EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
SOUTHWEST SECURITIES GROUP, INC.
DALLAS, TEXAS
AND
ASBI HOLDINGS, INC.
ARLINGTON, TEXAS
Dated as of August 10, 1999
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TABLE OF CONTENTS
ARTICLE I.ACQUISITION OF ASBI BY SWS............................................................. 2
SECTION 1.01 Merger of Newco with and into ASBI............................................ 2
SECTION 1.02 Effects of the Merger......................................................... 2
SECTION 1.03 Articles of Incorporation and Bylaws.......................................... 2
SECTION 1.04 Directors and Officers........................................................ 2
SECTION 1.05 Conversion of the ASBI Common Stock........................................... 2
SECTION 1.06 ASBI Dissenting Shares........................................................ 4
SECTION 1.07 SWS Common Stock.............................................................. 4
SECTION 1.08 ASBI Shareholders' Meeting.................................................... 4
SECTION 1.09 SWS Shareholders' Meeting..................................................... 5
SECTION 1.10 Exchange of Certificates...................................................... 5
SECTION 1.11 Rights of Former ASBI Shareholders............................................ 6
SECTION 1.12 Piggyback Registration........................................................ 6
SECTION 1.13 Escrow of Shares.............................................................. 7
ARTICLE II.THE CLOSING AND THE CLOSING DATE...................................................... 8
SECTION 2.01 Time and Place of the Closing and Closing Date................................ 8
SECTION 2.02 Effective Time................................................................ 8
SECTION 2.03 Actions to be Taken at the Closing by ASBI.................................... 8
SECTION 2.04 Actions to be Taken at the Closing by SWS..................................... 10
SECTION 2.05 Further Assurances............................................................ 11
ARTICLE III.REPRESENTATIONS AND WARRANTIES OF ASBI............................................... 11
SECTION 3.01 Organization and Qualification................................................ 11
SECTION 3.02 Execution and Delivery........................................................ 12
SECTION 3.03 ASBI Capitalization........................................................... 12
SECTION 3.04 ASBI Subsidiaries............................................................. 13
SECTION 3.05 Compliance with Laws, Permits and Instruments................................. 13
SECTION 3.06 ASBI Financial Statements..................................................... 14
SECTION 3.07 The Bank...................................................................... 14
SECTION 3.08 Litigation.................................................................... 15
SECTION 3.09 Consents and Approvals........................................................ 16
SECTION 3.10 Undisclosed Liabilities....................................................... 16
SECTION 3.11 Title to Assets............................................................... 16
SECTION 3.12 Absence of Certain Changes or Events.......................................... 16
SECTION 3.13 Leases, Contracts and Agreements.............................................. 19
SECTION 3.14 Taxes......................................................................... 19
SECTION 3.15 Insurance..................................................................... 21
SECTION 3.16 No Adverse Change............................................................. 21
SECTION 3.17 Proprietary Rights............................................................ 21
SECTION 3.18 Transactions with Certain Persons and Entities................................ 21
SECTION 3.19 Evidences of Indebtedness..................................................... 22
SECTION 3.20 Employee Relationships........................................................ 22
SECTION 3.21 Condition of Assets........................................................... 22
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SECTION 3.22 Environmental Compliance...................................................... 22
SECTION 3.23 Regulatory Compliance......................................................... 23
SECTION 3.24 Absence of Certain Business Practices......................................... 23
SECTION 3.25 Information for Proxy Statements.............................................. 24
SECTION 3.26 Dissenting Shareholders....................................................... 24
SECTION 3.27 Books and Records............................................................. 24
SECTION 3.28 Forms of Instruments, Etc..................................................... 24
SECTION 3.29 Fiduciary Responsibilities.................................................... 24
SECTION 3.30 Guaranties.................................................................... 24
SECTION 3.31 Voting Trust or Buy-Sell Agreements........................................... 24
SECTION 3.32 Employee Benefit Plans........................................................ 25
SECTION 3.33 Year 2000..................................................................... 26
SECTION 3.34 Accounting, Tax, and Regulatory Matters....................................... 27
SECTION 3.35 Nonaccredited Investors....................................................... 27
SECTION 3.36 Information Systems........................................................... 28
SECTION 3.37 Representations Not Misleading................................................ 28
ARTICLE IV.REPRESENTATIONS AND WARRANTIES OF SWS................................................ 28
SECTION 4.01 Organization and Qualification............................................... 28
SECTION 4.02 Execution and Delivery....................................................... 28
