded any effect the cause of which is:
(A) any change, which is made or becomes effective after the date hereof, in
banking or similar laws of general applicability or interpretations thereof by
courts or Governmental Entities; (B) any change, which is made or becomes
effective after the date hereof, in generally accepted accounting principles
and/or applicable regulatory accounting principles or banking regulations
consistently applied, and applicable to savings associations or savings and loan
holding companies; (C) any action or omission of TI or Guaranty, on the one
hand, or HFB or Hemet, on the other hand, taken with the prior written consent
of the other, as applicable, in contemplation of the Mergers; (D) any changes in
general economic conditions affecting financial institutions generally,
including, without limitation, general changes in market interest rates; and (E)
any expenses or costs reasonably incurred or accrued in connection with the
transactions contemplated by this Agreement.
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13.4 Successors and Assigns. All terms and conditions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and assigns; provided, however, that
this Agreement and all rights, privileges, duties and obligations of the parties
hereto may not be assigned or delegated by any party hereto and any such
attempted assignment or delegation shall be null and void.
13.5 Counterparts. This Agreement and any exhibit hereto may be executed
in one or more counterparts, all of which, taken together, shall constitute one
original document and shall become effective when one or more counterparts have
been signed by the appropriate parties and delivered to each party hereto.
13.6 Effect of Representations and Warranties. The representations and
warranties contained in this Agreement or in any List shall terminate
immediately after the Effective Time of the Holding Company Merger.
13.7 Third Parties. Except with respect to Section 7.6, which is
intended to benefit the directors and officers of HFB and its subsidiaries, each
party hereto intends that this Agreement shall not benefit or create any right
or cause of action to any person other than parties hereto. As used in this
Agreement the term "parties" shall refer only to TI, HFB, Guaranty or Hemet as
the context may require.
13.8 Lists; Exhibits; Integration. Each List, exhibit and letter
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Lists and letters need not be attached to each
copy of this Agreement. This Agreement, together with such Lists, exhibits and
letters, and the Confidentiality Agreement dated August 20, 1998 constitute the
entire agreement between the parties pertaining to the subject matter hereof and
supersede all prior agreements and understandings of the parties in connection
therewith.
13.9 Knowledge. Whenever any statement herein or in any List,
certificate or other document delivered to any party pursuant to this Agreement
is made "to the knowledge" of any party or another Person, such knowledge shall
mean facts and other information which any director, executive officer or
controller knows as a result of the performance of his or her duties and
includes such diligent inquiry as is reasonable under the circumstances.
13.10 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware without regard
to the conflict of law principles thereof. The parties hereby irrevocably submit
to the jurisdiction of the courts of the State of Delaware and the federal
courts of the United States of America located in the State of Delaware solely
in respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the transactions contemplated herein and therein, and hereby waive, and agree
not to assert, as a defense in any action, suit or proceeding for the
interpretation or
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enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such Delaware state or federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 13.2 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
13.11 Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
13.12 Severability. If any portion of this Agreement shall be deemed by
a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein in substantially the same manner as
originally set forth at the date this Agreement was executed.
13.13 Waiver and Modification; Amendment. No waiver of any term,
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
Except as otherwise required by law, this Agreement and the Agreement of Bank
Merger, when executed and delivered, may be modified or amended by action of the
Boards of Directors of TI, Guaranty, HFB or Hemet without action by their
respective stockholders. This Agreement may be modified or amended only by an
instrument of equal formality signed by the parties or their duly authorized
agents.
13.14 Attorneys' Fees. If any legal action or any arbitration upon
mutual agreement is brought for the enforcement of this Agreement or because of
an alleged dispute, controversy, breach, or default in connection with this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs and expenses incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
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IN WITNESS WHEREOF, the parties to this Agreement have duly
executed this Agreement as of the day and year first above written.
TEMPLE-INLAND INC.
By: K.M. Jastrow, II
-------------------------------------
President and Chief Operating Officer
GUARANTY FEDERAL BANK, F.S.B.
By: Kenneth R. Dubuque
-------------------------------------
President and Chief Executive Officer
HF BANCORP, INC.
By: Richard S. Cupp
-------------------------------------
President and Chief Executive Officer
HEMET FEDERAL SAVINGS & LOAN
ASSOCIATION
By: Richard S. Cupp
-------------------------------------
President and Chief Executive Officer
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<PAGE> 77
EXHIBIT LIST
A STOCK OPTION AGREEMENT
B AGREEMENT OF BANK MERGER
C FORM OF SHAREHOLDER'S AGREEMENT
D FORM OF AFFILIATE LETTER
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EXHIBIT 99.2
AGREEMENT OF BANK MERGER
This Agreement of Bank Merger is made by and between Hemet
Federal Savings & Loan Association, a federally chartered savings association
("Hemet"), and Guaranty Federal Bank, F.S.B., a federally chartered savings bank
("Guaranty") in connection with the transactions described in that Agreement and
Plan of Merger, dated as of November 14, 1998 (the "Merger Agreement") by and
among Temple-Inland Inc., a Delaware corporation ("TI"), HF Bancorp, Inc., a
Delaware corporation ("HFB"), Guaranty and Hemet. Terms not otherwise defined
herein shall have the meaning given them in the Merger Agreement.
As of the date hereof, Guaranty has authorized capital of
[________] shares of common stock, par value $1 per share (the "Guaranty
Stock"). As of the date hereof, [________] shares of Guaranty Stock are issued
and outstanding. As of the date hereof, Hemet has authorized capital stock of
15,000,000 shares of common stock, par value $.01 per share ("Hemet Stock"), of
which 1,000 shares are issued and outstanding, and 2,000 shares of serial
preferred stock of which no shares are outstanding.
As of the date hereof, collectively, Guaranty Holdings Inc. I and
Temple-Inland Financial Holdings Inc. own directly and TI owns indirectly all
the issued and outstanding stock of Guaranty, and HFB owns directly all of the
issued and outstanding stock of Hemet. Immediately prior to the Effective Time
of the Bank Merger, either HFB shall be merged with and into TI or a
wholly-owned subsidiary of TI or one of TI's subsidiaries, shall be merged with
and into HFB, depending upon certain calculations pursuant to the Merger
Agreement, with either TI or HFB being the resulting corporation, so that as of
the Effective Time of the Bank Merger, TI shall own directly or indirectly all
of the Guaranty Stock and all of the Hemet Stock.
Guaranty and Hemet hereby agree as follows:
1. Merger. At and on the Effective Time of the Bank Merger, Hemet shall
be merged with and into Guaranty in accordance with the terms hereof (the "Bank
Merger"). Guaranty, as the institution surviving the Bank Merger, shall be the
"Surviving Bank."
2. Effective Time. The effective time of the Bank Merger ("Effective
Time") shall be the date the articles of combination are endorsed by the Office
of Thrift Supervision (the "OTS") or such later date specified in such articles,
which shall be after approval of the Bank Merger by the OTS.
3. Name. The name of the Surviving Bank shall continue to be "Guaranty
Federal Bank, F.S.B.".
