AGREEMENT AND PLAN OF MERGER
between
EAST TEXAS FINANCIAL SERVICES, INC.
and
GILMER FINANCIAL SERVICES, INC.
dated as of November 15, 1999
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................2
ARTICLE II THE MERGER......................................................7
2.1 The Corporate Merger..................................7
2.2 Effective Time; Closing...............................7
2.3 Treatment of Capital Stock............................8
2.4 Shareholder Rights; Stock Transfers...................8
2.5 Options...............................................8
2.6 Exchange Procedures...................................9
2.7 Dissenting Shares....................................10
2.8 Additional Actions...................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER......................11
3.1 Capital Structure....................................11
3.2 Organization, Standing and Authority of Seller.......11
3.3 Ownership of Seller Subsidiaries.....................12
3.4 Organization, Standing and Authority of Seller
Subsidiaries........................................12
3.5 Authorized and Effective Agreement...................12
3.6 Securities Documents and Regulatory Reports..........14
3.7 Financial Statements.................................14
3.8 Material Adverse Change..............................15
3.9 Environmental Matters................................15
3.10 Tax Matters..........................................15
3.11 Legal Proceedings....................................16
3.12 Compliance with Laws.................................16
3.13 Certain Information..................................17
3.14 Employee Benefit Plans...............................17
3.15 Certain Contracts....................................18
3.16 Brokers and Finders..................................19
3.17 Insurance............................................19
3.18 Properties...........................................19
3.19 Labor................................................20
3.20 Allowance for Loan Losses............................20
3.21 Year 2000 Compliant..................................20
3.22 Fairness Opinion.....................................21
3.23 Disclosures..........................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................21
4.1. Capital Structure....................................21
4.2 Organization, Standing and Authority of Buyer........21
4.3 Ownership of Buyer Subsidiaries......................22
4.4 Organization, Standing and Authority of Buyer
Subsidiaries........................................22
4.5 Authorized and Effective Agreement...................22
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4.6 Securities Documents and Regulatory Reports..........24
4.7 Financial Statements.................................24
4.8 Material Adverse Change..............................25
4.9 Legal Proceedings....................................25
4.10 Certain Information..................................25
4.11 Brokers and Finders..................................25
4.12 Ownership of Seller Common Stock.....................25
4.13 Disclosures..........................................26
4.14 Financial Resources..................................26
4.15 Certain Information..................................26
4.16 Year 2000 Compliant..................................26
ARTICLE V COVENANTS.......................................................27
5.1 Reasonable Best Efforts..............................27
5.2 Shareholder Meeting..................................27
5.3 Regulatory Matters...................................27
5.4 Investigation and Confidentiality....................28
5.5 Press Releases.......................................29
5.6 Business of the Parties..............................29
5.7 Certain Actions......................................32
5.8 Current Information..................................33
5.9 Indemnification; Insurance...........................33
5.10 Conforming Accounting and Reserve Policies;
Restructuring Expenses..............................35
5.11 Employees and Employee Benefit Plans.................35
5.12 Liquidation..........................................37
5.13 Bank Merger..........................................37
5.14 Organization of Merger Sub...........................38
5.15 Integration of Policies..............................38
5.16 Disclosure Supplements...............................38
5.17 Failure to Fulfill Conditions........................38
ARTICLE VI CONDITIONS PRECEDENT...........................................38
6.1 Conditions Precedent - Buyer and Seller..............38
6.2 Conditions Precedent - Seller........................39
6.3 Conditions Precedent - Buyer.........................40
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT.............................41
7.1 Termination..........................................41
7.2 Effect of Termination................................42
7.3 Survival of Representations, Warranties
and Covenants.......................................42
7.4 Waiver...............................................43
7.5 Amendment or Supplement..............................43
ARTICLE VIII MISCELLANEOUS................................................43
8.1 Expenses; Termination Fees...........................43
8.2 Entire Agreement.....................................44
8.3 No Assignment........................................44
8.4 Notices..............................................44
8.5 Alternative Structure................................45
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8.6 Interpretation.......................................45
8.7 Counterparts.........................................45
8.8 Governing Law........................................46
8.9 Limitation on Liability..............................46
8.10 Time of Essence......................................46
8.11 Attorneys Fees.......................................46
8.12 Severability.........................................46
8.13 Delivery by Facsimile................................46
8.14 Exhibits.............................................47
8.15 Arbitration..........................................47
Exhibit A Form of Voting Agreement
Exhibit B Form of Plan of Liquidation
Exhibit C Form of Bank Merger Agreement
Exhibit D Form of Cancellation Agreement
Exhibit E Form of Employment Agreement and Non-Competition Agreement
iii
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of November 15,
1999, by and between East Texas Financial Services, Inc. ("Buyer"), a Delaware
corporation, and Gilmer Financial Services, Inc. ("Seller") a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Buyer and Seller have determined to
consummate the business combination transactions provided for herein, subject to
the terms and conditions set forth herein; and
WHEREAS, to effect the acquisition, Buyer will form a new interim
corporation organized under the laws of the State of Delaware, which will be a
wholly-owned direct subsidiary of Buyer ("Merger Sub"), and Merger Sub will be
merged with and into Seller (the "Corporate Merger"), with Seller the surviving
corporation and a wholly-owned subsidiary of Buyer (the "Surviving
Corporation"). Immediately upon the Corporate Merger becoming effective, the
Surviving Corporation will adopt a plan of complete liquidation substantially in
the form attached hereto as Exhibit B (the "Plan of Liquidation"), pursuant to
which the Surviving Corporation will merge with and into Buyer (the
"Liquidation"). Immediately thereafter, Gilmer Savings Bank, FSB ("Seller
Bank"), a federally-chartered savings bank and a wholly-owned subsidiary of
Seller, will be merged (the "Bank Merger") with and into First Federal Savings
and Loan Association of Tyler ("Buyer Bank"), a federally-chartered savings
institution and a wholly-owned subsidiary of Buyer, with Buyer Bank the
surviving bank, pursuant to a plan of merger substantially in the form attached
hereto as Exhibit C (the "Bank Merger Agreement") (the Corporate Merger, the
Liquidation and the Bank Merger are sometimes hereinafter collectively referred
to as the "Merger");
WHEREAS, as a condition to, and simultaneously with, the execution of this
Agreement, Buyer and the directors of Seller will enter into Voting Agreements
in the form attached hereto as Exhibit A;
WHEREAS, the respective boards of directors of Buyer and Seller have
approved the Corporate Merger, this Agreement and the proposed transactions
substantially on the terms and conditions set forth in this Agreement and in
accordance with applicable statutes of the State of Delaware; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the warranties,
representations, mutual covenants and agreements herein contained, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
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ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquisition Proposal" shall have the meaning set forth in Section 5.7(b)
hereof.
"Best Efforts" means the taking of all reasonable steps to cause or prevent
any event or condition which would have been taken in similar circumstances by a
reasonably prudent business person engaged in a similar business for the
advancement or protection of his own economic interest in light of the
consequences of failure to cause or prevent the occurrence of such event or
condition.
"Buyer Common Stock" shall mean the common stock, par value $0.01 per
share, of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of Buyer as of September 30,
1998, 1997 and 1996 and the consolidated income statements and statements of
changes in equity and cash flows (including related notes and schedules, if any)
of Buyer for each of the three years ended September 30, 1998, 1997 and 1996, as
filed by Buyer in its Securities Documents, and (ii) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer and the
consolidated income statements and statements of changes in equity and cash
flows (including related notes and schedules, if any) of Buyer included in
Securities Documents filed by Buyer with respect to the periods ended subsequent
to September 30, 1998.
"Buyer Options" shall mean options to purchase shares of Buyer Common Stock
granted pursuant to the Buyer Option Plan.
"Buyer Option Plan" shall mean the Stock Option and Incentive Plan of
Buyer, as amended and as in effect as of the date hereof.
"Buyer Preferred Stock" shall mean the shares of preferred stock, par value
$0.01 per share, of Buyer.
"Cause" shall mean termination because of the employee's material personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties or willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses).
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"CRA" shall mean the Community Reinvestment Act, as amended.
"Dissenting Shares" shall have the meaning set forth in Section 2.7 hereof.
"DGCL" shall mean the General Corporation Law of the State of Delaware, as
amended.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Corporate Merger.
"Environmental Claim" shall mean any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
and applicable state and local laws, and (ii) any applicable common law
(including without limitation common law that may impose strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Materials of
Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 2.6 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
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"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of Dallas.
"GAAP" shall mean generally accepted accounting principles in effect on the
date thereof.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"IRS" shall mean the Internal Revenue Service or any successor thereto.
"Knowledge" or "known" - An individual shall be deemed to have "knowledge"
of or to have "known" a particular fact or other matter if (i) such individual
is actually aware of such fact or other matter or (ii) a prudent individual
possessing the requisite knowledge and experience could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the truth or
existence of such fact or other matter. A corporation or bank shall be deemed to
have "knowledge" of or to have "known" a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director or
officer (or in any similar capacity) of the corporation or bank, has, or at any
time had, knowledge of such fact or other matter. Neither party is understood to
have undertaken a separate investigation in connection with the transactions
contemplated hereby to determine the existence or absence of facts or other
matters in the statement qualified as "known" by, or to the "knowledge" of such
party.
"Material Adverse Effect" shall mean, with respect to any party, any effect
that is material and adverse to the financial condition, results of operations
or business of that party and its Subsidiaries taken as whole, or that
materially impairs the ability of any party to consummate the Corporate Merger,
the Liquidation, the Bank Merger or any of the other transactions contemplated
by this Agreement. Material Adverse Effect shall not, however, be deemed to
include the impact of (a) changes in laws and regulations or interpretations
thereof that are generally applicable to the banking or savings industries, (b)
changes in GAAP that are generally applicable to the banking or savings
industries, (c) expenses incurred in connection with the transactions
contemplated hereby, (d) actions or omissions of a party (or any of its
Subsidiaries) taken with the prior informed written consent of the other party
or parties in contemplation of the transactions contemplated hereby, or (e)
changes attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest rates.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger Sub" shall mean a Delaware corporation to be organized as a
subsidiary of Buyer.
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"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a disclosure schedule
delivered on or prior to the date hereof from the disclosing party to the other
party specifically referring to the appropriate section of this Agreement and
describing in reasonable detail the matters contained therein, or (ii) a
supplement to the disclosure schedule dated after the date hereof from the
disclosing party specifically referring to this Agreement and describing in
reasonable detail the matters contained therein and delivered by the other party
pursuant to Section 5.16 hereof.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their approval of
this Agreement and the Corporate Merger contemplated herein.