SECTION 4.03 Authorized and Outstanding Stock of SWS...................................... 29
SECTION 4.04 Authorized and Outstanding Stock of Newco.................................... 29
SECTION 4.05 Compliance with Laws, Permits and Instruments................................ 29
SECTION 4.06 Litigation................................................................... 29
SECTION 4.07 Consents and Approvals....................................................... 30
SECTION 4.08 SEC Filings; SWS Financial Statements........................................ 30
SECTION 4.09 Proxy Statement.............................................................. 30
SECTION 4.10 Representations Not Misleading............................................... 31
ARTICLE V.COVENANTS OF ASBI..................................................................... 31
SECTION 5.01 Best Efforts................................................................. 31
SECTION 5.02 Merger Agreement............................................................. 31
SECTION 5.03 Information for Regulatory Applications and Proxy Statements................. 31
SECTION 5.04 Required Acts of the ASBI Companies......................................... 32
SECTION 5.05 Prohibited Acts of the ASBI Companies........................................ 33
SECTION 5.06 Access; Pre-Closing Investigation............................................ 35
SECTION 5.07 Invitations to and Attendance at Directors' and Committee Meet............... 36
SECTION 5.08 Additional Financial Statements.............................................. 36
SECTION 5.09 Untrue Representations....................................................... 36
SECTION 5.10 Litigation and Claims........................................................ 36
SECTION 5.11 Notice of Material Adverse Changes........................................... 36
SECTION 5.12 No Negotiation with Others................................................... 37
SECTION 5.13 Consents and Approvals....................................................... 37
SECTION 5.14 Environmental Investigation; Right to Terminate Agreement.................... 37
SECTION 5.15 Proxies...................................................................... 38
SECTION 5.16 S Corporation Termination.................................................... 39
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SECTION 5.17 Conforming Accounting and Reserve Policies; Restructuring Expenses............ 39
SECTION 5.18 Affiliate Agreements.......................................................... 39
SECTION 5.19 Environmental Matters......................................................... 40
ARTICLE VI.COVENANTS OF SWS...................................................................... 40
SECTION 6.01 Best Efforts.................................................................. 40
SECTION 6.02 Incorporation and Organization of Newco....................................... 40
SECTION 6.03 Merger Agreement.............................................................. 40
SECTION 6.04 Information for Regulatory Applications and Proxy Statements.................. 40
SECTION 6.05 Acts of Newco................................................................. 41
SECTION 6.06 Untrue Representations........................................................ 41
SECTION 6.07 Litigation and Claims......................................................... 41
SECTION 6.08 Regulatory and Other Approvals................................................ 41
SECTION 6.09 Adverse Change................................................................ 41
SECTION 6.10 Employee Benefits and Contracts............................................... 41
ARTICLE VII.CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ASBI...................................... 42
SECTION 7.01 Compliance with Representations, Warranties and Agreements.................... 42
SECTION 7.02 Shareholder Approvals......................................................... 42
SECTION 7.03 Government and Other Approvals................................................ 42
SECTION 7.04 No Litigation................................................................. 42
SECTION 7.05 Pooling Letter................................................................ 43
SECTION 7.06 SWS Common Stock.............................................................. 43
SECTION 7.07 Tax Opinion................................................................... 43
SECTION 7.08 Opinion of Counsel............................................................ 43
SECTION 7.09 Registration Rights Agreement................................................. 43
SECTION 7.10 No Material Adverse Change.................................................... 43
ARTICLE VIII.CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SWS...................................... 43
SECTION 8.01 Compliance with Representations, Warranties and Agreements.................... 43
SECTION 8.02 Shareholder Approvals......................................................... 44
SECTION 8.03 Government and Other Approvals................................................ 44
SECTION 8.04 No Litigation................................................................. 44
SECTION 8.05 Accounting Treatment.......................................................... 45
SECTION 8.06 No Material Adverse Change.................................................... 45
SECTION 8.07 Dissenters.................................................................... 45
SECTION 8.08 Tax Opinion................................................................... 45
SECTION 8.09 Pooling Letter................................................................ 45
SECTION 8.10 Fairness Opinion.............................................................. 45
SECTION 8.11 Releases of Directors and Officers of ASBI Companies.......................... 45
SECTION 8.12 Non Compete and Employment Agreements......................................... 46