<PAGE> 2
4. Directors and Principal Officers. The directors and principal
officers of Guaranty immediately prior to the Effective Time of the Bank Merger
shall continue to serve as directors and principal officers of Guaranty after
the Effective Time of the Bank Merger. Guaranty, as the Surviving Bank, shall
have ___ directors. There shall be three classes of directors; members of each
class shall have a three-year term. The name, residential address and term of
each director is set forth below:
Term
Name Residential Address Expires
- ---- ------------------- -------
[INSERT CORRECT INFORMATION AT TIME OF EXECUTION]
5. Offices. The location of the home office of the Surviving Bank shall
continue to be Dallas, Texas, and the offices of the Surviving Bank shall be:
Address City or Town State Zip Code
- ------- ------------ ----- --------
6. Terms and Conditions of Bank Merger.
At the Effective Time of the Bank Merger:
(a) Each share of Hemet Stock outstanding immediately prior
to the Effective Time of the Bank Merger shall at the Effective Time of the Bank
Merger be canceled.
(b) Each share of Guaranty Stock issued and outstanding
immediately prior to the Effective Time of the Bank Merger shall remain
outstanding and unchanged and shall continue to be owned by either Guaranty
Holdings Inc. I or Temple-Inland Financial Holdings Inc, accordingly.
(c) Guaranty, as the Surviving Bank, may issue additional
capital stock to TI or a TI subsidiary.
7. Charter and Bylaws. At and after the Effective Time of the Bank
Merger, the Charter and Bylaws of Guaranty as in effect immediately prior to the
Effective Time of the Bank Merger shall continue to be the Charter and Bylaws of
the Surviving Bank until amended in accordance with law.
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<PAGE> 3
8. Rights and Duties of the Surviving Bank. At the Effective Time of the
Bank Merger, Hemet shall be merged with and into Guaranty, which, as the
Surviving Bank, shall be the same association as Guaranty. The business of the
Surviving Bank shall be that of a federal savings bank chartered under the laws
of the United States and as provided for in the Charter of Guaranty as now
existing, the business of which shall be continued at its head office and at its
legally established branches and other offices. All assets, rights, privileges,
powers, franchises and property (real, personal and mixed) shall be
automatically transferred to and vested in the Surviving Bank by virtue of the
Bank Merger without any deed or other document of transfer. The Surviving Bank,
without any order or action on the part of any court or otherwise and without
any documents of assumption or assignment, shall hold and enjoy all of the
properties, franchises and interests, including appointments, powers,
designations, nominations and all other rights and interest as agent or other
fiduciary in the same manner and to the same extent as such rights, franchises
and interest and powers were held or enjoyed by Guaranty and Hemet,
respectively. The Surviving Bank shall be responsible for all the liabilities of
every kind and description of both Guaranty and Hemet immediately prior to the
Effective Time of the Bank Merger, including liabilities for all debts, savings
accounts, deposits obligations, and contracts of Guaranty and Hemet,
respectively, matured or unmatured, whether accrued, absolute, contingent or
otherwise and whether or not reflected or reserved against on balance sheets,
books or accounts or records of either Guaranty or Hemet. All rights of
creditors and other obligees and all liens on property of either Guaranty or
Hemet shall be preserved and shall not be released or impaired.
9. Execution. This Agreement of Bank Merger may be executed in any
number of counterparts each of which shall be deemed an original and all of such
counterparts shall constitute one and the same instrument.
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<PAGE> 4
Dated as of _________, 199_.
GUARANTY FEDERAL BANK, F.S.B.
By:
------------------------------------------
President and Chief Executive Officer
HEMET FEDERAL SAVINGS & LOAN
ASSOCIATION
By:
------------------------------------------
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 99.3
FORM OF AFFILIATE LETTER ADDRESSED TO TEMPLE-INLAND, INC.
Temple-Inland Inc.
303 South Temple Drive
Diboll, Texas 75941
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to
be an "affiliate" of HF Bancorp, Inc., a Delaware corporation ("HFB"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 ("Rule 145") of the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"). I have been further advised that pursuant
to the terms of the Agreement and Plan of Merger, dated as of November 14, 1998
(the "Merger Agreement"), by and among you ("TI"), HFB, Guaranty Federal Bank,
F.S.B. and Hemet Federal Savings & Loan Association, HFB will be merged with TI
or a direct or indirect subsidiary of TI will be merged with HFB, and that as a
result of the Merger, I may receive shares of TI Stock (as defined in the Merger
Agreement) in exchange for shares of HFB Stock (as defined in the Merger
Agreement), owned by me.
I hereby represent, warrant and covenant to TI that in the event
I receive any TI Stock pursuant to the Merger:
A. I shall not make any sale, transfer or other disposition of
the TI Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of TI Stock to the extent I believed
necessary, with my counsel or with counsel for HFB.
C. I have been advised that the issuance of TI Stock to me
pursuant to the Merger Agreement will be registered with the Commission on a
registration statement on Form S-4. However, I have also been advised that,
since at the time the Merger will be submitted to the shareholders of HFB for
approval, I may be an "affiliate" of HFB, any sale or disposition by me of any
of the TI Stock, may, under current law, only be made in accordance with the
provisions of paragraph (d) of Rule 145 under the Act, pursuant to an effective
registration statement under the Act or pursuant to an exemption thereunder. I
agree that I will not sell, transfer, or otherwise dispose of Tl Stock issued to
me in the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act; (ii) such
<PAGE> 2
sale, transfer or other disposition is made in conformity with the volume and
other limitations of Rule 145 promulgated by the Commission under the Act; or
(iii) in the written opinion of counsel, which opinion and counsel shall be
reasonably acceptable to TI, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. I understand that TI is under no obligation to register the
sale, transfer or other disposition of the TI Stock by me or in my behalf or to
take any other action necessary to make compliance with an exemption from
registration available.
E. I understand that stop transfer instructions will be given to
TI's transfer agents with respect to TI Stock and that there will be placed on
the certificates for the TI Stock issued to me, or any substitutions therefor, a
legend stating in substance:
"The securities represented by this certificate have been issued
in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies and may be sold or otherwise
transferred only in compliance with the requirements of Rule 145
or pursuant to a registration statement under said act or an
exemption from such registration."
F. I also understand that unless the transfer by me of my TI
Stock has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, TI reserves the right to put the following legend on the
certificates issued to my transferee:
"The sale of the shares represented by this certificate has not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and the shares were acquired from a person who
received such shares in a transaction to which Rule 145
promulgated under the Securities Act applies. The shares have
been acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning of
the Securities Act and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act."
It is understood and agreed that this letter agreement shall
terminate and be of no further force and effect and the legends set forth in E
or F, as the case may be, above shall be removed by delivery of substitute
certificates without such legend, and the related stop transfer of restrictions
shall be lifted forthwith, if (i) any such shares of TI Stock shall have been
registered under the Act for sale, transfer or other disposition by me or on my
behalf and are sold, transferred or otherwise disposed of, or (ii) any such
shares of TI Stock are sold in accordance with the provisions of paragraphs (c),
(e), (f) and (g) of Rule 144 promulgated under the Act, or (iii) I am not at the
time an affiliate of TI and have been the
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beneficial owner of the TI Stock for at least one year (or such other period as
may be prescribed by the Act and the rules and regulations promulgated
thereunder), and TI has filed with the Commission all of the reports it is
required to file under the Securities Exchange Act of 1934, as amended, during
the preceding 12 months, or (iv) I am not and have not been for at least three
months an affiliate of TI and have been the beneficial owner of the TI Stock for
at least two years (or such other period as may be prescribed by the Act and the
Rules and Regulations), or (v) TI shall have received a letter from the Staff of
the Commission, or a written opinion of counsel, which opinion and counsel shall
be reasonably acceptable to TI, to the effect that the stock transfer
restrictions and the legend are not required.