"Liquidation Surviving Corporation" shall have the meaning set forth in
Section 5.12 hereof.
"Merger Consideration" shall have the meaning set forth in Section 2.3(d)
hereof.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws, and, with respect to Seller, shall
also mean information as stated in its audited financial statements, as reported
in its quarterly reports to the OTS, or as provided to stockholders after March
31, 1999.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Seller Bank 401(k)" shall mean the 401(k) Savings Plan of the Seller Bank,
as amended and as in effect as of the date hereof.
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"Seller Common Stock" shall mean the common stock, par value $0.01 per
share, of Seller.
"Seller Employee Plans" shall have the meaning set forth in Section 3.14(a)
hereof.
"Seller ESOP" shall mean the Seller Employee Stock Ownership Plan and
Trust, as in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Seller as of June 30,
1999, 1998 and 1997 and the consolidated statements of income, changes in
stockholders' equity and cash flows (including related notes and schedules, if
any) of Seller for each of the three years ended June 30, 1999, 1998 and 1997 as
filed or set forth by Seller in its Securities Documents, and (ii) the
consolidated balance sheets of Seller (including related notes and schedules, if
any) and the consolidated statements of income, changes in stockholders' equity
and cash flows (including related notes and schedules, if any) of Seller
included in the Securities Documents filed or set forth by Seller with respect
to the periods ended subsequent to June 30, 1999.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock granted pursuant to the Seller Option Plan.
"Seller Option Plan" shall mean the 1995 Stock Option and Incentive Plan of
Seller, as in effect as of the date hereof.
"Seller Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of Seller.
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to the Seller Restricted Stock Plan.
"Seller Restricted Stock Plan" shall mean the Recognition and Retention
Plan of Seller, as in effect as of the date hereof.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Bank" shall have the meaning set forth in Section 5.13 hereof.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
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ARTICLE II
THE MERGER
2.1 The Corporate Merger
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time, Merger Sub shall be merged with and into Seller in accordance with the
provisions of Section 251 of the DGCL. Seller shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of the Corporate
Merger, and shall continue its corporate existence under the laws of the State
of Delaware. The name of the Surviving Corporation shall be as stated in the
Certificate of Incorporation of Seller immediately prior to the Effective Time.
Upon consummation of the Corporate Merger, the separate corporate existence of
Merger Sub shall terminate.
(b) From and after the Effective Time, the Corporate Merger shall have the
effects set forth in Section 259 of the DGCL.
(c) The Certificate of Incorporation and Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Certificate of Incorporation of Merger Sub immediately prior to
the Effective Time.
(e) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
2.2 Effective Time; Closing
The Corporate Merger shall become effective upon the occurrence of the
filing of a certificate of merger with the Secretary of State of the State of
Delaware (the "Certificate of Merger"), unless a later date and time is
specified as the effective time in such Certificate of Merger (the "Effective
Time"). The Certificate of Merger of Delaware shall be duly prepared, executed
and acknowledged by the Buyer and Seller in accordance with the GCL and in form
and substance reasonably acceptable to the parties and their counsel. A closing
(the "Closing") shall take place immediately prior to the Effective Time at
10:00 a.m., Eastern Time, following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation of the Corporate
Merger specified in Article VI of this Agreement (other than the delivery of
certificates and other instruments and documents to be delivered at the Closing)
(the "Closing Date"), at such place and at such time as the parties may mutually
agree upon. At the Closing, there shall be delivered to Buyer and to Seller the
certificates and other documents required to be delivered under Article VI
hereof. The Closing shall occur no earlier than January 1, 2000.
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2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on the
part of any shareholder:
(a) each share of Merger Sub issued and outstanding or held in treasury
immediately prior to the Effective Time shall automatically convert into a share
of the Surviving Corporation and become an issued and outstanding or treasury
share of the Surviving Corporation;
(b) each share of Buyer Common Stock issued and outstanding or held in
treasury immediately prior to the Effective Time shall remain issued and
outstanding or held in treasury and continue to be an identical issued and
outstanding or treasury share of Buyer Common Stock;
(c) each share of Seller Common Stock owned by Seller (including treasury
shares) or the Buyer or any of their respective Subsidiaries (other than shares
held in a fiduciary capacity for the benefit of third parties or as a result of
debts previously contracted) shall be canceled and retired and shall not
represent capital stock of the Surviving Corporation and shall not be exchanged
for the Merger Consideration or any other consideration; and
(d) each share of Seller Common Stock (other than Dissenting Shares),
issued and outstanding immediately prior to the Effective Time shall be
cancelled and converted into and become the right to receive $29.50 in cash
without interest (the "Merger Consideration").
(e) each outstanding share of Seller Common Stock awarded pursuant to the
Seller Restricted Stock Plan that is unvested immediately prior to the Effective
Time shall be canceled and converted into and become the right to receive the
Merger Consideration. Each holder of such restricted shares, as a condition to
the receipt of payment, shall be required to deliver his certificate or
certificates representing such restricted shares to Buyer for cancellation and
shall also be required to execute a cancellation agreement in the form attached
hereto as Exhibit D.
2.4 Shareholder Rights; Stock Transfers
At the Effective Time, holders of Seller Common Stock shall cease to be and
shall have no rights as shareholders of Seller, other than to receive the
consideration provided under Section 2.3 hereof. After the Effective Time, there
shall be no transfers on the stock transfer books of Seller or the Surviving
Corporation of shares of Seller Common Stock and if certificates evidencing such
shares are presented for transfer after the Effective Time, they shall be
canceled against delivery of the Merger Consideration as herein provided.
2.5 Options
Each holder of an option to purchase Seller Common Stock outstanding on the
date hereof and remaining outstanding at the Effective Time shall receive from
Buyer, as of the Effective Time, whether or not the option is then exercisable,
a cash payment in an amount equal to the product of (i) the number of shares of
Seller Common Stock subject to such option at the Effective Time and
8
(ii) the excess, if any, of $29.50 over the exercise price per share of such
option, net of any cash which must be withheld under federal and state income
and employment tax requirements. Such cash payments shall be in consideration
for, and shall result in, the settlement and cancellation of all such options.
As a condition to the receipt of a cash payment in cancellation of options, each
option holder shall execute a cancellation agreement in substantially the form
attached hereto as Exhibit D-1.
2.6 Exchange Procedures
(a) Buyer shall designate an exchange agent, reasonably acceptable to
Seller, to act as agent (the "Exchange Agent") for purposes of conducting the
exchange procedure as described herein. As soon as practicable after the
Effective Time, but no later than five business days following the Effective
Time, Buyer shall cause the Exchange Agent to mail or make available to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding shares of Seller Common Stock
(i) a notice and letter of transmittal (which shall specify that delivery shall
be effected and risk of loss and title to the certificates theretofore
representing shares of Seller Common Stock shall pass only upon proper delivery
of such certificates to the Exchange Agent) advising such holder of the
effectiveness of the Corporate Merger and the procedure for surrendering to the
Exchange Agent such certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding shares of Seller Common Stock
in exchange for the Merger Consideration.
(b) At or prior to the Effective Time, Buyer shall deliver to the Exchange
Agent an amount of cash equal to the aggregate Merger Consideration.
(c) Each holder of an outstanding certificate or certificates which prior
thereto represented shares of Seller Common Stock who surrenders such
certificate or certificates to the Exchange Agent will, upon acceptance thereof
by the Exchange Agent, be entitled to prompt payment of the Merger
Consideration, without interest. The Exchange Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. Each outstanding certificate which prior to the
Effective Time represented Seller Common Stock and which is not surrendered to
the Exchange Agent in accordance with the procedures provided for herein shall,
except as otherwise herein provided, until duly surrendered to the Exchange
Agent be deemed to evidence ownership of only the right to receive the Merger
Consideration, without interest. After the Effective Time, there shall be no
further transfer on the records of Seller of certificates representing shares of
Seller Common Stock and if such certificates are presented to Seller for
transfer, they shall be cancelled against delivery of the Merger Consideration.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders the certificate or certificates
representing the shares of Seller Common Stock for exchange as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in which
the certificate evidencing Seller Common Stock surrendered in exchange therefor
is registered, it shall be a condition of the issuance
9
thereof that the certificate so surrendered shall be properly endorsed or
accompanied by an executed form of assignment separate from the certificate and
otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a check in any name other than that of the registered holder
of the certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders of Seller
for six months after the Effective Time shall be delivered by the Exchange Agent
to the Buyer. Any shareholders of Seller who have not theretofore complied with
Section 2.6(c) shall thereafter look only to Buyer for the consideration
deliverable in respect of each share of Seller Common Stock such shareholder
holds as determined pursuant to this Agreement without any interest thereon. If
outstanding certificates for shares of Seller Common Stock are not surrendered
or the payment for them is not claimed prior to the date on which such payment
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned property
and any other applicable law, become the property of Buyer (and to the extent
not in its possession shall be delivered to it), free and clear of all claims or
interest of any person previously entitled to such property. Neither the
Exchange Agent nor any party to this Agreement shall be liable to any holder of
Seller Common Stock represented by any certificate for any consideration paid to
a public official pursuant to applicable abandoned property, escheat or similar
laws. Buyer and the Exchange Agent shall be entitled to rely upon the stock
transfer books of Seller to establish the identity of those persons entitled to
receive consideration specified in this Agreement, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any certificate, Buyer and the Exchange Agent
shall be entitled to deposit any consideration represented thereby in escrow
with an independent third party and thereafter be relieved with respect to any
claims thereto.
2.7 Dissenting Shares
(a) "Dissenting Shares" means any shares held by any holder of Seller
Common Stock who becomes entitled to payment of the fair value of such shares
under the DGCL. Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of the DGCL; provided, however, that if, in accordance with the DGCL,
any holder of Dissenting Shares shall forfeit such right to payment of the fair
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration.
(b) Seller shall give Buyer (i) prompt notice of any written objections to
the Corporate Merger and any written demands for the payment of the fair value
of any shares, withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by Seller and (ii) the opportunity to participate
in all negotiations and proceedings with respect to such demands under the DGCL.
Seller shall not voluntarily make any payment with respect to any demands for
payment of fair value and shall not, except with the prior written consent of
Buyer, settle or offer to settle any such demands.