SECTION 8.13 Affiliate Agreements.......................................................... 46
SECTION 8.14 Opinion of Counsel............................................................ 46
SECTION 8.15 Compliance with the 1933 Act.................................................. 46
SECTION 8.16 Termination of Shareholder Agreement and Voting Agreement.................... 46
SECTION 8.17 Escrow Agreement; Environmental Liabilities................................... 46
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ARTICLE IX.TERMINATION AND ABANDONMENT........................................................... 46
SECTION 9.01 Right of Termination.......................................................... 46
SECTION 9.02 Notice of Termination......................................................... 48
SECTION 9.03 Effect of Termination......................................................... 48
SECTION 9.04 Break-Up Fee.................................................................. 48
ARTICLE X.CONFIDENTIAL INFORMATION............................................................... 49
SECTION 10.01 Definition of "Recipient," "Disclosing Party" and" Representat............... 49
SECTION 10.02 Definition of "Subject Information".......................................... 49
SECTION 10.03 Confidentiality.............................................................. 49
SECTION 10.04 Securities Law Concerns...................................................... 49
SECTION 10.05 Return of Subject Information................................................ 50
SECTION 10.06 Specific Performance/Injunctive Relief....................................... 50
ARTICLE XI.MISCELLANEOUS......................................................................... 50
SECTION 11.01 Survival of Representations and Warranties................................... 50
SECTION 11.02 Expenses..................................................................... 50
SECTION 11.03 Brokerage Fees and Commissions............................................... 50
SECTION 11.04 Entire Agreement............................................................. 51
SECTION 11.05 Further Cooperation.......................................................... 51
SECTION 11.06 Severability................................................................. 51
SECTION 11.07 Notices...................................................................... 51
SECTION 11.08 GOVERNING LAW................................................................ 53
SECTION 11.09 Multiple Counterparts........................................................ 53
SECTION 11.10 Certain Definitions.......................................................... 53
SECTION 11.11 Specific Performance......................................................... 55
SECTION 11.12 Attorneys' Fees and Costs.................................................... 56
SECTION 11.13 Rules of Construction........................................................ 56
SECTION 11.14 Binding Effect; Assignment................................................... 56
SECTION 11.15 Public Disclosure............................................................ 56
SECTION 11.16 Extension; Waiver............................................................ 57
SECTION 11.17 Amendments................................................................... 57
SECTION 11.18 Binding Arbitration Relating to Environmental Escrow......................... 57
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AGREEMENT AND PLAN OF REORGANIZATION
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This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of the 10th day of August, 1999, by and between SOUTHWEST
SECURITIES GROUP, INC., a Delaware corporation with its principal offices in
Dallas, Texas ("SWS"), and ASBI HOLDINGS, INC., a Texas corporation and unitary
savings and loan holding company with its principal offices in Arlington, Texas
("ASBI").
W I T N E S S E T H:
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WHEREAS, ASBI owns all of the stock of Arlington Savings Bancshares, Inc.,
a Delaware corporation and unitary savings and loan holding company ("ASBI
Delaware"), and ASBI Delaware owns all of the stock of First Savings Bank,
F.S.B., Arlington, Texas, a federal savings bank (the "Bank");
WHEREAS, SWS wishes to acquire all of the issued and outstanding shares of
ASBI Voting Common Stock, par value $0.001 per share ("ASBI Voting Common
Stock") and ASBI Non-Voting Common Stock, par value $0.001 per share (the "ASBI
Non-Voting Common Stock") (collectively, the ASBI Voting Common Stock and ASBI
Non-Voting Common Stock are referred to herein as the "ASBI Common Stock") in
exchange for shares of common stock of SWS, par value $0.10 per share ("SWS
Common Stock") in a transaction that qualifies (i) for federal tax purposes as a
reorganization pursuant to Section 368(a) of the Internal Revenue Code of 1986
(the "Code"), and (ii) for accounting purposes for pooling-of-interests
treatment;
WHEREAS, SWS desires to effect such acquisition through its wholly-owned
subsidiary, SWS Acquisition Corporation, a Texas corporation ("Newco"), by
causing Newco to be merged with and into ASBI (the "Merger");
WHEREAS, SWS and ASBI believe that the Merger, as provided for and subject
to the terms and conditions set forth in this Agreement and all exhibits,
schedules and supplements hereto, is in the best interests of SWS, ASBI and
their respective shareholders;
WHEREAS, SWS and ASBI desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement and certain additional agreements
related to the transactions contemplated hereby; and
WHEREAS, the respective boards of directors of SWS and ASBI have approved
this Agreement and the proposed transactions substantially on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the conditions set
forth below, SWS and ASBI undertake, promise, covenant and agree with each other
as follows:
ARTICLE I.