Very truly yours,
Accepted this ____ day of _________, 199_.
Temple-Inland Inc.
By: _________________________________
Name:
Title:
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EXHIBIT 99.4
SHAREHOLDER'S AGREEMENT
This SHAREHOLDER'S AGREEMENT (this "Agreement"), dated as of
November 14, 1998, is entered into by and between Temple-Inland Inc., a Delaware
corporation ("TI"), and ____________ (the "Shareholder").
R E C I T A L S
A. TI, Guaranty Federal Bank, F.S.B., a federally chartered stock
savings bank ("Guaranty"), HF Bancorp, Inc., a Delaware corporation ("HFB"), and
Hemet Federal Savings & Loan Association, a federally chartered savings
association ("Hemet"), entered into that certain Agreement and Plan of Merger
dated as of November 14, 1998 (the "Merger Agreement").
B. The Shareholder is a beneficial shareholder of shares of common
stock, $.01 par value, of HFB (the "HFB Stock").
C. As an inducement to TI to enter into the Merger Agreement, the
Shareholder desires to enter into this Agreement.
D. Unless otherwise provided in this Agreement, capitalized terms shall
have the meanings ascribed to such terms in the Merger Agreement.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Merger Agreement, and intending to be legally bound hereby, TI
and Shareholder agree as follows:
ARTICLE I
SHAREHOLDER'S AGREEMENT
1.1 Agreement to Vote. Shareholder shall vote or cause to be voted, or
execute a written consent with respect to, all of the shares of HFB Stock as to
which Shareholder has sole or shared voting power (the "Shares") (a) in favor of
adoption and approval of the principal terms of the Merger Agreement and all
transactions contemplated thereby including any agreement of merger contemplated
thereby at every meeting of the shareholders of HFB at which such matters are
considered and at every adjournment thereof and in connection with every
proposal to take action by written consent with respect thereto, and (b) against
any Competing Transaction at every meeting of the shareholders of HFB at which
such matters are considered and at every
<PAGE> 2
adjournment thereof and in connection with every proposal to take action by
written consent with respect thereto.
1.2 Legend. The Shareholder agrees to stamp, print or type (or to cause
the stamping, printing or typing) on the face of his certificates of HFB Stock
evidencing the Shares the following legend:
"THE VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER ENCUMBRANCE OR DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO A SHAREHOLDER'S
AGREEMENT DATED AS OF THE 14TH DAY OF NOVEMBER, 1998 BY AND
BETWEEN TI AND [THE RECORD OWNER HEREOF], COPIES OF WHICH ARE ON
FILE AT THE OFFICES OF HFB."
1.3 Restrictions on Dispositions. Except to a donee who agrees in
writing to be bound by the provisions of Article I hereof, during the term of
this Agreement, Shareholder agrees not to sell, assign, transfer or dispose of
any of the Shares of take any other action that will alter or affect in any way
the right to vote the Shares, except (i) with the prior written consent of TI or
(ii) to change such right from that of a shared right of the Shareholder to vote
the Shares to a sole right of the Shareholder to vote the Shares.
1.4 Shareholder Approval. The Shareholder shall (i) recommend
shareholder approval of the Merger Agreement and the transactions contemplated
thereby by the HFB shareholders at every meeting of the shareholders of HFB at
which such matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with respect
thereto and (ii) advise the HFB shareholders to reject any subsequent proposal
or offer received by HFB relating to any Competing Transaction or purchase,
sale, acquisition, merger or other form of business combination involving HFB or
any of its assets, equity securities or debt securities and to proceed with the
transactions contemplated by the Merger Agreement; provided, however, that the
Shareholder shall not be obligated to take any action specified in clause (i) or
(ii) if the Board of Directors of HFB is advised in writing by outside legal
counsel (Manatt, Phelps & Phillips, LLP, or such other counsel that is
reasonably acceptable to TI) that doing any act pursuant to clause (i) or (ii)
is inconsistent with the continuing fiduciary duties of said Shareholder to the
stockholders of HFB.
1.5 Confidential Information/Non-solicitation. Neither Shareholder nor
any corporation, partnership, trust or other entity controlled by Shareholder
shall:
(a) at any time following the Effective Time of the Holding
Company Merger, disclose confidential information regarding HFB or Hemet to any
third parties,
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<PAGE> 3
except as required by law, regulation, a court order, in the defense of
litigation for which HFB or Hemet may be liable, or in any actions relating to
this Agreement or the Merger Agreement and the transactions contemplated hereby
or thereby; or
(b) at any time following the Effective Time of the Holding
Company Merger, solicit, directly or indirectly, on its own behalf or on behalf
of any other person or entity, management personnel employed by TI or any of its
subsidiaries immediately after the Effective Time of the Holding Company Merger
for employment with any other business.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to TI that the statements set
forth below are true and correct as of the date of this Agreement, except those
that are specifically as of a different date:
2.1 Ownership and Related Matters.
(a) Schedule 2.1(a) hereto correctly sets forth the number of
Shares and the nature of Shareholder's voting power with respect thereto. Within
five Business Days after the Record Date, the Shareholder shall amend said
Schedule 2.1(a) to correctly reflect the number of Shares and the nature of
Shareholder's voting power with respect thereto as of the Record Date.
(b) There are no proxies, voting trusts or other agreements or
understandings to or by which the Shareholder or the Shareholder's spouse is a
party or bound or that expressly requires that any of the Shares be voted in any
specific manner other than as provided in this Agreement.
2.2 Authorization and Binding Agreement. The Shareholder has the legal
right, power, capacity and authority to execute, deliver and perform this
Agreement, and this Agreement is the valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity.
2.3 Noncontravention. The execution, delivery and performance of this
Agreement by the Shareholder will not (a) conflict with or result in the breach
of, or default or actual or potential loss of any benefit under, any provision
of any agreement, instrument or obligation to which the Shareholder or the
Shareholder's spouse is a party or by which any of the Shareholder's properties
or the Shareholder's spouse's properties
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<PAGE> 4
are bound, or give any other party to any such agreement, instrument or
obligation a right to terminate or modify any term thereof; (b) require any
consent of any Person; (c) result in the creation or imposition of any
Encumbrance on any of the Shares or any other assets of the Shareholder or the
Shareholder's spouse; or (d) violate any statute or law, judgment, decree,
injunction, order, regulation or rule of any Governmental Entity to which the
Shareholder or the Shareholder's spouse is subject.
ARTICLE III
GENERAL
3.1 Amendments. To the fullest extent permitted by law, this Agreement
and any schedule or exhibit attached hereto may be amended by agreement in
writing of the parties hereto at any time.
3.2 Integration. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof and (except for other
documents to be executed pursuant to the Merger Agreement) supersedes all prior
agreements and understandings of the parties in connection therewith.