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2.8 Additional Actions
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (i) vest, perfect or confirm, of record or otherwise, in Buyer its
right, title or interest in, to or under any of the rights, properties or assets
of Seller acquired or to be acquired by Buyer as a result of, or in connection
with, the Merger, or (ii) otherwise carry out the purposes of this Agreement,
Seller and its proper officers and directors shall be deemed to have granted to
Buyer an irrevocable power of attorney to execute and deliver all such proper
deeds, assignments and assurances in law and to do all acts necessary or proper
to vest, perfect or confirm title to and possession of such rights, properties
or assets in Buyer and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of Buyer are fully authorized in the name
of Seller or otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, except as Previously
Disclosed:
3.1 Capital Structure
The authorized capital stock of Seller consists of 2,000,000 shares of
Seller Common Stock and 500,000 shares of Seller Preferred Stock. As of the date
hereof, 192,236 shares of Seller Common Stock are issued and outstanding, 4,497
shares of Seller Common Stock are held in treasury, and no shares of Seller
Preferred Stock are issued and outstanding. All outstanding shares of Seller
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Seller Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
Except for Seller Options to acquire not more than 9,783 shares of Seller Common
Stock as of the date hereof, a schedule of which has been Previously Disclosed,
there are no Rights authorized, issued or outstanding with respect to the
capital stock of Seller.
3.2 Organization, Standing and Authority of Seller
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on Seller. Seller is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. True and complete copies of the Certificate
of Incorporation and Bylaws of Seller as in effect as of the date hereof have
been Previously Disclosed.
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3.3 Ownership of Seller Subsidiaries
Seller has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect Seller Subsidiary and identified
Seller Bank as its only Significant Subsidiary. Except for (x) capital stock of
Seller Subsidiaries, (y) securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration of
debts previously contracted and (z) securities and other interests which are
Previously Disclosed, Seller does not own or have the right to acquire, directly
or indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
joint venture or other organization, other than investment securities
representing not more than 5% of any entity. The outstanding shares of capital
stock or other ownership interests of each Seller Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Seller free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind. No Rights
are authorized, issued or outstanding with respect to the capital stock or other
ownership interests of Seller Subsidiaries and there are no agreements,
understandings or commitments relating to the right of Seller to vote or to
dispose of such capital stock or other ownership interests.
3.4 Organization, Standing and Authority of Seller Subsidiaries
Each of the Seller Subsidiaries is a savings bank, corporation or
partnership duly organized, validly existing and, in the case of the non-savings
bank subsidiaries, in good standing under the laws of the jurisdiction in which
it is organized. Each of the Seller Subsidiaries (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such qualification, except
where the failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect on Seller. The deposit accounts of Seller Bank
are insured by the SAIF to the maximum extent permitted by the FDIA and Seller
Bank has paid all deposit insurance premiums and assessments required by the
FDIA and the regulations thereunder. True and complete copies of the Charter and
Bylaws of Seller Bank as in effect as of the date hereof have been Previously
Disclosed.
3.5 Authorized and Effective Agreement
(a) Seller has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals
and the approval of Seller's shareholders of this Agreement) to perform all of
its respective obligations under this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Seller, except for the approval of this Agreement by
Seller's shareholders. This Agreement has been duly executed and delivered by
Seller and, assuming approval of this Agreement by Seller's shareholders,
approvals of governmental and regulatory agencies, and due authorization,
execution and delivery by Buyer, constitutes a legal, valid and binding
obligation of Seller, which is enforceable against Seller in accordance with its
terms, subject to the effect of bankruptcy,
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insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby, nor compliance by Seller with any of
the provisions hereof (i) does or will conflict with or result in a violation of
any provisions of the Certificate of Incorporation or Bylaws of Seller or the
equivalent documents of any Seller Subsidiary, subject to the deletion of
Section 8A of Seller Bank's Federal Stock Charter, (ii) violate, conflict with
or result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Seller or an Seller
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Seller or an Seller Subsidiary is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental and shareholder approvals, violates any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or any
Seller Subsidiary.
(c) To the knowledge of Seller, except for (i) the filing of applications
and notices with and the approvals of the OTS, (ii) the approval of this
Agreement and the transactions contemplated hereby by the requisite vote of the
shareholders of Seller, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the DGCL in connection
with the Corporate Merger, (iv) the filing of Articles of Combination with the
OTS in connection with the Bank Merger, and (v) review of the Merger by the DOJ
under federal antitrust laws, no prior consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are necessary
on the part of Seller or Seller Bank in connection with (x) the execution and
delivery by Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby, (y) the execution and delivery by Seller, as
the Surviving Corporation, of the Plan of Liquidation, and the consummation of
the transactions contemplated thereby and (z) the execution and delivery by
Seller Bank of the Bank Merger Agreement and the consummation by Seller Bank of
the transactions contemplated thereby.
(d) As of the date hereof, neither Seller nor Seller Bank has knowledge of
any circumstance or event relating to Seller or Seller Bank (including, without
limitation, CRA compliance) which would prevent or limit all consents and
approvals from being procured from all regulatory agencies having jurisdiction
over the transactions contemplated by this Agreement, the Plan of Liquidation
and the Bank Merger Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement, the Plan of Liquidation and the
Bank Merger Agreement and (ii) the continuation by Buyer after the Effective
Time of the business of each of Seller and Seller Bank, respectively, as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which could have a Material Adverse Effect on Seller
or Buyer.
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3.6 Securities Documents and Regulatory Reports
(a) From January 1, 1996 until May 19, 1999, Seller timely filed with the
SEC and the NASD all Securities Documents required by the Securities Laws and
such Securities Documents complied in all material respects with the Securities
Laws, if applicable, and as of their respective dates, did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) Since January 1, 1996, each of Seller and Seller Bank has duly filed
with the OTS and any other applicable federal or state banking authority, as the
case may be, the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and accurate
and in compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of Seller and Seller Bank by the
OTS, neither Seller nor Seller Bank was required to correct or change any
action, procedure or proceeding which Seller or Seller Bank believes has not
been corrected or changed as required as of the date hereof and which could have
a Material Adverse Effect on Seller.
3.7 Financial Statements
(a) True and complete copies of Seller Financial Statements, which are
accompanied by the audit reports of Henry & Peters, P.C., independent certified
public accountants with respect to Seller, have been Previously Disclosed. The
Seller Financial Statements, as well as the Seller Financial Statements to be
delivered pursuant to Section 5.8 hereof, fairly present or will fairly present,
as the case may be, the consolidated financial condition of Seller, except as
otherwise stated therein, as of the respective dates set forth therein, and the
consolidated income, changes in stockholders' equity and cash flows of Seller,
except as otherwise stated therein, for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein or as
may be required by the OTS. Interim statements shall be prepared in a manner
consistent with past practices and may be subject to year end adjustments. The
audits of Seller have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Seller and the
Seller Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of Seller and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated balance sheets of Seller as of June 30, 1999 (including related
notes), (ii) of liabilities incurred since June 30, 1999 in the ordinary course
of business and (iii) of liabilities incurred in connection with consummation of
the transactions contemplated by this Agreement, neither Seller nor any Seller
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of Seller on a consolidated basis.
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3.8 Material Adverse Change
Since June 30, 1999, (i) Seller and its Subsidiaries have conducted their
respective businesses in the ordinary and usual course (excluding the incurrence
of expenses in connection with this Agreement and the transactions contemplated
hereby) and (ii) no event has occurred or circumstance arisen that, individually
or in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect on Seller.
3.9 Environmental Matters
(a) To the Seller's knowledge, Seller and its Subsidiaries are in
compliance with all Environmental Laws, except for any violations of any
Environmental Law which would not, singly or in the aggregate, have a Material
Adverse Effect on Seller. Neither Seller nor any Seller Subsidiary has received
any communication alleging that Seller or a Seller Subsidiary is not in such
compliance and, to the best knowledge of Seller, there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) To the Seller's knowledge, none of the properties owned, leased or
operated by Seller or a Seller Subsidiary has been or is in violation of or
liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a Material Adverse Effect on
Seller.
(c) To the Seller's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents that form the basis
of any Environmental Claim or other claim or action or governmental
investigation that could result in the imposition of any liability arising under
any Environmental Law against Seller or a Seller Subsidiary or against any
person or entity whose liability for any Environmental Claim Seller or a Seller
Subsidiary has or may have retained or assumed either contractually or by
operation of law, except such which would not have a Material Adverse Effect on
Seller.
(d) Except in the ordinary course of its loan underwriting activities,
Seller has not conducted any environmental studies during the past five years
with respect to any properties owned by it or a Seller Subsidiary as of the date
hereof.
3.10 Tax Matters
(a) Seller and its Subsidiaries have for tax years beginning with 1996 to
present timely filed all federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns and
withholding and employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or accrual for the
payment of, all taxes shown to be due in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or prior
to the Effective
15
Time. Neither Seller nor any Seller Subsidiary will have any material liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Seller and its Subsidiaries are complete and accurate in all material
respects. Neither Seller nor any Seller Subsidiary is delinquent in the payment
of any tax, assessment or governmental charge or has requested any extension of
time within which to file any tax returns in respect of any fiscal year or
portion thereof. The federal, state and local income tax returns of Seller and
its Subsidiaries have not been audited by the applicable tax authorities in the
last seven years and no deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against Seller or any Subsidiary as a result of such audits or otherwise which
have not been settled and paid. There are currently no agreements in effect with
respect to Seller or any Subsidiary to extend the period of limitations for the
assessment or collection of any tax. As of the date hereof, no audit,
examination or deficiency or refund litigation with respect to any return is
pending or, to the best of Seller's knowledge, threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by Seller or any
Subsidiary (nor does Seller have any knowledge that the IRS has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the knowledge of Seller, that are
threatened against Seller or any of its Subsidiaries or against any asset,
interest or right of Seller or any of its Subsidiaries, or against any officer,
director or employee of any of them that in any such case, if decided adversely,
would have a Material Adverse Effect on Seller. Neither Seller nor any Seller
Subsidiary is a party to any order, judgment or decree which has a Material
Adverse Effect on Seller.
3.12 Compliance with Laws
(a) Each of Seller and the Seller Subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on Seller;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect; and to the best knowledge of Seller, no suspension or
cancellation of any of the same is threatened.
(b) Neither Seller nor any Seller Subsidiary is in violation of its
respective Certificate of Incorporation, Charter or Bylaws, or to its knowledge
any applicable federal, state or local law or
16
ordinance or any order, rule or regulation of any federal, state, local or other
governmental agency or body (including, without limitation, all banking
(including all regulatory capital requirements), securities, municipal
securities, safety, health, zoning, anti-discrimination, antitrust, and wage and
hour laws, ordinances, orders, rules and regulations), or in default with
respect to any order, writ, injunction or decree of any court, or in default
under any order, license, regulation or demand of any governmental agency, any
of which violations or defaults could reasonably be expected to have a Material
Adverse Effect on Seller; and neither Seller nor any Seller Subsidiary has
received any notice or communication from any federal, state or local
governmental authority asserting that Seller or any Seller Subsidiary is in
violation of any of the foregoing which could have a Material Adverse Effect on
Seller or, to the knowledge of Seller, on Buyer. Neither Seller nor any Seller
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to savings banks or holding companies
thereof issued by governmental authorities), and none of them has received any
written communication requesting that it enter into any of the foregoing.