ACQUISITION OF ASBI BY SWS
SECTION 1.01 Merger of Newco with and into ASBI. Subject to the terms and
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conditions of this Agreement and the Agreement and Plan of Merger to be entered
into between ASBI and Newco and joined by SWS (the "Merger Agreement"), attached
hereto as Exhibit A, SWS shall cause Newco to be merged with and into ASBI
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pursuant to the provisions of Part Five of the Texas Business Corporation Act
(the "TBCA").
SECTION 1.02 Effects of the Merger. The Merger shall have the effects set
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forth in Article 5.06 of the TBCA. Following the Merger, ASBI shall continue as
the corporation resulting from the Merger (the "Surviving Corporation"), and the
separate corporate existence of Newco shall cease. The name of the Surviving
Corporation shall be "ASBI Holdings, Inc." The existing offices and facilities
of ASBI immediately preceding the Merger shall be the principal offices and
facilities of the Surviving Corporation following the Merger. At the Effective
Time (as hereinafter defined), all rights, title and interests to all real
estate and other property owned by each of Newco and ASBI shall be allocated to
and vested in the Surviving Corporation without reversion or impairment, without
further act or deed, and without any transfer or assignment having occurred, but
subject to any existing liens or encumbrances thereon. At the Effective Time,
all liabilities and obligations of Newco and ASBI shall be allocated to the
Surviving Corporation, and the Surviving Corporation shall be the primary
obligor therefor and no other party to the Merger shall be liable therefor. At
the Effective Time, a proceeding pending by or against either Newco or ASBI may
be continued as if the Merger did not occur, or the Surviving Corporation may be
substituted in the proceedings.
SECTION 1.03 Articles of Incorporation and Bylaws. The Articles of
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Incorporation and Bylaws, respectively, of the Surviving Corporation shall be
the Articles of Incorporation and Bylaws of ASBI (as such Articles of
Incorporation and Bylaws may be amended and restated pursuant to the terms of
the Merger Agreement).
SECTION 1.04 Directors and Officers. The directors and officers,
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respectively, of the Surviving Corporation shall be as set forth in the Merger
Agreement.
SECTION 1.05 Conversion of the ASBI Common Stock. At the Effective Time of
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the Merger:
A. Subject to the terms of this Agreement and adjustment pursuant to
Section 1.05B of this Agreement, each share of ASBI Common Stock
outstanding immediately prior to the Effective Time, other than any
Dissenting Shares (as such term is defined in the Merger Agreement), shall
be converted into the right to receive shares of SWS Common Stock (the
"Merger Consideration") in the amount equal to the quotient of (i)
2,600,000 shares of SWS Common Stock divided by (ii) the number of shares
of ASBI Common Stock outstanding immediately prior to the Effective Time
(herein the "Exchange Ratio").
B. Except for payment of a 10% stock dividend payable to SWS
shareholders of record on July 15, 1999 (the "SWS Stock Dividend"), in the
event SWS changes the number of shares of SWS Common Stock issued and
outstanding prior to the Effective Time
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as a result of a stock split, stock dividend, recapitalization, or similar
transaction with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective time thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall
be proportionately adjusted. No adjustment shall be made as a result of the
SWS Stock Dividend.
C. Notwithstanding any other provision of this Agreement, each holder
of shares of ASBI Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of SWS
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of SWS Common Stock
multiplied by the market value of one share of SWS Common Stock at the
Effective Time. The market value of one share of SWS Common Stock at the
Effective Time shall be the last sale price of SWS Common Stock on the New
York Stock Exchange (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by SWS) on the
last trading day preceding the Effective Time. No such holder will be
entitled to dividends, voting rights, or any other rights as a shareholder
in respect of any fractional shares.
D. Each Dissenting Share shall be converted into the right to receive
payment from the Surviving Corporation with respect thereto in accordance
with the provisions of the TBCA;
E. The shares of Newco (the "Newco Stock") outstanding at the
Effective Time shall, at the Effective Time and by virtue of the Merger and
without any action on the part of SWS or any other party as holder thereof,
be converted into a like number of shares of common stock of the Surviving
Corporation with a par value of $0.001 per share, with the effect that the
number of shares of the common stock of the Surviving Corporation
outstanding immediately after the Effective Time shall be equal to the
aggregate number of shares of Newco Stock outstanding immediately before
the Effective Time. The authorized number of shares of common stock of the
Surviving Corporation shall be the same as the authorized number of shares
of Newco Stock immediately prior to the Effective Time.