3.3 Specific Performance. Shareholder acknowledges and agrees that
irreparable injury will result to TI and Guaranty in the event of a breach of
any of the provisions of this Agreement and that TI will have no adequate remedy
at law with respect thereto. Accordingly, in the event of a material breach of
this Agreement, and in addition to any other legal or equitable remedy TI may
have, TI shall be entitled to the entry of a preliminary injunction and a
permanent injunction (including, without limitation, specific performance) by a
court of competent jurisdiction, to restrain the violation or breach thereof by
Shareholder or any affiliates, agents, or any other persons acting for or with
Shareholder in any capacity whatsoever, and Shareholder submits to the
jurisdiction of such court in any such action. Shareholder agrees that it will
not seek, and agrees to waive any requirement for, the securing or posting of a
bond in connection with TI's seeking or obtaining such equitable relief. In
addition, after discussing the matter with Shareholder, TI shall have the right
to inform any third party that TI reasonably believes to be, or to be
contemplating, participating with Shareholder or receiving from Shareholder
assistance in violation of this Agreement, of the terms of this Agreement and of
the rights of TI hereunder, and that participation by any such persons with
Shareholder in activities in violation of Shareholder's agreement with TI set
forth in this Agreement may give rise to claims by TI against such third party.
3.4 Termination. This Agreement, other than Section 1.5 hereof, shall
terminate automatically without further action at the earlier of the Effective
Time of the Holding Company Merger or the termination of the Merger Agreement in
accordance
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<PAGE> 5
with its terms. Upon such termination of this Agreement, the parties shall have
no further obligation or liability to one another, except in respect of a wilful
and material failure in the performance of any such party's agreements,
covenants and obligations hereunder and except in respect of Section 1.5 hereof.
3.5 No Assignment. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by TI or the Shareholder, in whole or
in part. Any attempted assignment in violation of this prohibition shall be null
and void. Subject to the foregoing, all of the terms and provisions hereof shall
be binding upon, and inure to the benefit of, the successors of the parties
hereto.
3.6 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
3.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each party hereto.
3.8 Notices. Any notice or communication required or permitted
hereunder, shall be deemed to have been given if in writing and (a) delivered in
person, (b) delivered by confirmed facsimile transmission, (c) sent by overnight
carrier, postage prepaid with return receipt requested, or (d) mailed by
certified or registered mail, postage prepaid with return receipt requested,
addressed as follows:
If to TI, addressed to:
Temple-Inland Inc.
303 South Temple Drive
Diboll, Texas 75941
Attention: M. Richard Warner
Facsimile Number: (409) 829-3333
With a copy addressed to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, CA 90067
Attention: Stanley F. Farrar
Facsimile Number: (310) 712-8800
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<PAGE> 6
If to Shareholder, addressed to:
______________________________
______________________________
______________________________
______________________________
With a copy addressed to:
Manatt, Phelps & Phillips, LLP
11355 West Olympic Blvd.
Los Angeles, CA 90067
Attention: William T. Quicksilver
Telecopier No: (310) 312-4224
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 3.8. Any such notice or
communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission, on the first Business Day after
it was sent by overnight carrier, postage prepaid with return receipt requested
or on the third Business Day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
3.9 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware without regard to the
conflict of law principles thereof. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the federal courts of
the United States of America located in the State of Delaware solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the transactions
contemplated herein and therein, and hereby waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document, that it is not subject thereto or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that the venue thereof may not be appropriate or that this Agreement
or any such document may not be enforced in or by such courts, and the parties
hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such Delaware state or federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 3.8 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
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<PAGE> 7
3.10 Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be unreasonable as to duration, activity or
subject, it shall be deemed to extend only over the maximum duration, range of
activities or subjects as to which such provision shall be valid and enforceable
under applicable law. If any provisions shall, for any reason, be held by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforcability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
3.11 Waiver of Breach. Any failure or delay by TI in enforcing any
provision of this Agreement shall not operate as a waiver of this Agreement. The
waiver by TI of a breach of any provision of this Agreement shall not operate as
a waiver of this Agreement. The waiver by TI of a breach of any provision of
this Agreement by the Shareholder shall not operate or be construed as a waiver
of any subsequent breach or violation thereof. All waivers shall be in writing
and signed by the party to be bound.
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<PAGE> 8
IN WITNESS WHEREOF, the parties to this Agreement have caused and duly
executed this Agreement as of the day and year first above written.
TEMPLE-INLAND INC.
By: ____________________________________
Name:
Title:
SHAREHOLDER
________________________________________
(Shareholder's Name)
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<PAGE> 9
SPOUSAL CONSENT
I am the spouse of _______________, the Shareholder in the above
Agreement. I understand that I may consult independent legal counsel as to the
effect of this Agreement and the consequences of my execution of this Agreement
and, to the extent I felt it necessary, I have discussed it with legal counsel.
I hereby confirm this Agreement and agree that it shall bind my interest in the
Shares, if any.
_________________________________________
(Shareholder's Spouse's Name)
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EXHIBIT 99.5
STOCK OPTION AGREEMENT
This AGREEMENT is dated as of November 14, 1998, between Temple-
Inland Inc. ("Grantee"), a Delaware corporation, and HF Bancorp, Inc., a
Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Grantee and Issuer have
approved an Agreement and Plan of Merger (the "Merger Agreement") dated as of
the date hereof which contemplates the acquisition of Issuer by Grantee and the
acquisition of Hemet Federal Savings & Loan Association ("Issuer Bank") by
Guaranty Federal Bank, F.S.B.
("Acquiror Bank");
WHEREAS, as a condition to Grantee's having entered into the
Merger Agreement and in consideration therefor, Issuer has agreed to grant to
Grantee the option set forth herein to purchase shares of Issuer's authorized
but unissued common stock, par value $.01 per share ("Common Stock").
NOW, THEREFORE, in consideration of the premises herein
contained, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an option (the "Option") to purchase up
to 1,272,665 shares of fully paid and nonassessable Common Stock (the "Option
Shares"), at a price of $16.0625 per share (the "Exercise Price"); provided,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the total number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to this Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
2. Exercise of Option.
(a) Grantee may exercise the Option, in whole or in part,
in accordance with and to the extent permitted by applicable law at any time or
from time to time but only upon or after the occurrence of a Purchase Event (as
that term is defined in paragraph (b) of this section); provided, that to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect upon the earliest to occur (such earliest date, the
"Expiration Date") of (i) the date of termination of the Merger
<PAGE> 2
Agreement in accordance with its terms (other than a termination of the Merger
Agreement by Grantee pursuant to Section 12.1(b) or Section 12.1(d) (if prior to
such termination pursuant to Section 12.1(b) or Section 12.1(d) there shall have
occurred a Preliminary Purchase Event or a Purchase Event) or Section 12.1(a)
(if Grantee shall at that time have been entitled to terminate the Merger
Agreement pursuant to Section 12.1(d) and a Preliminary Purchase Event or a
Purchase Event had occurred prior to such termination), Section 12.1(h) or
Section 12.1(i)); (ii) the time immediately prior to the Effective Time of the
Holding Company Merger; (iii) eighteen months following the occurrence of the
earliest to occur of (A) the date of termination of the Merger Agreement by
Grantee pursuant to Section 12.1(b) or Section 12.1(d) (if prior to such
termination pursuant to Section 12.1(b) or Section 12.1(d) there shall have
occurred a Preliminary Purchase Event or a Purchase Event) or Section 12.1(a)
(if Grantee shall at that time have been entitled to terminate the Merger
Agreement pursuant to Section 12.1(d) and a Preliminary Purchase Event or a
Purchase Event had occurred prior to such termination), Section 12.1(h) or
Section 12.1(i) and (B) the date of first occurrence of a Preliminary Purchase
Event or a Purchase Event; or (iv) the date that the aggregate amount received
by TI under Section 13.1(c) of the Merger Agreement together with the Notional
Total Profit or Total Profit attributable to or received hereunder in the
aggregate by all Grantees equals $4,866,128. Notwithstanding the foregoing,
Issuer shall not be obligated to issue the Option Shares upon exercise of the
Option (i) in the absence of any required governmental or regulatory waiver,
consent or approval necessary for Issuer to issue such Option Shares or for
Grantee or any transferee to exercise the Option or prior to the expiration or
termination of any waiting period required by law, (ii) so long as any
injunction or other order, decree or ruling issued by any federal or state court
of competent jurisdiction is in effect which prohibits the sale or delivery of
the Option Shares or (iii) if at such time Grantee or Acquiror Bank shall be in
material breach of the agreements or covenants contained in the Merger
Agreement. Further, the rights set forth in Section 6 hereof shall terminate on
the Expiration Date.