3.13 Certain Information
None of the information relating to Seller and its Subsidiaries supplied or
to be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
3.14 Employee Benefit Plans
(a) Seller has Previously Disclosed all stock option, restricted stock,
employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, any deferred compensation, consultant, bonus or group
insurance contract or any other incentive, health and welfare or employee
benefit plan or agreement maintained for the benefit of employees or former
employees of Seller or any Seller Subsidiary (the "Seller Employee Plans"),
whether written or oral, and Seller has Previously Disclosed accurate and
complete copies of the same together with, in the case of qualified plans, (i)
the most recent actuarial and financial reports prepared with respect thereto,
(ii) the most recent annual reports filed with any governmental agency with
respect thereto, and (iii) all rulings and determination letters and any open
requests for rulings or letters that pertain thereto.
(b) None of Seller, any Seller Subsidiary, any Seller Employee Plan
constituting an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Seller Defined Benefit Plan") or, to the Seller's knowledge, any
fiduciary of such Seller Defined Benefit Plan, has incurred any material
liability to the PBGC or the IRS with respect to any such Seller Defined Benefit
Plan. To the Seller's knowledge, no reportable event under Section 4043(b) of
ERISA has occurred with respect to any Seller Defined Benefit Plan.
17
(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the IRS with
respect to each Seller Defined Benefit Plan which is intended to qualify under
Section 401 of the Code to the effect that such Seller Defined Benefit Plan is
qualified under Section 401 of the Code, and the trust associated with such
Seller Defined Benefit Plan is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the Seller's knowledge, is threatened to be
revoked, and Seller does not have knowledge of any ground on which such
revocation may be based. Neither Seller nor any Seller Subsidiary has any
liability under any such Seller Defined Benefit Plan that is not reflected on
the consolidated statement of financial condition of Seller at June 30, 1999 or
the notes thereto included in Seller Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) To the Seller's knowledge, no prohibited transaction (which shall mean
any transaction prohibited by Section 406 of ERISA and not exempt under Section
408 of ERISA or Section 4975 of the Code) has occurred with respect to any
Seller Employee Plan which would result in the imposition, directly or
indirectly, of a material excise tax under Section 4975 of the Code or otherwise
have a Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Seller Employee Plan or ERISA,
except as disclosed in the Seller Financial Statements; no accumulated funding
deficiency (as defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, exists with respect to any Seller Defined Benefit Plan,
and there is no "unfunded current liability" (as defined in Section 412 of the
Code) with respect to any Seller Defined Benefit Plan.
(g) To Seller's knowledge, Seller Employee Plans have been operated in
compliance in all material respects with the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or issued
thereunder and all other applicable governmental laws and regulations.
(h) There are no pending or, to the knowledge of Seller, threatened claims
(other than routine claims for benefits) by, on behalf of or against any of
Seller Employee Plans or any trust related thereto or any fiduciary thereof.
3.15 Certain Contracts
(a) Neither Seller nor a Subsidiary is a party to, is bound or affected by,
receives, or is obligated to pay, benefits under (i) any agreement, arrangement
or commitment, including without limitation any agreement, indenture or other
instrument, relating to the borrowing of money by Seller or a Subsidiary (other
than in the case of Seller Bank deposits, FHLB advances, federal funds
18
purchased and securities sold under agreements to repurchase in the ordinary
course of business) or the guarantee by Seller or a Subsidiary of any
obligation, other than by Seller Bank in the ordinary course of its banking
business, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director, officer or employee of Seller or a Subsidiary,
(iii) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of Seller or a Subsidiary upon execution of this
Agreement or upon or following consummation of the transactions contemplated by
this Agreement (either alone or in connection with the occurrence of any
additional acts or events); (iv) any agreement, arrangement or understanding
pursuant to which Seller or a Subsidiary is obligated to indemnify any director,
officer, employee or agent of Seller or a Subsidiary; (v) any agreement,
arrangement or understanding to which Seller or a Subsidiary is a party or by
which any of the same is bound which limits the freedom of Seller or a
Subsidiary to compete in any line of business or with any person, (vi) any
assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, or (vii) any
agreement, arrangement or understanding which would be required to be disclosed
in the Seller Financial Statements and which has not been so disclosed.
(b) Neither Seller nor any Seller Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on Seller, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 Brokers and Finders
Neither Seller nor any Seller Subsidiary nor any of their respective
directors or officers has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
3.17 Insurance
Each of Seller and its Subsidiaries is insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
3.18 Properties
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
Seller and its Subsidiaries in the ordinary course of business
19
consistent with their past practices. Seller has good and indefeasible title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of its
properties and assets, real and personal, except (i) liens for current taxes not
yet due or payable, (ii) pledges to secure deposits and other liens incurred in
the ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are de minimis in character, amount or
extent and (iv) as reflected on the consolidated balance sheet of Seller as of
June 30, 1999 included in the Seller Financial Statements. All real and personal
property which is material to Seller's business on a consolidated basis and
leased or licensed by Seller or a Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
All improved real property owned by Seller or its Subsidiaries is in compliance
with all applicable zoning laws.
3.19 Labor
No work stoppage involving Seller or a Subsidiary is pending or, to the
knowledge of Seller, threatened. Neither Seller nor a Subsidiary is involved in
or, to the knowledge of Seller, threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving the
employees of Seller or a Subsidiary which could have a Material Adverse Effect
on Seller. Employees of Seller and Seller Subsidiaries are not represented by
any labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees, and to the Seller's knowledge, there have been
no efforts to unionize or organize any employees of Seller or any Seller
Subsidiaries during the past five years.
3.20 Allowance for Loan Losses
The allowance for loan losses reflected on Seller's consolidated balance
sheet included in the June 30, 1999 Seller Financial Statements is, or will be
in the case of subsequently delivered Seller Financial Statements, as the case
may be, in the opinion of Seller's management, adequate in all material respects
as of their respective dates under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans, net of recoveries; provided,
however, that nothing in this Agreement is an assurance or guarantee of the
collectability of the Seller Bank's loans. The real estate owned reflected on
the consolidated balance sheet included in the June 30, 1999 Seller Financial
Statements is, or will be in the case of subsequently delivered Seller Financial
Statements, as the case may be, carried at the lower of cost or fair value, less
estimated costs to sell, as required by GAAP.
3.21 Year 2000 Compliant
To Seller's knowledge, all hardware, firmware, software and computer
systems of Seller and its Subsidiaries are or will be Year 2000 Compliant (as
defined below) and shall continue to substantially function in accordance with
their intended purpose without material error or material interruption during
and after the year 2000. For purposes of this Agreement, "Year 2000 Compliant"
means that the hardware, firmware, software and computer systems of Seller and
its Subsidiaries (i) will address, produce, store and calculate all material
data involving dates beginning with January
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1, 2000 and will not produce abnormally ending or incorrect results involving
such dates as used in any forward or regression data based functions; and (ii)
will provide that all material date-related functionalities and data fields
include the indication of century and millennium, and will perform calculations
which involve a four-digit year.
3.22 Fairness Opinion
Seller has received an opinion from Charles Webb & Company to the effect
that, as of the date hereof, the consideration to be received by shareholders of
Seller pursuant to this Agreement is fair, from a financial point of view, to
such shareholders.
3.23 Disclosures
None of the representations and warranties of Seller or any of the written
information or documents furnished or to be furnished by Seller to Buyer in
connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, except as Previously
Disclosed:
4.1. Capital Structure
The authorized capital stock of Buyer consists of 5,500,000 shares of Buyer
Common Stock and 500,000 shares of Buyer Preferred Stock. As of the date hereof,
1,294,420 shares of Buyer Common Stock are issued and outstanding, 590,072
shares of Buyer Common Stock are held in treasury, and no shares of Buyer
Preferred Stock are issued and outstanding. All outstanding shares of Buyer
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Buyer Common Stock has been
issued in violation of the preemptive rights of any person, firm or entity.
Except for Buyer Options to acquire not more than 147,276 shares of Buyer Common
Stock as of the date hereof there are no Rights authorized, issued or
outstanding with respect to the capital stock of Buyer.
4.2 Organization, Standing and Authority of Buyer
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Buyer is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification, except where the failure to be
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so licensed, qualified or in good standing would not have a Material Adverse
Effect on Buyer. Buyer is duly registered as a savings and loan holding company
under the HOLA and the regulations of the OTS thereunder.
4.3 Ownership of Buyer Subsidiaries
Buyer has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect Buyer Subsidiary and identified
Buyer Bank as its only Significant Subsidiary. Except for (x) capital stock of
Buyer Subsidiaries, (y) securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration of
debts previously contracted and (z) securities and other interests which are
Previously Disclosed, Buyer does not own or have the right to acquire, directly
or indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
joint venture or other organization, other than investment securities
representing not more than 5% of any entity. The outstanding shares of capital
stock or other ownership interests of each Buyer Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by Buyer free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind. No Rights
are authorized, issued or outstanding with respect to the capital stock or other
ownership interests of Buyer Subsidiaries and there are no agreements,
understandings or commitments relating to the right of Buyer to vote or to
dispose of such capital stock or other ownership interests.
4.4 Organization, Standing and Authority of Buyer Subsidiaries
Each of the Buyer Subsidiaries is a savings institution, corporation or
partnership duly organized, validly existing and, in the case of the non-savings
institution subsidiaries, in good standing under the laws of the jurisdiction in
which it is organized. Each of the Buyer Subsidiaries (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such qualification, except
where the failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect on Buyer. The deposit accounts of Buyer Bank are
insured by the SAIF to the maximum extent permitted by the FDIA and Buyer Bank
has paid all deposit insurance premiums and assessments required by the FDIA and
the regulations thereunder.