F. The shares of ASBI Common Stock issued and outstanding at the
Effective Time shall, by operation of law and without any action on the
part of the holder thereof, unless dissenters' rights under applicable law
are being perfected with respect thereto, be converted into the right to
receive the Merger Consideration.
G. On or following the Effective Time, each holder of ASBI Common
Stock shall be required to surrender, in accordance with Section 1.10, his
or her shares of ASBI Common Stock to the exchange agent designated by SWS
(the "Exchange Agent"), and upon such surrender, each such holder shall be
entitled to receive from SWS within ten (10) business days thereafter, the
Merger Consideration which such holder is entitled to receive as described
in Section 1.05A of this Agreement. Until so surrendered, each such
outstanding certificate representing shares of ASBI Common Stock shall be
deemed for all
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purposes, subject only to dissenters' rights under applicable law, to
evidence solely the right to receive such Merger Consideration from SWS.
SECTION 1.06 ASBI Dissenting Shares. ASBI shall give SWS prompt notice
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upon receipt by ASBI of any written notice from any ASBI shareholder of such
shareholder's intent to dissent from the Merger pursuant to Articles 5.11 and
5.12 of the TBCA, and will keep SWS apprised of all details known to ASBI
relating to all such notices of intent to dissent including but not limited to
informing SWS of the names of all shareholders providing such notice, the number
of shares owned by such shareholders and the dates of their respective notices.
SECTION 1.07 SWS Common Stock. ASBI acknowledges and agrees that the
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shares of SWS Common Stock to be issued in the Merger will not have been
registered under the Securities Act of 1933, as amended (the "1933 Act"), or
under any state securities laws, and the certificates representing shares of SWS
Common Stock will bear an appropriate legend substantially in the following
form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities laws and neither such securities
nor any interest therein may be offered, sold, pledged, assigned
or otherwise transferred unless (1) a registration statement with
respect thereto is effective under the Act and any applicable
state securities laws or (2) the Company receives an opinion of
counsel, which counsel and opinion are reasonably satisfactory to
the Company, that such securities may be offered, sold, pledged,
assigned or transferred in the manner contemplated without an
effective registration statement under the Act or applicable
state securities laws."
SECTION 1.08 ASBI Shareholders' Meeting'. ASBI, acting through its board
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of directors, shall, in accordance with applicable law:
A. Duly call, give notice of, convene and hold a meeting of its
shareholders (the "ASBI Shareholders' Meeting") as soon as practicable for
the purpose of approving and adopting the Merger and the Merger Agreement
and the transactions contemplated hereby and thereby;
B. Require no greater than the minimum vote of the holders of ASBI
Common Stock required by applicable law in order to approve the Merger and
the Merger Agreement;
C. Subject to its fiduciary duties to the shareholders of ASBI,
include in the ASBI Proxy Statement/PPM (defined in Section 1.08D below)
the recommendation of its board of directors that the shareholders of ASBI
vote in favor of the approval and adoption of the Merger and the Merger
Agreement and the transactions contemplated hereby and thereby; and
D. Cause the ASBI Proxy Statement/PPM to be mailed to the
shareholders of ASBI as soon as practicable, and use its best efforts to
obtain the approval and adoption of the Merger and the Merger Agreement by
shareholders holding at least the minimum number of shares of ASBI Common
Stock entitled to vote at the ASBI Shareholders' Meeting
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necessary to approve the Merger and the Merger Agreement under applicable
law. The letter to ASBI shareholders, notice of meeting, proxy
statement/private placement memorandum and form of proxy to be distributed
to shareholders in connection with the Merger and the Merger Agreement
shall be in form and substance satisfactory to SWS and are collectively
referred to herein as the "ASBI Proxy Statement/PPM."