(b) As used herein, a "Purchase Event" shall have occurred
when:
(i) Issuer, Issuer Bank or any subsidiary of Issuer
(without prior written consent of Grantee) enters into an agreement with any
Person (other than Grantee or any of its affiliates or subsidiaries) pursuant to
which such Person would: (x) merge or consolidate with, or enter into any
similar transaction with Issuer, Issuer Bank or any other subsidiary of Issuer
(other than a merger, consolidation or similar transaction involving solely
Issuer and one or more of its wholly owned subsidiaries), (y) purchase, lease or
otherwise acquire all or substantially all of the assets of Issuer or Issuer
Bank or (z) purchase or otherwise acquire (by merger, consolidation, share
exchange or any similar transaction) securities representing 15% or more of the
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<PAGE> 3
voting shares of Issuer or Issuer Bank (the transactions referred to in
subparagraph (x), (y) and (z) are referred to as an "Acquisition Transaction");
(ii) any Person or group of Persons (other than
Grantee or any of its affiliates or subsidiaries) acquires the beneficial
ownership or the right to acquire beneficial ownership of securities
representing 15% or more of the voting shares of Issuer or Issuer Bank (the term
"beneficial ownership" for purposes of this Agreement shall have the meaning set
forth in Section 13(d) of the Exchange Act, and the regulations promulgated
thereunder);
(iii) a public announcement by Issuer, Issuer Bank
or any Person involved with Issuer or Issuer Bank therewith of the
authorization, recommendation or endorsement by Issuer of an Acquisition
Transaction, Exchange Offer (as defined below) or Tender Offer (as defined
below) or a public announcement by Issuer, Issuer Bank or any Person involved
with Issuer or Issuer Bank therewith of an intention to authorize, recommend or
endorse an Acquisition Transaction, Exchange Offer or Tender Offer;
(iv) the shareholders of Issuer fail to approve the
business combination contemplated by the Merger Agreement at any meeting of such
shareholders which has been held for that purpose or any adjournment or
postponement thereof, the failure of such a shareholder meeting to occur prior
to termination of the Merger Agreement or the withdrawal or modification (in a
manner adverse to Grantee in any respect) of the recommendation of Issuer's
Board of Directors that the shareholders of Issuer approve the Holding Company
Merger and the Merger Agreement in each case, after there shall have been a
public announcement that any Person (other than Grantee or any of its affiliates
or subsidiaries), shall have (a) made or publicly disclosed an intention to make
a proposal to engage in an Acquisition Transaction, (b) commenced a Tender
Offer, or filed a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to an Exchange Offer or (c) filed
an application (or given a notice to) with the Office of Thrift Supervision 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; or
(v) after a proposal is made by a third party to
Issuer or any of its subsidiaries or its shareholders to engage in an
Acquisition Transaction, or such third party states its intention to make such a
proposal if the Merger Agreement terminates and/or the Option expires, Issuer or
Issuer Bank shall have willfully breached any covenant or obligation contained
in the Merger Agreement and following such breach Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both).
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<PAGE> 4
(c) As used herein, "Preliminary Purchase Event" shall
have occurred when:
(i) any Person or group of Persons (other than
Grantee or any of its affiliates or subsidiaries) shall have commenced (as such
term is defined in Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or shall have filed a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to a
tender offer or exchange offer to purchase any shares of Common Stock such that
such Person would own or control 10% or more of the shares of Common Stock (such
an offer being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively);
(ii) any Person (other than Grantee or any of its
affiliates or subsidiaries) shall have filed an application with or given a
notice to the Office of Thrift Supervision or other federal or state bank
regulatory authority for approval to engage in an Acquisition Transaction,
Exchange Offer or Tender Offer; or
(iii) The occurrence of an event described in
Section 2(b)(i) hereof, except that the percentage referred to in clause (z)
thereof shall be at least 10%.
(d) If a Purchase Event has occurred, the Option shall
continue to be exercisable until its termination in accordance with Section 2(a)
hereof. Issuer shall notify Grantee promptly in writing upon learning of the
occurrence of a Preliminary Purchase Event or Purchase Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to transfer or exercise the Option.
(e) In the event a Purchase Event occurs, Grantee may
elect to exercise the Option. If Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which shall be referred to herein
as the "Notice Date") which specifies (i) the total number of Option Shares to
be purchased, and (ii) a place and date not earlier than two Business Days nor
later than ten (10) Business Days from the Notice Date for the closing (the
"Closing") of such purchase (the "Closing Date"); provided, however, that if
prior notification to or approval of the Office of Thrift Supervision or any
other regulatory agency is required in connection with such purchase, Grantee
shall promptly file the required notice or application for approval, shall
promptly notify Issuer of such filing, and shall expeditiously process the same
and the period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto. On or prior
to the Closing, Grantee shall have the right to revoke its exercise of the
Option in
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<PAGE> 5
the event that the transaction constituting a Purchase Event that gives rise to
such right to exercise shall not have been consummated.
3. Payment and Delivery of Certificates; Grantee Representation.
(a) If Grantee elects to exercise the Option, then at the
Closing, Grantee shall pay to Issuer the aggregate purchase price for the Option
Shares purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank designated by Issuer.
(b) At such Closing, simultaneously with the delivery of
the purchase price for the Option Shares as provided in paragraph (a) hereof,
Issuer shall deliver to Grantee a certificate or certificates, registered in the
name of Grantee or its designee, representing the number of Option Shares
purchased by Grantee. Such certificates may be endorsed with a legend which
shall read as follows:
THE SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND ARE ACCORDINGLY SUBJECT TO RESALE RESTRICTIONS
ARISING UNDER THE ACT. THE TRANSFER OF SUCH SHARES IS SUBJECT TO
CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND THE ISSUER, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICE OF THE ISSUER. A COPY OF SUCH AGREEMENT WILL
BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
THE ISSUER OF A REQUEST THEREFOR.
Any such legend shall be removed by delivery of a substitute certificate without
such legend if Grantee shall have delivered to Issuer an opinion of counsel, in
form and substance satisfactory to Issuer, that such legend is not required for
purposes of assuring compliance with applicable securities or other law or with
this Agreement.
(c) Except as otherwise provided herein, Grantee hereby
represents and warrants to Issuer that the Option is being, and any Option
Shares issued upon exercise of the Option will be, acquired by Grantee for its
own account and not with a view to any distribution thereof, and Grantee will
not sell any Option Shares purchased pursuant to exercise of the Option except
in compliance with applicable securities and other laws.