4.5 Authorized and Effective Agreement
(a) Buyer has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals)
to perform all of its respective obligations under this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Buyer. This Agreement has
been duly executed and delivered by Buyer and, assuming approval of this
Agreement by governmental and regulatory agencies, and due authorization,
execution and delivery by Seller constitutes a legal, valid and binding
obligation of Buyer, which is enforceable against Buyer in accordance with its
terms,
22
subject to the effect of bankruptcy, insolvency, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby nor compliance by Buyer or with any of
the provisions hereof (i) does or will conflict with or result in a breach of
any provisions of the Certificate of Incorporation or Bylaws of Buyer or the
equivalent documents of any Buyer Subsidiary, (ii) violate, conflict with or
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Buyer or any Buyer
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Buyer or any Buyer Subsidiary is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt of
all required governmental approvals, violates any order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer or any Buyer Subsidiary.
(c) To the knowledge of Buyer, except for (i) the filing of applications
and notices with and the approval of the OTS and the FDIC, (ii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL in connection with the Corporate Merger, (iii) review of
the Merger by the DOJ under federal antitrust laws, (iv) the filing of Articles
of Combination with the OTS in connection with the Bank Merger, and (v) review
of the Merger by the DOJ under federal antitrust laws, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are necessary on the part of Buyer or Buyer Bank in connection with (x)
the execution and delivery by Buyer of this Agreement, and the consummation by
Buyer and Buyer Bank of the transactions contemplated hereby, (y) the execution
and delivery by Buyer of the Plan of Liquidation, and the consummation of the
transactions contemplated thereby, and (z) the execution and delivery by Buyer
Bank of the Bank Merger Agreement and the consummation by Buyer Bank of the
transactions contemplated thereby.
(d) As of the date hereof, neither Buyer nor Buyer Bank has knowledge of
any circumstance or event relating to Buyer or Buyer Bank (including, without
limitation, CRA compliance) which would prevent or limit all consents and
approvals from being procured from all regulatory agencies having jurisdiction
over the transactions contemplated by this Agreement, the Plan of Liquidation
and the Bank Merger Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement, the Plan of Liquidation and the
Bank Merger Agreement and (ii) the continuation by the Buyer after the Effective
Time of the business of each of Seller and Seller Bank, respectively, as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, could have a Material Adverse Effect on Seller
or Buyer.
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4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1996, Buyer has timely filed with the SEC and the NASD
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws and, as of
their respective dates, did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1996, each of Buyer and Buyer Bank has duly filed with
the OTS and any other applicable federal or state banking authority, as the case
may be, the reports required to be filed under applicable laws and regulations
and such reports were in all material respects complete and accurate and in
compliance with the requirements of applicable laws and regulations. In
connection with the most recent examinations of Buyer and Buyer Bank by the OTS,
neither Buyer nor Buyer Bank was required to correct or change any action,
procedure or proceeding which Buyer or Buyer Bank believes has not been
corrected or changed as required as of the date hereof and which could have a
Material Adverse Effect on Buyer.
4.7 Financial Statements
(a) Buyer has previously delivered or made available to Seller accurate and
complete copies of the Buyer Financial Statements, which are accompanied by the
audit reports of Bryant & Welborn. L.L.P., independent certified public
accountants with respect to Buyer. The Buyer Financial Statements, as well as
the Buyer Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of Buyer as of the respective dates set forth therein, and
the consolidated income, changes in stockholders' equity and cash flows of Buyer
for the respective periods or as of the respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section 4.7(a)
has been or will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods involved, except as stated therein. The
audits of Buyer have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of Buyer and the
Buyer Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and all such books and records accurately
reflect in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for in the
consolidated balance sheets of Buyer as of September 30, 1998 (including related
notes), (ii) of liabilities incurred since September 30, 1998 in the ordinary
course of business and (iii) of liabilities incurred in connection with
consummation of the transactions contemplated by this Agreement, neither Buyer
nor any Buyer Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise, material to the financial condition, results of
operations or business of Buyer on a consolidated basis.
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4.8 Material Adverse Change
Since September 30, 1998, (i) Buyer and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Buyer.
4.9 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the knowledge of Buyer, that are
threatened against Buyer or any of its Subsidiaries or against any asset,
interest or right of Buyer or any of its Subsidiaries, or against any officer,
director or employee of any of them that in any such case, if decided adversely,
would have a Material Adverse Effect on Buyer. Neither Buyer nor any Buyer
Subsidiary is a party to any order, judgment or decree which has a Material
Adverse Effect on Buyer.
4.10 Certain Information
None of the information relating to Buyer and its subsidiaries supplied or
to be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
4.11 Brokers and Finders
Neither Buyer nor any Buyer Subsidiary, nor any of their respective
directors or officers, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in connection with the
transactions contemplated hereby.
4.12 Ownership of Seller Common Stock
As of the date hereof, neither Buyer nor, to its knowledge, any of its
affiliates or associates (as such terms are defined under the Exchange Act), (i)
beneficially own, directly or indirectly, or (ii) are parties to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of Seller Common Stock which in the aggregate
represent 5% or more of the outstanding shares of Seller Common Stock (other
than shares held in a fiduciary capacity and beneficially owned by third parties
or shares taken in consideration of debts previously contracted).
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4.13 Disclosures
None of the representations and warranties of Buyer or any of the written
information or documents furnished or to be furnished by Buyer to Seller in
connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
4.14 Financial Resources
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient funds to perform its obligations under this
Agreement. Buyer and Buyer Bank are, and will be immediately following the
Merger, in material compliance with all applicable capital, debt and financial
and non-financial regulations of state and federal banking agencies having
jurisdiction over them.
4.15 Certain Information
None of the information relating to Buyer and its Subsidiaries supplied or
to be supplied by them for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of Seller and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date.
4.16 Year 2000 Compliant.
To Buyer's knowledge, all hardware, firmware, software and computer systems
of Buyer and its Subsidiaries are or will be Year 2000 Compliant and shall
continue to function in accordance with their intended purpose without material
error or material interruption during and after the year 2000.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of Seller and
Buyer (i) shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or advisable under applicable laws and regulations so as to permit and otherwise
enable consummation of the Merger as promptly as reasonably practicable, it
being the intention of the parties that the Liquidation and the Bank Merger be
consummated following the Effective Time in accordance with Sections 5.12 and
5.13 hereof, and (ii) shall cooperate fully with
26
each other to that end. Seller shall use its reasonable best efforts in good
faith to cause the Federal Stock Charter of Seller Bank to be amended to delete
Section 8A thereof prior to the Effective Time.
5.2 Shareholder Meeting
Seller shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of Seller will recommend that the shareholders of Seller
approve this Agreement and the transactions contemplated hereby, provided that
the Board of Directors of Seller may fail to make such recommendation, or
withdraw, modify or change any such recommendation, if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the fiduciary
duties of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation of the Proxy Statement relating to the meeting of shareholders of
Seller to be held pursuant to Section 5.2 of this Agreement. Each of Buyer and
Seller shall use its reasonable best efforts to have the Proxy Statement in
appropriate form for mailing as promptly as practicable and thereafter Seller
shall promptly mail to its shareholders the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file within 30 days after the
date hereof or as soon as thereafter as reasonably practicable all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement. Buyer and Seller shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors and
officers, the shareholders of Seller and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Buyer, Buyer Bank, Merger Sub, Seller or
Seller Bank to any Governmental Entity in connection with the transactions
contemplated hereby.
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(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received by Buyer or Seller, as the case may be, or any
of their respective Subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party upon such other party's reasonable request all
books, papers and records relating to the assets, properties, operations,
obligations and liabilities of it and its Subsidiaries, including, but not
limited to, all books of account (including the general ledger), tax records,
minute books of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the other party may have a reasonable interest,
provided that such access shall be reasonably related to the transactions
contemplated hereby and, in the reasonable opinion of the respective parties
providing such access, not unduly interfere with normal operations. Each party
and its Subsidiaries shall make their respective directors, officers, employees
and agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish was already in its possession prior to the disclosure thereof by
the party furnishing the information; (y) was then generally known to the
public; or (z) became known to the public through no fault of the party
receiving the information; or (ii) disclosures pursuant to a legal requirement
or in accordance with an order of a court of competent jurisdiction, provided
that the party which is the subject of any such legal requirement or order shall
use its best efforts to give the other party at least ten business days prior
notice thereof.
Without limiting the foregoing, Buyer, on behalf of itself, its
Subsidiaries, Affiliates and representatives, acknowledges and agrees that the
information provided by Seller and its Subsidiaries is subject to the terms of
that confidentiality letter agreement ("Confidentiality Agreement") dated June
2, 1999 between Seller and Buyer, and by the execution and delivery of this
Agreement, Buyer, its Subsidiaries, Affiliates and representatives ratify,
confirm and fully adopt the terms of the
28
Confidentiality Agreement in full as of its original date. A copy of the
Confidentiality Agreement has been Previously Disclosed and made apart hereof
for all purposes.
5.5 Press Releases
Buyer and Seller shall agree with each other as to the form and substance
of any press release related to this Agreement or the transactions contemplated
hereby, and consult with each other as to the form and substance of other public
disclosures which may relate to the transactions contemplated by this Agreement;
provided, however, that nothing contained herein shall prohibit either party,
following notification to the other party, from making any disclosure which is
required by law or regulation.
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Buyer, Seller and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, Seller also will use all
reasonable efforts to (x) preserve its business organization and that of Seller
Bank intact, (y) keep available to itself the present services of the employees
of Seller and Seller Bank and (z) preserve for itself and Buyer the goodwill of
the customers of Seller and Seller Bank and others with whom business
relationships exist. Without limiting the generality of the foregoing, except
with the prior written consent of Buyer or as expressly contemplated hereby,
between the date hereof and the Effective Time, Seller will not, and will cause
each Seller Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of Seller Common Stock; provided, however, that nothing contained herein
shall be deemed to affect the ability of a Subsidiary to pay dividends on
its capital stock to Seller;
(ii) issue any shares of its capital stock, other than upon exercise
of Seller Options referred to in Section 3.1 hereof, or issue, grant,
modify or authorize any Rights; purchase any shares of Seller Common Stock;
or effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
(iii) amend its Certificate of Incorporation, Bylaws or similar
organizational documents, other than as contemplated by Section 5.1 hereof;
impose, or suffer the imposition on any share of stock or other ownership
interest held by Seller in a Subsidiary of any lien, charge or encumbrance
or permit any such lien, charge or encumbrance to exist; or waive or
release any material right or cancel or compromise any material debt or
claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees,
29
except (i) as may be required pursuant to Previously Disclosed commitments
existing on the date hereof, (ii) as may be required by law, (iii) merit
increases in accordance with past practices, normal cost-of-living
increases and normal increases related to promotions or increased job
responsibilities; (iv) for bonuses (e.g., Christmas or annual bonuses) and
fringe benefits consistent with past practice; and (v) as contemplated by
this Agreement.