SECTION 1.09 SWS Shareholders' Meeting. SWS, acting through its board of
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directors, shall, in accordance with applicable law:
A. Duly call, give notice of, convene and hold a meeting of its
shareholders (the "SWS Shareholders' Meeting") for the purpose of obtaining
the shareholder approval in connection with the transactions contemplated
by this Agreement and the Merger Agreement, including without limitation,
approving the issuance of the SWS Common Stock pursuant to the terms of
this Agreement and increasing the number of authorized shares of SWS, if
necessary;
B. Subject to its fiduciary duties to the shareholders of SWS,
include in the SWS Proxy Statement (defined in Section 1.09C below) the
recommendation of its board of directors that the shareholders of SWS vote
in favor of the approval of the issuance of the SWS Common Stock and the
transactions contemplated by this Agreement and the Merger Agreement; and
C. Prepare and file with the Securities and Exchange Commission
("SEC") the SWS Proxy Statement in accordance with Regulation 14A of the
Securities Exchange Act of 1934 (the "1934 Act"), and once SWS is permitted
pursuant to Regulation 14 to mail it shareholders the SWS Proxy Statement
as a definitive proxy statement, SWS shall mail the SWS Proxy Statement to
the shareholders of SWS as soon as practicable, and use its best efforts to
obtain the approval of the issuance of the SWS Common Stock and the
transactions contemplated by this Agreement and the Merger Agreement by SWS
shareholders holding at least the minimum number of shares required by
applicable law of SWS Common Stock entitled to vote at the SWS
Shareholders' Meeting. The letter to SWS shareholders, notice of meeting,
proxy statement and form of proxy to be distributed to shareholders in
connection with the Merger and the Merger Agreement are collectively
referred to herein as the "SWS Proxy Statement."
SECTION 1.10 Exchange of Certificates. Promptly after the Effective Time,
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SWS and ASBI shall cause the Exchange Agent to mail to the former shareholders
of ASBI appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of ASBI Common Stock shall pass, only upon proper delivery
of such certificates to the Exchange Agent). After the Effective Time, each
holder of shares of ASBI Common Stock issued and outstanding at the Effective
Time shall surrender the certificate or certificates representing such shares to
the Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the Merger Consideration provided in Section 1.05A of this Agreement,
together with all undelivered dividends or distributions in respect of such
shares (without interest thereon) pursuant to Section 1.11 of this Agreement,
subject to any shares of the Merger Consideration being placed in escrow
pursuant to Section 1.13 of this Agreement. To the
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extent required by Section 1.05C of this Agreement, each holder of shares of
ASBI Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of SWS Common Stock to which such
holder may be otherwise entitled (without interest). SWS shall not be obligated
to deliver the consideration to which any former holder of ASBI Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of ASBI Common Stock for
exchange as provided in this Section 1.10. If any record shareholder of ASBI is
unable to locate any certificate evidencing the ASBI Common Stock, such
shareholder shall submit to the Exchange Agent an affidavit of lost certificate
and indemnification agreement in form reasonably acceptable to SWS and, if
required by SWS, a surety bond in an amount equal to the amount to be delivered
to such shareholder, in lieu of such certificate. The certificate or
certificates of ASBI Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither the Surviving Corporation, SWS nor the Exchange Agent
shall be liable to a holder of ASBI Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property law.
SECTION 1.11 Rights of Former ASBI Shareholders. At the Effective Time,
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the stock transfer books of ASBI shall be closed as to holders of ASBI Common
Stock immediately prior to the Effective Time and no transfer of ASBI Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 1.10 of
this Agreement, each certificate theretofore representing shares of ASBI Common
Stock shall from and after the Effective Time represent for all purposes only
the right to receive the Merger Consideration, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by ASBI in respect of such shares of ASBI Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by law, former shareholders of record
of ASBI shall be entitled to vote after the Effective Time at any meeting of SWS
shareholders the number of whole shares of SWS Common Stock into which their
respective shares of ASBI Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing ASBI Common Stock for
certificates representing SWS Common Stock in accordance with the provisions of
this Agreement. Whenever a dividend or other distribution is declared by SWS on
the SWS Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of SWS Common Stock issuable pursuant to this Agreement, but no dividend
or other distribution payable to the holders of record of SWS Common Stock as of
any time subsequent to the Effective Time shall be delivered to the holder of
any certificate representing shares of ASBI Common Stock issued and outstanding
at the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 1.10 of this Agreement. However, upon surrender of such