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4. Representations; Covenants. Issuer hereby represents and
warrants to and agrees with Grantee as follows:
(a) Issuer has all requisite corporate power and authority
to enter into and perform all of its obligations under this Agreement. The
execution, delivery and performance of this Agreement and all of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been duly executed
and delivered by Issuer and constitutes a valid and binding agreement of Issuer,
enforceable against Issuer in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally or by equitable
principles, whether such enforcement is sought in law or equity.
(b) The execution and delivery by Issuer of this Agreement
and the consummation of the transactions herein contemplated do not and will not
violate or conflict with Issuer's Certificate of Incorporation or Bylaws, any
statute, regulation, judgment, order, writ, decree or injunction applicable to
Issuer (other than as may be effected by Grantee's ownership of Issuer Common
Stock exceeding certain limits set forth by statute or regulation) or its
properties or assets and do not and will not violate, conflict with, result in a
breach of, constitute a default (or an event which with due notice and/or lapse
of time would constitute a default) under, result in a termination of,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of Issuer under the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, or loan agreement or other
agreement, instrument or obligation to which Issuer is a party, or by which
Issuer or any of its properties or assets may be bound or affected.
(c) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms,
will have reserved for issuance upon the exercise of the Option a number of
shares of Common Stock sufficient to satisfy the exercise of the Option in full,
all of which Common Stock, upon issuance pursuant hereto, shall be duly
authorized, validly issued, fully paid and nonassessable, and shall be delivered
free and clear of all claims, liens, encumbrances, security interests and
preemptive rights.
(d) Issuer agrees that it will not, by amendment of its
Certificate of Incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer.
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<PAGE> 7
(e) Issuer shall promptly take all action as may from time
to time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under any federal or
state banking law, prior approval of or notice to the Federal Reserve Board, the
Office of Thrift Supervision or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with Grantee in preparing
such applications or notices and providing such information to the Federal
Reserve Board, the Office of Thrift Supervision or such state regulatory
authority as they may require) in order to permit Grantee to exercise the Option
and Issuer duly and effectively to issue shares of Common Stock pursuant hereto,
and to protect the rights of Grantee against dilution.
5. Adjustment Upon Changes in Capitalization.
(a) In the event of any dividend, stock split, split-up,
recapitalization, reclassification, combination, exchange of shares or similar
transaction or event with respect to Common Stock, the type and number of shares
or securities subject to the Option and the Exercise Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Grantee shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Grantee would have received in respect of Common Stock if the Option had been
exercised immediately prior to such event, or the record date thereof, as
applicable. If any shares of Common Stock are issued after the date of this
Agreement (other than pursuant to this Agreement and other than pursuant to an
event described in the first sentence of this Section 5(a)), the number of
shares of Common Stock subject to the Option shall be adjusted so that, after
such issuance, such number, together with any shares of Common Stock previously
issued pursuant hereto, equals 19.9% of the number of shares of Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to this Option. Nothing contained in this Section 5(a) or
elsewhere in this Agreement shall be deemed to authorize Issuer to issue shares
in breach of any provision of the Merger Agreement.
(b) In the event that Issuer, shall, prior to the
Expiration Date, enter in an agreement: (i) to consolidate with or merge into
any Person, other than Grantee or one of its affiliates or subsidiaries, and
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any Person, other than Grantee or one of its affiliates
or subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of Issuer or any other Person or cash or any other property or the
outstanding shares of Common Stock immediately prior to such merger shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the
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<PAGE> 8
merged company; or (iii) to sell or otherwise transfer all or substantially all
of its assets or any of its affiliates or subsidiaries to any Person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Succeeding
Corporation (as defined below), (y) any Person that controls the Succeeding
Corporation, or (z) in the case of a merger described in clause (ii), Issuer (in
each case, such Person being referred to as the "Substitute Option Issuer.")
(c) The Substitute Option shall be exercisable for such
number of shares of the Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the number of
shares of Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Option Price") shall then be equal to the Exercise Price multiplied by a
fraction in which the numerator is the number of shares of the Common Stock for
which the Option was theretofore exercisable and the denominator is the number
of shares for which the Substitute Option is exercisable.
(d) The Substitute Option shall otherwise have the same
terms as the Option, provided, that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms shall be as
similar as possible and in no event less advantageous to Grantee. The Substitute
Option Issuer shall also enter into an agreement with the then-holder or holders
of the Substitute Option in substantially the form as this Agreement, which
shall be applicable to the Substitute Option.
(e) The following terms have the meanings indicated:
(i) "Succeeding Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving Person, and (z) the transferee of all or any substantial part of
Issuer assets (or the assets of its subsidiaries).
(ii) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of
(x) the price per share of Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any Person (other than Grantee or any of its
affiliates or its subsidiaries) (y)
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<PAGE> 9
the price per share of Common Stock to be paid by any Person (other than Grantee
or any of its affiliates or subsidiaries) pursuant to an agreement with Issuer,
and (z) the highest closing sales price per share of Common Stock as quoted on
the Nasdaq National Market (or if Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Grantee and reasonably acceptable
to Issuer) within the six-month period immediately preceding the agreement
referred to in (y); provided, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Grantee and reasonably acceptable to Issuer, divided by the number of shares
of Common Stock outstanding at the time of such sale. In the event that an
Exchange Offer is made for Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the value of
the securities or other property issuable or deliverable in exchange for the
Common Stock shall be determined by a nationally-recognized investment banking
firm mutually selected by Grantee and Issuer (or if applicable, the Succeeding
Corporation), provided that if a mutual selection cannot be made as to such
investment banking firm, it shall be selected by Grantee, in either case whose
determination shall be conclusive and binding on all parties.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale, provided, however, that if such
closing price is not ascertainable due to an absence of a public market for the
Substitute Common Stock, "Average Price" shall mean the higher of (i) the price
per share of Substitute Common Stock paid or to be paid by any third party
pursuant to an agreement with the issuer of the Substitute Common Stock and (ii)
the book value per share, calculated in accordance with generally accepted
accounting principles, of the Substitute Common Stock immediately prior to
exercise of the Substitute Option; provided, further, that if Issuer is the
issuer of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by Issuer, the Person merging into
Issuer or by any company which controls or is controlled by such merging Person,
as Grantee may elect.
(f) In no event pursuant to any of foregoing paragraphs
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding immediately prior to
exercise of the Substitute Option. In the event that the Substitute Option would
be exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Grantee equal to the excess of (i)
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<PAGE> 10
the value of the Substitute Option without giving effect to the limitation in
this clause (f) over (ii) the value of the Substitute Option after giving effect
to the limitation in this clause (f). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
Grantee and reasonably acceptable to the Substitute Option Issuer, whose
determination shall be conclusive and binding on the parties.
(g) Issuer shall not enter into any transaction described
in subsection (b) of this Section 5 unless the Succeeding Corporation and any
Person that controls the Succeeding Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be necessary
so that the provisions of this Section 5 are given full force and effect
(including, without limitation, any action that may be necessary so that the
shares of Substitute Common Stock are in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision) than other shares
of common stock issued by the Substitute Option Issuer).