(v) enter into or, except as may be required by law and for amendments
contemplated by Section 5.11 hereof, modify any Seller Employee Plan or
other employee benefit, incentive or welfare contract, plan or arrangement,
or any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any Seller Defined
Benefit Plan or the Seller ESOP (other than as required by law or
regulation or in a manner and amount consistent with past practices);
(vi) enter into (w) any transaction, agreement, arrangement or
commitment not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by Seller
or a Subsidiary or guarantee by Seller or any Seller Subsidiary of any such
obligation, except in the case of Seller Bank for deposits, FHLB advances,
federal funds purchased and securities sold under agreements to repurchase
in the ordinary course of business consistent with past practice, (y) any
agreement, arrangement or commitment relating to the employment of an
employee or consultant, or amend any such existing agreement, arrangement
or commitment, provided that Seller and Seller Bank may employ an employee
or consultant in the ordinary course of business if the employment of such
employee or consultant is terminable by Seller or Seller Bank at will
without liability, other than as required by law, provided that the Seller
Bank may cancel the Employment Agreement; or (z) any contract, agreement or
understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
June 30, 1999, except as required by changes in laws or regulations or
GAAP, or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the immediately preceding tax year, except as
required by changes in laws or regulations;
(viii) make any capital expenditures in excess of $10,000 individually
or $50,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof, and other than expenditures necessary to
maintain existing assets in good repair; or enter into any new lease of
real property or any new lease of personal property providing for annual
payments exceeding $15,000;
(ix) file any applications or make any contract with respect to
branching or site location or relocation;
30
(x) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) control over or any equity interest in any
business or entity, except for investments in marketable equity securities
in the ordinary course of business and not exceeding 5% of the outstanding
shares of any class;
(xi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xii) except as necessitated in the reasonable opinion of Seller due
to changes in interest rates, and in accordance with safe and sound banking
practices, change or modify in any material respect any of its lending or
investment policies, except to the extent required by law or an applicable
regulatory authority;
(xiii) except as necessitated in the reasonable opinion of Seller due
to changes in interest rates, and in accordance with safe and sound banking
practices, enter into any futures contract, option contract, interest rate
caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest;
(xiv) take any action that would result in any of the representations
and warranties of Seller contained in this Agreement not to be true and
correct in any material respect at the Effective Time or that would cause
any of the conditions of Sections 6.1 or 6.3 hereof not to be satisfied; or
(xv) agree to do any of the foregoing.
Nothing contained in this Section 5.6(a) is intended to influence the
general management or overall operations of the Seller or its Subsidiaries
in a manner not permitted by applicable law and the provisions thereof
shall automatically be reduced, if required, in compliance therewith.
(b) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the representations
and warranties of Buyer contained in this Agreement not to be true and
correct in any material respect at the Effective Time or that would cause
any of the conditions of Sections 6.1 or 6.2 hereof not to be satisfied;
(ii) except as contemplated by this Agreement, adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring,
31
recapitalization, or other reorganization, or business combination of the
Buyer or its Subsidiaries; or
(iii) agree to do any of the foregoing.
(c) Seller shall promptly notify Buyer in writing of any matter or event
known to and directly involving Seller or any Seller Subsidiary that is
reasonably likely to result in a Material Adverse Effect on Seller or impair the
ability of Seller to consummate the transactions contemplated herein. Buyer
agrees that, within thee business days of receipt of all relevant information
regarding the matter or event, it will advise Seller whether, on an individual
basis or on a cumulative basis to date, Buyer believes that such occurrence has
resulted in a Material Adverse Effect.
5.7 Certain Actions
(a) Each of Seller and Seller Bank agrees (i) that neither it nor any of
its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) shall initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any Acquisition
Proposal (as defined herein) (including, without limitation, any Acquisitions
Proposal to its stockholders) or, except as may be required in the exercise of
the fiduciary duties of the Board of Directors of the Seller to the Seller or
its shareholders after receiving advice from outside counsel and in response to
an unsolicited request therefor by a person who a majority of the Board of
Directors of the Seller believes intends to submit a Superior Proposal (as
defined below), engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or release any third party from any
obligations under any existing standstill agreement or arrangement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
and (ii) that it will cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 5.7; provided, however, that nothing contained in this Section 5.7 shall
prohibit the Seller or its Board of Directors from taking and disclosing to the
Seller's shareholders a position with respect to a tender offer by a third party
or from making such disclosure to the Seller's shareholders which, in the
judgment of the Board of Directors of the Seller after receiving advice of
outside counsel, may be required under applicable law. From and after the
execution of this Agreement, each of Seller and Seller Bank shall immediately
advise Buyer in writing of the receipt, directly or indirectly, of any
inquiries, discussion, negotiations, or proposals, whether oral or written,
relating to an Acquisition Proposal (including the specific terms thereof and
the identity of the other party or parties involved) and furnish to Buyer within
24 hours of such receipt an accurate description of all material terms
(including any changes or adjustment to such terms as a result of negotiations
or otherwise) of any such inquiry, discussion, negotiation or proposal in
addition to any information provided to any third party relating thereto. In
addition, each of the Seller and Seller Bank shall immediately advise Buyer, in
writing, if the Board of Directors of the Seller or Seller Bank shall make any
determination as to any Acquisition Proposal.
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(b) For purposes of this Agreement: (i) "Acquisition Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 25% or more of any class of equity securities of
Seller or Seller Bank, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 25% or more of any class of
equity securities of Seller or Seller Bank, any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving Seller or Seller Bank,
other than the transactions contemplated by this Agreement, or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the transactions contemplated by
this Agreement or which would reasonably be expected to dilute materially the
benefits to Buyer, Buyer Bank or Merger Sub of the transactions contemplated
hereby; and (ii) "Superior Proposal" means an Acquisition Proposal which a
majority of the disinterested directors of Seller determines in its good faith
judgment (based on advice of Seller's independent financial advisor) to be more
favorable to the shareholders of Seller than the Merger.
5.8 Current Information
During the period from the date hereof to the Effective Time, each of Buyer
and Seller shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
two business days after filing, Buyer and Seller will deliver to the other party
all reports filed by them under the Exchange Act or made available to
stockholders. Buyer and Seller also will deliver to the other party each report
filed by them with the OTS concurrently with the filing of such report.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, Buyer (the "Indemnifying Party") shall indemnify and hold
harmless any present or former director or officer of Seller and each Seller
Subsidiary (the "Indemnified Parties"), with respect to any and all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with any claim, action,
suit, matter, proceeding or investigation, whether, civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time (including the transactions contemplated herein),
if first asserted or claimed prior to the date hereof and Previously Disclosed,
if first asserted or claimed between the date hereof and the Effective Time and
disclosed pursuant to Section 5.16 hereof or if first asserted or claimed after
the Effective Time, to the fullest extent, if any, that such Indemnified Party
would have been entitled to indemnification by Seller or any Seller Subsidiary
under the Certificate of Incorporation, Charter or Bylaws of Seller or any
Seller Subsidiary as Previously Disclosed; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim, and provided, further,
that nothing contained herein shall extend or be deemed a waiver of any
applicable statute of limitations in respect of any claim or claim for
indemnification. Without limiting the foregoing, all limitations of liability
existing in favor of the Indemnified Parties in the Certificate of
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Incorporation, Charter or Bylaws of Seller or any Seller Subsidiary, arising out
of matters existing or occurring at or prior to the Effective Time shall survive
the Merger and shall continue in full force and effect.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest) in accordance with the obligations set forth in
Section 5.9(a) hereof, (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) Buyer shall maintain Seller's existing directors' and officers'
liability insurance policy (or purchase a tail insurance policy providing
coverage on substantially the same terms and conditions) for acts or omissions
occurring prior to the Effective Time by persons who are currently covered by
such insurance policy maintained by Seller and Seller Subsidiaries for a period
of three years following the Effective Time; provided, however, that in no event
shall the Seller be required to expend on an annual basis more than 150% of the
amount paid by Seller and Seller Subsidiaries on an annual basis as of the date
hereof for such insurance coverage (the "Insurance Amount") to maintain or
procure such insurance coverage, and further provided that if Buyer is unable to
maintain or obtain the insurance called for hereby, Buyer shall use all
reasonable efforts to obtain as much comparable insurance as is available for
the Insurance Amount. At the request of Buyer, Seller shall use reasonable
efforts to procure the insurance coverage referred to in the preceding sentence
prior to the Effective Time.
(d) In the event that the Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly
34
intended to be for the irrevocable benefit of, and shall be enforceable by, each
director and officer covered hereby.
5.10 Conforming Accounting and Reserve Policies; Restructuring Expenses
At the request of Buyer, Seller shall cause Seller Bank, immediately prior
to the Effective Time and after satisfaction or waiver of the conditions
precedent set forth in Article VI hereof, to establish and take such reserves
and accruals as Buyer reasonably shall request to conform Seller Bank's loan,
accrual, reserve and other accounting policies to the policies of Buyer Bank,
provided however, (i) such requested conforming adjustment shall not be taken
into account in determining whether Seller has experienced a Material Adverse
Effect, and (ii) Seller shall not be required to take any such action that is
not consistent with GAAP. No reserves, accruals or charges taken in accordance
with this Section 5.10 may be a basis to assert a violation or a breach of a
representation, warranty or covenant of Seller herein or constitute a Material
Adverse Effect.
5.11 Employees and Employee Benefit Plans
(a) It is the intention of Buyer that within a reasonable period of time
following the Effective Time (a) it will provide former full time employees of
Seller or Seller Bank who remain employed by Buyer following the Effective Time
with employee benefit plans substantially similar in the aggregate to those
provided to similarly situated employees of Buyer, (b) any such employees will
receive credit for years of service with Seller or any of its Subsidiaries prior
to the Effective Time for the purpose of eligibility and vesting (but not for
the purpose of accrual of benefits or allocation of employer contributions) and
(c) Buyer shall cause any and all pre-existing condition limitations (to the
extent such limitations did not apply to a pre-existing condition under any
Seller Employee Plan) and eligibility waiting periods under group health plans
to be waived with respect to such participants and their eligible dependents.
(b) Buyer Bank shall have entered into an employment agreement and
non-competition agreement in the form of Exhibit E attached hereto and hereby
made a part hereof with Gary P. Cooper, who shall have cancelled and terminated
his current employment agreement with Seller Bank for a payment of $150,000.
Immediately prior to the Effective Time, Seller Bank shall pay such cancellation
amount and, if Mr. Cooper so desires, it shall also assign to Mr. Cooper the
life insurance/annuity policy it holds on his life for a price equal to the
greater of the policy's then-current book value to Seller Bank or the cash value
of such policy.
(c) In the sole discretion of the Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of obligations
of Seller or Seller Bank under any Seller Employee Plan or under any agreement
referred to in Disclosure Schedule 5.11(d) hereto shall be subject to the
recipient's delivery to the Buyer or a Buyer Subsidiary, as applicable, of (i) a
written acknowledgment signed by such recipient that the payment or payments and
benefits to be made to him or her is in full and complete satisfaction of all
liabilities and obligations thereunder of Seller, Seller Bank, the Buyer or any
Buyer Subsidiary, and each of their respective affiliates, directors, officers,
employees and agents, and (ii) a release by such recipient of all such parties
from further liability in connection with the particular Seller Employee Plan or
agreement, as applicable.
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(d) (i) Prior to the Effective Time, the Seller's employee stock ownership
plan ("ESOP") may be amended to provide for (y) full vesting of benefits by
participants; and (z) elimination of the requirement for a participant to be
employed on the last day of the year to receive an employer contribution, other
annual additions or allocations, in each case effective as of the Effective Time
Seller shall make no other amendments to the ESOP without the prior written
consent of Buyer and shall only make additional contributions to the ESOP at
levels consistent with prior practice and applied to the ESOP indebtedness (the
"ESOP Debt").
(ii) Any cash received by the ESOP trustee in the course of the Merger with
respect to unallocated shares of Seller Common Stock shall be applied by the
trustee to the repayment of the ESOP Debt. The balance of the cash, if any,
received by the ESOP trustee in the course of the Merger with respect to
unallocated shares of Seller Common Stock shall be allocated to the accounts of
all participants in the ESOP who have accounts remaining under the ESOP (whether
or not the participants are then actively employed) and beneficiaries in
proportion to the account balances of the participants and beneficiaries as they
existed as of the Effective Time (and, if required, to the accounts of former
participants or their beneficiaries) as investment earnings of the ESOP, except
to the extent that any portion of the balance of the cash received by the ESOP
trustee would be subject to the limitations of Section 415 of the Code for that
year. Prior to the allocation contemplated by the preceding sentence, the
administrative and other authority previously exercised with respect to the ESOP
by the board of directors of Seller or Seller's Subsidiaries shall be exercised
solely by a committee appointed by the board of directors of Seller and in place
under the terms of the ESOP at the Effective Time (the "Committee"), which
authority shall include the authority to appoint and remove trustees of the
ESOP. If the ESOP is required to be maintained for a transition period after the
Effective Time in order to fully allocate to participants the cash received in
the Merger with respect to unallocated shares of Seller Common Stock, Buyer
agrees to cause the ESOP to be so continued for a period of up to 24 months
after the Effective Time for the benefit of its participants to the extent
permitted by ERISA, the Code, and other applicable laws and regulations;
provided, however, in such event the ESOP shall be amended, effective as of the
Effective Time, to provide that there shall be no new participants in the plan
on or after the Effective Time. Upon the making of all allocations in this
Agreement, the ESOP shall be terminated and the account balances therein will be
distributed to participants or their beneficiaries, with the right of tax-free
roll-over, to the extent permitted by law, to an individual retirement account
or another tax-qualified plan of Buyer, at the election of the distributee. As a
condition to any distributions, Buyer may secure a favorable determination
letter for termination from the IRS relating to that termination and
distribution. If a determination letter is secured, all distributions will be
made in strict compliance therewith. Notwithstanding the foregoing: (y) Seller
shall be entitled to file with the IRS an application, at any time prior to the
Effective Time, for an advance determination letter relating to termination of
the ESOP and/or the methodology for allocating proceeds; and (z) if at the
expiration of the full transition period for continued maintenance of the ESOP
there remain unallocated proceeds, then Buyer may take any action it deems
appropriate with respect to the ESOP, including (but not limited to) terminating
the ESOP and making distributions therefrom or merging the ESOP into another
Buyer tax-qualified plan.
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(e) The Bank 401(k) shall be terminated at or prior to the Effective Time
in accordance with applicable law and in a manner that will not result in the
imposition of any liability or responsibility upon the Buyer or any of its
Subsidiaries.
(f) Any separate agreement entered into by the Buyer and the Seller on the
date hereof relating to employee benefits is incorporated herein by reference
and shall be deemed a part of this Agreement.
5.12 Liquidation
Buyer and Seller shall take, and shall cause their Subsidiaries to take,
all necessary and appropriate actions, including causing Seller, as the
Surviving Corporation, to enter into the Plan of Liquidation, to cause Seller,
as the Surviving Corporation, to merger with and liquidate into Buyer
immediately after the Corporate Merger, or at such other time thereafter as may
be determined by Buyer in its sole discretion. Buyer shall be the surviving
corporation in the Liquidation (the "Liquidation Surviving Corporation"), and
shall continue its existence under the laws of the State of Delaware. The name
of the Liquidation Surviving Corporation shall be East Texas Financial Services,
Inc. The directors and executive officers of the Liquidation Surviving
Corporation upon consummation of the Liquidation shall be the directors and
executive officers of Buyer immediately prior to the consummation of the
Liquidation. Upon consummation of the Liquidation, the separate corporate
existence of Seller, as the Surviving Corporation, shall cease.
5.13 Bank Merger
Buyer and Seller shall take, and shall cause their subsidiaries to take,
all necessary and appropriate actions, including causing Seller Bank and Buyer
Bank to enter into the Bank Merger Agreement, to cause Seller Bank to merge with
and into Buyer Bank immediately after the Liquidation, or at such other time
thereafter as may be determined by Buyer in its sole discretion. Buyer Bank
shall be the surviving bank in the Bank Merger (the "Surviving Bank"), and shall
continue its existence under the laws of the United States as a wholly-owned
subsidiary of the Buyer. In the Bank Merger, the issued and outstanding shares
of common stock of Seller Bank (representing the only issued and outstanding
shares of its capital stock) will be exchanged for a number of shares of Buyer
Bank common stock representing the fair market value of Seller Bank immediately
prior to the consummation of the Bank Merger and such shares of Buyer Bank
common stock received in the exchange shall be distributed to Buyer. The name of
the Surviving Bank shall be First Federal Savings and Loan Association of Tyler.
The directors and executive officers of the Surviving Bank upon consummation of
the Bank Merger shall be the directors and executive officers of Buyer Bank
immediately prior to the consummation of the Bank Merger. Upon consummation of
the Bank Merger, the separate existence of Seller Bank shall cease.
5.14 Organization of Merger Sub
Buyer shall cause Merger Sub to be organized under the DGCL as soon as
practicable hereafter. Following the organization, the Board of Directors of
Merger Sub shall approve this
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Agreement and the transactions contemplated hereby, whereupon Merger Sub shall
become a party to, and be bound by, this Agreement.
5.15 Integration of Policies
During the period from the date hereof to the Effective Time, Seller and
Seller Bank shall, and shall cause their directors, officers and employees to,
and shall make all reasonable efforts to cause their respective data processing
service providers to, cooperate and assist Buyer in connection with an
electronic and systematic conversion of all applicable data regarding Seller to
Buyer's system of electronic data processing. In furtherance of the foregoing,
Seller shall make reasonable arrangements during normal business hours to permit
representatives of Buyer to train Seller and Seller Bank employees in Buyer's
system of electronic data processing.
5.16 Disclosure Supplements
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered materially inaccurate thereby; no such supplement or
amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.17 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party. Each party will promptly inform the other party
of any facts applicable to it that would be likely to prevent or materially
delay approval of the Merger or any of the other transactions contemplated
hereby by any Governmental Entity or third party or which would otherwise
prevent or materially delay consummation of such transactions.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
The respective obligations of Buyer and Seller to effect the Merger shall
be subject to satisfaction of the following conditions at or prior to the
Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger and the other transactions
contemplated hereby shall
38
have been duly and validly taken by Buyer, Merger Sub and Seller, including
without limitation adoption of this Agreement by the requisite vote of the
shareholders of Seller.
(b) All approvals and consents from any Governmental Entity the approval or
consent of which is required for the consummation of the Merger and the other
transactions contemplated hereby shall have been received and all statutory
waiting periods in respect thereof shall have expired; and Buyer, Buyer Bank,
Seller and Seller Bank shall have procured all other approvals, consents and
waivers of each person (other than the Governmental Entities referred to above)
whose approval, consent or waiver is necessary to the consummation of the Merger
and the other transactions contemplated hereby and the failure of which to
obtain would have the effects set forth in the following proviso clause;
provided, however, that no approval or consent referred to in this Section
6.1(b) shall be deemed to have been received if it shall include any condition
or requirement that, individually or in the aggregate, would so materially
reduce the economic or business benefits of the transactions contemplated by
this Agreement to Buyer that had such condition or requirement been known,
Buyer, in its reasonable judgment, would not have entered into this Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank shall be
subject to any statute, rule, regulation, injunction or other order or decree
which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Corporate Merger, the Liquidation, the Bank Merger or the
other transactions contemplated hereby.
6.2 Conditions Precedent - Seller
The obligations of Seller to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by Seller pursuant to Section 7.4 hereof.
(a) The representations and warranties of Buyer set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date. Notwithstanding the preceding
sentence, except for the representations and warranties contained in Section
4.15; any inaccuracies in the representations and warranties of Buyer shall not
prevent the satisfaction of the condition contained in this Section 6.2(a)
unless the cumulative effect of all such inaccuracies, taken in the aggregate,
represent a Material Adverse Effect on Buyer. In applying the preceding
sentence, the determination of whether a representation and warranty of Buyer is
inaccurate shall be made without regard to any language in Article IV which
would otherwise qualify such representation and warranty individually by
reference to materiality or a Material Adverse Effect.
(b) Buyer shall have performed in all material respects all obligations and
complied with all covenants required to be performed and complied with by it
pursuant to this Agreement on or prior to the Effective Time.
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(c) Buyer shall have delivered to Seller a certificate, dated the date of
the Closing and signed by its President and Chief Executive Officer and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) No proceeding initiated by any Governmental Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or the other transactions contemplated hereby shall be pending.
(e) Buyer shall have furnished Seller with such certificates of its
respective officers or others and such other documents to evidence fulfillment
of the conditions set forth in Sections 6.1 and 6.2 as such conditions relate to
Buyer as Seller may reasonably request.
6.3 Conditions Precedent - Buyer
The obligations of Buyer to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by Buyer pursuant to Section 7.4 hereof.