6. Purchase of Option Shares and Options by Issuer.
(a) From and after the first date a transaction specified
in Section 5(b) herein is consummated (the "Repurchase Event"), and subject to
the last sentence of Section 2(a), Section 9 and applicable regulatory and legal
restrictions, Grantee, after having exercised any Option in whole or in part,
shall have the right to require Issuer to purchase some or all of the Option
Shares at a purchase price per share (the "Purchase Price") equal to the highest
of (i) 100% of the Exercise Price, (ii) the highest price paid or agreed to be
paid for shares of Common Stock by an Acquiring Person (as defined in paragraph
(b) of this Section) in any tender offer, exchange offer or other transaction or
series of related transactions involving the acquisition of 10% or more of the
outstanding shares of Common Stock during the one-year period immediately
preceding the Purchase Date (as defined in paragraph (e) of this Section), (iii)
the highest closing price for shares of Common Stock as reported on the Nasdaq
National Market (or if Common Stock is not quoted on the Nasdaq National Market,
the highest bid price per share on any day as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Grantee and reasonably acceptable to Issuer), within
the 90-day period ending on the Purchase Date and (iv) in the event of a sale of
all or substantially all of Issuer's assets, (x) the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a recognized investment banking firm selected by
Grantee and reasonably acceptable to Issuer, whose determination shall be
conclusive and binding on the parties hereto, divided by (y) the number of
shares of Common Stock then outstanding. In the event that any of the
consideration paid or agreed to be paid by an Acquiring Person for any shares of
Common Stock or for any of Issuer's assets consists
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<PAGE> 11
in whole or in part of securities, the value of such securities for purposes of
determining the Purchase Price shall be determined (i) if there is an existing
public trading market therefor, by the average of the last sales prices for such
securities on the twenty (20) trading days ending three trading days prior to
the payment of such consideration (if such consideration has been paid) or prior
to the date of determination (if such consideration has not yet been paid) and
(ii) if there is no existing public trading market for such securities, by a
recognized investment banking firm selected by Grantee and reasonably acceptable
to Issuer, whose determination shall be conclusive and binding on the parties
hereto.
(b) For purposes of this Agreement, "Acquiring Person"
shall mean a Person or group (as such terms are defined in the Exchange Act and
the rules and regulations thereunder) other than Grantee or an affiliate or
subsidiary of Grantee who on or after the date of this Agreement engages in a
transaction which gives rise to a Purchase Event.
(c) Subject to applicable regulatory and legal
restrictions and the last sentence of Section 2(a), from and after a Repurchase
Event and after Grantee receives official notice that an approval of the Office
of Thrift Supervision, or any other regulatory authority, required for the
exercise of the Option and purchase of the Option Shares will not be issued or
granted, Grantee shall, subject to Section 9, have the right to require Issuer
to purchase some or all of the Options held by Grantee at a price equal to the
Purchase Price minus the Exercise Price on the Purchase Date (as defined in
paragraph (e) of this Section) multiplied by the number of shares of Common
Stock that may be purchased on the Purchase Date upon the exercise of the
Options elected to be purchased.
(d) Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish any repurchase
contemplated by this Section 6. Nonetheless, to the extent that Issuer is
prohibited under applicable law or regulation from repurchasing the Option
and/or the Option Shares in full, Issuer shall immediately so notify Grantee and
thereafter deliver or cause to be delivered, from time to time, to Grantee, the
portion of the Purchase Price that it is no longer prohibited from delivering,
within five (5) Business Days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to this Section 6 is prohibited under applicable
law or regulation from delivering to Grantee the Purchase Price in full Grantee
may revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee that portion of the Purchase Price that Issuer
is not prohibited from delivering after taking into account any such revocation
and (ii) deliver, as appropriate, either a new Agreement evidencing the right to
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<PAGE> 12
purchase that number of shares of Common Stock equal to the number of shares of
Common Stock purchasable immediately prior to the delivery of the notice of
repurchase less the number of shares of Common Stock covered by the portion of
the Option repurchased or a certificate for the number of Option Shares covered
by the revocation. Notwithstanding anything else herein to the contrary,
Grantee's right to require Issuer to purchase some or all of the Option Shares
or some or all of the Options shall expire on the date which is the earlier to
occur of the (a) Expiration Date and (b) one year following the Repurchase Event
or, with respect to any Option Shares or Options that Issuer is prohibited under
applicable law or regulation from repurchasing, the date that is the earlier to
occur of the (a) Expiration Date and (b) one year following the date on which
Issuer is no longer prohibited from purchasing such Option Shares or Options, as
the case may be.
(e) Grantee may exercise its right to require Issuer to
purchase the Option Shares or Options (collectively, "Securities") pursuant to
this Section by surrendering for such purpose to Issuer, at its principal office
or at such other office or agency maintained by Issuer for that purpose, within
the period specified above, the certificates or other instruments representing
the Securities to be purchased accompanied by a written notice stating that it
elects to require Issuer to purchase all or a specified number of such
Securities. Within five Business Days after the surrender of such certificates
or instruments and the receipt of such notice relating thereto, to the extent it
is legally permitted to do so, Issuer shall deliver or cause to be delivered to
Grantee (i) a bank cashier's or certified check payable to Grantee in an amount
equal to the applicable purchase price therefor, and (ii) if less than the full
number of Securities evidenced by the surrendered instruments are being
purchased, a new certificate or instrument, for the number of Securities
evidenced by such surrendered certificates or other instruments less the number
of Securities purchased. Such purchases shall be deemed to have been made at the
close of business on the date (the "Purchase Date") of the receipt of such
notice and of such surrender of the certificates or other instruments
representing the Securities to be purchased and the rights of Grantee, except
for the right to receive the applicable purchase price therefor in accordance
herewith, shall cease on the Purchase Date.
7. Registration Rights. As promptly as practicable upon Grantee's
request after a Purchase Event, Issuer agrees to prepare and file a registration
statement ("Registration Event") under federal and any applicable state
securities laws to the extent permitted by applicable laws and regulations, with
respect to any proposed dispositions by Grantee of all or any part of the Option
or any or all of the Option Shares, and to use its commercially reasonable
efforts to cause any such registration statement to become effective as
expeditiously as possible and to keep such registration effective for a period
of not less than 180 days unless, in the written opinion of counsel to Issuer,
addressed to Grantee and satisfactory in form and substance to Grantee and its
counsel, registration is not required for such proposed transactions. Issuer
shall be required to file only two such
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registration statements during the three year period following the date of the
first Purchase Event and shall have no obligation to file such a registration
statement at any time which is three years or later after the first Purchase
Event. All reasonable fees, expenses and charges of any kind or nature
whatsoever incurred in connection with any registration of, or the preparation
of any prospectus relating to, the Option Shares pursuant to this Section 7
shall be borne and paid by Issuer (except for underwriting discounts or
commissions and brokers' fees of Grantee related thereto). In addition, if the
Issuer proposes to register Common Stock or any other securities on a form that
would permit the registration of the Option Shares for public sale under the
Securities Act (whether proposed to be offered for sale by the Issuer or any
other Person) it will give prompt written notice to Grantee of its intention to
do so, specifying the relevant terms of such proposal, including the proposed
maximum offering price thereof. Upon the written notice of Grantee (whether on
its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto) delivered
to the Issuer within 15 Business Days after the giving of any such notice, which
request shall specify the number of Option Shares desired to be disposed by
Grantee, the Issuer will use its commercially reasonable efforts to effect, in
connection with its proposed registration, the registration under the Securities
Act of the Option Shares set forth in such request. Issuer shall be required to
effect no more than three such registrations (each, a "piggy-back
registration"). In the event Grantee exercises its registration rights under
this Section 7, Issuer shall provide Grantee, its affiliates, each of their
respective officers and directors and any underwriters used by Grantee, with
indemnifications, representations and warranties and shall cause its attorneys
and accountants to deliver to Grantee and any such underwriters attorneys'
opinions and "comfort letters", all of a type customarily provided or delivered
in connection with public underwritten offerings of securities. The foregoing
notwithstanding, if, at the time of any request by Grantee for piggy-back
registration of Option Shares as provided above, in the good faith judgment of
the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering, the offer and sale of the Option
Shares would interfere with the successful marketing of the shares of Issuer
Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of Grantee shall
constitute at least 25% of the total number of shares to be sold by Grantee and
the Issuer in aggregate; and provided further, however, that if such reduction
occurs, then the Issuer shall file a registration statement for the balance as
promptly as practicable thereafter as to which no reduction pursuant to this
Section 7 shall be permitted or occur. Notwithstanding the foregoing, Issuer
shall have the right to delay (a "Delay Right") a Registration Event for a
period of up to sixty days, in the event it receives a request from Grantee to
effect a Registration Event, if Issuer determines, in the good faith exercise of
its reasonable business judgment, that such registration and offering could
adversely effect or interfere with bona fide material
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<PAGE> 14
financing plans of Issuer or would require disclosure of information, the
premature disclosure of which could materially adversely affect Issuer or any
transaction under active consideration by Issuer. Issuer shall have the right to
exercise two Delay Rights in any eighteen month period. Notwithstanding anything
to the contrary stated herein, Issuer shall not be required to register Options
or Option Shares under the Securities Act pursuant to this Section 7 (a) on more
than one occasion during any calendar year or (b) within 180 days after the
effective date of any registration referred to in this Section 7 pursuant to
which Grantee was afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested.