(a) The representations and warranties of Seller set forth in Article III
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, or on the date when made in the case of a representation and warranty
which specifically relates to an earlier date. Notwithstanding the preceding
sentence, except for the representations and warranties contained in the second
and fourth sentences of Section 3.1 and in Section 3.13, any inaccuracies in the
representations and warranties of Seller shall not prevent the satisfaction of
the condition contained in this Section 6.3(a) unless the cumulative effect of
all such inaccuracies, taken in the aggregate, represent a Material Adverse
Effect on Seller. In applying the preceding sentence, the determination of
whether a representation and warranty of Seller is inaccurate shall be made
without regard to any language in Article III which would otherwise qualify such
representation and warranty individually by reference to materiality or a
Material Adverse Effect.
(b) Seller shall have performed in all material respects all obligations
and covenants required to be performed by it pursuant to this Agreement on or
prior to the Effective Time.
(c) Seller shall have delivered to Buyer a certificate, dated the date of
the Closing and signed by its President and Chief Executive Officer and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and 6.3(b) have been satisfied.
(d) No proceeding initiated by any Governmental Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger
or the other transactions contemplated hereby shall be pending.
40
(e) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to Seller
as Buyer may reasonably request.
(f) No more than 10% of the outstanding shares of Seller Common Stock shall
be Dissenting Shares.
(h) The Federal Stock Charter of Seller Bank shall have been amended to
delete Section 8A thereof.
(g) Buyer shall have received a letter of resignation from each director of
Seller and Seller Bank effective as of the Effective Time.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent in
writing of the Boards of Directors of the parties hereto;
(b) at any time on or prior to the Effective Time, by Buyer in writing if
Seller has, or by Seller in writing if Buyer has, in any material respect,
breached any material covenant or undertaking contained herein or any
representation or warranty contained herein, in any case if such breach would
have a Material Adverse Effect on the party and has not been cured by the
earlier of 30 days after the date on which written notice of such breach is
given to the party committing such breach or the Effective Time;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary to
consummate the Merger or the other transactions contemplated hereby is denied or
withdrawn at the request or recommendation of the Governmental Entity which must
grant such approval, unless within the 25-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 7.1(c)(i) if
such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein, or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
Merger or the other transactions contemplated by this Agreement;
(d) by either Buyer or Seller in writing if the Effective Time has not
occurred by the close of business on June 30, 2000, provided that this right to
terminate shall not be available to any party
41
whose failure to perform an obligation in breach of such party's obligations
under this Agreement has been the cause of, or resulted in, the failure of the
Merger to be consummated by such date; and
(e) by Seller if, prior to the Effective Time, any person has made a
bona fide proposal relating to an Acquisition Proposal, or has commenced a
tender or exchange offer for the Seller Common Stock, and the Board of Directors
of Seller determines in good faith (i) after consultation with its financial
advisors, that such transaction constitutes a Superior Proposal and (ii) after
having received the advice of outside legal counsel to Seller, that the failure
to engage in such negotiations or discussions or provide such information would
result in a breach of the fiduciary duties of the Board of Directors of Seller
under applicable law;
(f) by Buyer, if the Board of Directors of Seller shall have (i) failed
to recommend to the holders of the Seller Common Stock that they approve and
adopt this Agreement (the "Stockholder Acceptance"), (ii) withdrawn or modified
its approval or recommendation of this Agreement and the Corporate Merger, (iii)
shall have approved or recommended an Acquisition Proposal, (iv) shall have
resolved to effect any of the foregoing or (v) shall have otherwise taken steps
to impede the Stockholder Acceptance;
(g) at any time, by either Buyer or Seller, if the shareholders of
Seller do not approve this Agreement;
For purposes of this Section 7.1, termination by Buyer also shall be
deemed to be termination on behalf of the Merger Sub.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality set forth in Section 5.4(b) and expenses
and the termination fees set forth in Section 8.1, and this Section 7.2, shall
survive any such termination and (ii) a termination pursuant to Section 7.1(b),
(c), (d) or (e) shall not relieve the breaching party from liability for willful
breach of any covenant, undertaking, representation or warranty giving rise to
such termination.
7.3 Survival of Representations, Warranties and Covenants
Except as expressly provided herein, all representations, warranties and
covenants in this Agreement or in any instrument delivered pursuant hereto or
thereto shall expire on, and be terminated and extinguished at, the Effective
Time other than covenants that by their terms are to be performed after the
Effective Time (including without limitation the covenants set forth in Sections
5.9, 5.11, 5.12 and 5.13 hereof), provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive the Buyer or Seller (or any director, officer or controlling person
of either thereof) of any defense at law or in equity which otherwise would be
available against the claims of any person, including, without limitation, any
shareholder or former shareholder of either Buyer or Seller.
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Except as and to the extent set forth in Article III hereof, the Seller
makes no representations or warranties whatsoever and disclaims all liability
and responsibility for any other representation, warranty, statement or
information made or communicated (orally or in writing) to Buyer (including, but
not limited to, any opinion, information or advice which may have been provided
to Buyer by any officer, stockholder, director, employee, agent, consultant,
attorney or representative of the Seller or the Seller Subsidiaries or any of
its Affiliates). Buyer acknowledges and affirms that it has had full access to
the Securities Documents of the Seller and other information regarding Seller
and that Buyer has made its own independent investigation, analysis, evaluation
and verification of Seller and the Seller Subsidiaries, their business, assets,
properties, operations and their financial condition.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of Seller) extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party, (iii)
to the extent permitted by law, satisfaction of any of the conditions precedent
to its obligations contained herein or (iv) the performance by the other party
of any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof executed
after shareholders of Seller have approved this Agreement, shall not modify
either the amount or form of the consideration to be provided hereby to the
holders of Seller Common Stock upon consummation of the Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by or under
the direction of their respective Board of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses; Termination Fees
(a) Subject to Section 8.1(b), each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by this Agreement, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, provided that
notwithstanding anything to the contrary contained in this Agreement, neither
Buyer nor Seller shall be released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement.
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(b) In the event that (i) this Agreement is terminated pursuant to Section
7.1(e), (f) or (g), and (ii) in the case of a termination pursuant to Section
7.1(g), any person (other than Buyer) shall have made, or proposed, communicated
or disclosed in any manner which is or otherwise becomes public an Acquisition
Proposal prior to any meeting at which the shareholders of Seller are to vote
upon this Agreement, then the Seller shall promptly pay Buyer a termination fee
of $275,000.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein and therein. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and thereto and
their respective successors. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors, any rights, remedies, obligations or liabilities other
than as set forth in Sections 5.9 and 5.11 hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to Buyer:
East Texas Financial Services, Inc.
1200 South Beckham Avenue
Tyler, Texas 75701
Attn: Gerald Free
President and Chief Executive Officer
Fax: (903) 593-1094
With a required copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, DC 20005
Attn: Martin L. Meyrowitz, P.C.
James S. Fleischer, P.C.
Fax: (202) 682-0354
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If to Seller:
Gilmer Financial Services, Inc.
P.O. Box 1808
218 West Cass Street
Gilmer, Texas 75644
Attn: Gary P. Cooper
President
Fax: (903) 843-5331
With a required copy to:
Selman & Munson
111 Congress Avenue
Suite 1000
Austin, Texas 78701
Attn: Jack Selman, Esq.
Fax: (512) 505-5956
or to such other address as the person to whom the notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, Buyer may,
with the written consent of Seller, which shall not be unreasonably withheld,
elect, subject to the filing of all necessary applications and the receipt of
all required regulatory approvals, to modify the structure of the acquisition of
Seller set forth herein, provided that (i) the consideration to be paid to the
holders of Seller Common Stock is not thereby changed in kind or reduced in
amount as a result of such modification and (ii) such modification will not
materially delay or jeopardize receipt of any required regulatory approvals or
any other condition to the obligations of Buyer set forth in Sections 6.1 and
6.3 hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 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.
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8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and entirely to be
performed within such jurisdiction. Any action, suit or proceeding arising out
of, based on or in connection with this Agreement or the other transactions
contemplated hereby may be brought only in any Smith County, Texas court having
jurisdiction over the subject matter hereof, provided that the parties
specifically agree that such jurisdiction shall be proper in, among other
courts, the United States District Court for the Eastern District of Texas, and
each party covenants and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereby may not be enforced in or by such court. The parties contractually agree
that venue for any cause of action arising out of this Agreement shall be in
Smith County, Texas. The parties agree that this is a "qualified transaction" in
accordance with Section 35.51 of the Texas Business and Commerce Code and bears
a reasonable relationship to the State of Texas.
8.9 Limitation on Liability
Notwithstanding the provisions of this Agreement, the maximum liability of
the Seller for all losses, claims, damages or expenses under this Agreement or
any related document or instrument or otherwise shall not exceed $350,000.
8.10 Time of Essence
Time is of the essence in the performance of the obligations stated herein.
8.11 Attorneys Fees
If any action at law, in equity or by arbitration, including an action for
declaratory relief, is brought to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys fees from the other party, which fees may be set by the court in the
trial or the arbitrator of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief which may be awarded.
8.12 Severability
If any portion of this Agreement is declared by a court of competent
jurisdiction to be invalid or unenforceable, such declaration shall not affect
the validity of the remaining provisions.
8.13 Delivery by Facsimile
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This Agreement shall become effective upon execution and delivery hereof by
all the parties hereto; delivery of this Agreement may be made by facsimile to
the parties with original copies promptly to follow by overnight courier.
8.14 Exhibits
Each and all of the Exhibits referred to herein and attached hereto are
hereby incorporated into this Agreement for all purposes as fully as if set
forth herein. The Exhibits include Exhibits "A" through "E."
8.15 Arbitration
Any controversy or claim arising out of this Agreement, or the breach
thereof, shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitration may be entered in any court having jurisdiction thereof. The
arbitration agreement as set forth herein shall not limit a court from granting
a temporary restraining order or preliminary injunction in order to preserve the
status quo of the parties pending arbitration. Further, the arbitrator(s) shall
have power to enter such orders by way of interim award, and they shall be
enforceable in court. The place of such arbitration shall be in Dallas County,
Texas.
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IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in counterparts by their duly authorized officers and their
corporate seal to be hereunto affixed and attested by their officers thereunto
duly authorized, all as of the day and year first above written.
GILMER FINANCIAL SERVICES, INC.
Attest:
/s/ Sheri Parish By: /s/ Gary P. Cooper
- ---------------- ------------------
Sheri Parish Gary P. Cooper
Secretary President
EAST TEXAS FINANCIAL SERVICES, INC.
Attest:
/s/ Sandra J. Allen By: /s/ Gerald W. Free
- ------------------- ------------------
Sandra J. Allen Gerald W. Free
Secretary President
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