8. Listing.
If Common Stock or any other securities to be acquired upon
exercise of the Option are then authorized for quotation or trading or listing
on the Nasdaq National Market or any other securities exchange or automated
quotation system, Issuer, or any successor thereto, upon the request of the
holder of the Option, will promptly file an application, if required, to
authorize for listing or trading or quotation the shares of Common Stock or
other securities to be acquired upon exercise of the Option on the Nasdaq
National Market or any other securities exchange or automated quotation system
and will use its best efforts to obtain approval, if required, of such listing
or quotation as soon as possible.
9. Limitations on Total Profit and Notional Total Profit.
(a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined below in Section
9(c) hereof) exceed $4,866,128 and, if such Total Profit otherwise would exceed
such amount, Grantee, at its sole election, shall either (i) reduce the number
of shares of Issuer Common Stock subject to the Option, (ii) pay cash to Issuer,
or (iii) any combination thereof, so that Grantee's actually realized Total
Profit shall not exceed $4,866,128 after taking into account the foregoing
actions.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below in
Section 9(d) hereof) of more than $4,866,128; provided, that nothing in this
sentence restrict any exercise of the Option permitted hereby on any subsequent
date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 6 hereof, (ii) (x) the amount received by Grantee pursuant
to Issuer's repurchase of
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<PAGE> 15
Option Shares pursuant to Section 6 hereof, less (y) Grantee's purchase price
for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares may be converted or exchanged) to any unaffiliated party, less (y)
Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of any Option (or any portion thereof) to any
unaffiliated party, (v) any equivalent amount with respect to the Substitute
Option, and (vi) any amount paid by Issuer pursuant to Section 13.1(c) of the
Merger Agreement.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Option Shares held
by Grantee as of such date, were sold for cash at the closing market price for
the Issuer Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
(e) It is expressly agreed and understood that the
calculation at any time of Total Profit or Notional Total Profit with respect to
any Grantee shall aggregate and include the Total Profit or Notional Total
Profit received or deemed to be received at any time by all Grantees.
10. Miscellaneous.
(a) Expenses. Except as otherwise expressly provided
herein, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly
provided herein or in the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
(c) Assignment. At any time after a Purchase Event occurs,
Grantee may sell, assign or otherwise transfer its rights and obligations
hereunder, in
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<PAGE> 16
whole or in part, by issuing Options or otherwise, to any Person or group of
Persons, subject to applicable law, rule or regulation. In order to effectuate
the foregoing, Grantee shall be entitled to surrender this Agreement to Issuer
in exchange for two or more Agreements entitling the holders thereof to purchase
in the aggregate the same number of shares of Common Stock as may be purchasable
hereunder. The term "Grantee" as used in this Agreement shall also be deemed to
refer to any and all of Grantee's permitted assigns, with such modifications to
the context as are required to vest in such permitted assignees the full
benefits and obligations afforded by this Agreement.
(d) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or by confirmed facsimile transmission or sent by registered or
certified mail or overnight courier, postage prepaid, with return receipt
requested, at the respective addresses of the parties set forth in the Merger
Agreement or as otherwise notified to the other parties in writing.
To Grantee: Temple-Inland Inc.
303 South Temple Drive
Diboll, Texas 75941
Attention: M. Richard Warner
Facsimile Number: (409) 829-3333
With a copy to: Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Stanley F. Farrar
Facsimile Number: (310) 712-8800
To Issuer: HF Bancorp, Inc.
445 E. Florida Avenue
Hemet, California 92543
Attention: Richard Cupp
Facsimile Number: (909) 658-8461
With a copy to: Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: William T. Quicksilver, Esq.
Facsimile Number: (310) 312-4224
A party may change its address for notice purposes by written notice to the
other party hereto.
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<PAGE> 17
(e) Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties hereto agree that
irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed by them in accordance with their specific terms or
conditions or were otherwise breached and that money damages are an inadequate
remedy for breach of this Agreement because of the difficulty of ascertaining
the amount of damage that will be suffered by the parties in the event that this
Agreement is not performed in accordance with its terms or conditions or
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement by the
parties and to enforce specifically the terms and provisions hereof in any court
of the United States or any state having jurisdiction, this being in addition to
any other remedy to which it is entitled at law or in equity.
(g) Governing Law. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of Delaware without
regard to the conflict of law principles thereof. The parties hereby irrevocably
submit to the jurisdiction of the courts of the State of Delaware and the
federal courts of the United States of America located in the State of Delaware
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated herein and therein, and hereby waive,
and agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such Delaware state
or federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 10(d) or in such
other manner as may be permitted by law, shall be valid and sufficient service
thereof.
(h) Best Efforts. Each of Grantee and Issuer will use its
commercially reasonable efforts to make all filings with, and to obtain consents
of, all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Agreement, including without limitation
applying to the Office of Thrift Supervision for approval to acquire the shares
issuable hereunder.
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(i) Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(j) Severability. If any portion of this Agreement shall
be deemed by a court of competent jurisdiction to be unenforceable, the
remaining portions shall be valid and enforceable only if, after excluding the
portion deemed to be unenforceable, the remaining terms hereof shall provide for
the consummation of the transactions contemplated herein in substantially the
same manner as originally set forth at the date this Agreement was executed.
(k) Further Assurances. In the event of any exercise of
the option by Grantee, Issuer and such Grantee shall execute and deliver all
other documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(l) Definitions. Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
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<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, as of the day and year first written above.
TEMPLE-INLAND INC.
By: K.M. Jastrow, II
---------------------------------------
President and Chief Operating Officer
HF BANCORP, INC.
By: Richard S. Cupp
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President and Chief Executive Officer
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