ASBI Common Stock certificate, both the SWS Common Stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
SECTION 1.12 Piggyback Registration. If at any time within the five (5)
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year period after the Effective Time, SWS shall determine to register any of its
securities (for itself or for any other
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holder of securities of SWS) under the 1933 Act or any successor legislation
(other than a registration relating to stock option plans, employee benefit
plans or a transaction pursuant to Rule 145 under the 1933 Act), and in
connection therewith SWS may lawfully register the SWS Common Stock acquired by
the ASBI shareholders in connection with the Merger (the "Registrable
Securities"), SWS will promptly give written notice to the then holders (the
"Holders") of all outstanding Registrable Securities and will include in such
registration and effect the registration under the 1933 Act of all Registrable
Securities that such Holders may request in writing by notice delivered to SWS
within 20 days after receipt by such Holder of the notice given by SWS;
provided, however, that in connection with any such offering by SWS of any of
its securities, no such registration of Registrable Securities shall be required
if the managing underwriter, if any, for SWS advises SWS in writing that
including all or part of the Registrable Securities in such offering will
materially adversely affect the offering price of securities proposed to be sold
pursuant to the registration statement. If such managing underwriter advises SWS
that, in its opinion, part of the Registrable Securities may be included in such
offering without having a such material adverse effect on the proposed offering,
then SWS shall be obligated to include such limited number of shares of SWS
Common Stock in such offering, which shares shall be taken from those owned and
held by a group consisting of the Holders and other holders of SWS Common Stock
having registration rights that are pari passu with those of the Holders, and
such limitation shall be imposed upon the Holders and such other holders pro
rata on the basis of the total number of shares of SWS Common Stock owned by the
Holders and such other holders or obtainable by them upon the exercise of rights
with respect to other securities owned by them. All expenses of such
registration and offering (including SWS's attorneys' fees) shall be borne by
SWS, except that the Holders shall bear underwriting commissions and discounts
attributable to their Registrable Securities being registered and the fees and
expenses of separate counsel, if any, for such Holders. The Holders shall be
entitled to an unlimited number of registrations under this Section 1.12. The
rights and obligations of SWS under this Section 1.12 shall be governed by that
certain Registration Rights Agreement attached as Exhibit H hereto.
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SECTION 1.13 Escrow of Shares. Prior to execution of this Agreement, SWS
----------------
has identified certain potential Environmental Liabilities (as defined in
Section 11.10) relating to those properties described on Schedule 1.13 of this
-------------
Agreement (the "Environmental Properties"). Pursuant to Section 5.19, prior to
November 1, 1999 ASBI has agreed to use its best efforts to eliminate potential
Environmental Liabilities relating to the Environmental Properties to the
satisfaction of SWS, in its sole discretion. In addition, under Section 5.14,
SWS has the right to conduct additional environmental investigations with
respect to the Environmental Properties. If prior to November 1, 1999, SWS has
determined, in its sole discretion, that ASBI's actions have eliminated any
potential Environmental Liabilities, all shares of SWS Common Stock constituting
the Merger Consideration shall be delivered to the ASBI shareholders in
accordance with Section 1.10 of this Agreement and no shares of SWS Common Stock
constituting the Merger Consideration shall be placed in escrow. If, however,
prior to November 1, 1999, SWS has determined, in its sole discretion, that ASBI
has been unable to eliminate any Environmental Liabilities relating to the
Environmental Properties or that, as a result of SWS's subsequent environmental
investigations, that any Environmental Liabilities exist with respect to the
Environmental Properties, SWS and ASBI shall negotiate in good faith to
establish a mutually agreeable dollar amount sufficient to protect the SWS
Companies or the ASBI Companies from the Environmental Liabilities (the
"Environmental Escrow Amount") and the appropriate time period pursuant to which
shares of SWS Common Stock
7
constituting the Merger Consideration should be escrowed (the "Escrow Period").
In such event, at the Effective Time, shares of SWS Common Stock constituting
the Merger consideration shall be placed into escrow (the "Escrow Shares") in an
amount equal to the quotient of (i) the Environmental Escrow Amount and (ii) the
Average Closing Price (as defined in Section 11.10) of SWS Common Stock at the
end of the fifth business day prior to the Closing Date (rounded to the nearest
whole share of SWS Common Stock). The Escrow Shares shall be deposited with a
mutually agreeable escrow agent (the "Escrow Agent") in accordance with the
terms of the Escrow Agreement attached as Exhibit J hereto for the purpose of
---------
protecting the SWS Companies and the ASBI Companies against the Environmental
Liabilities relating to the Environmental Properties and such Escrow Shares
shall either be (i) delivered to the former ASBI shareholders or (ii) returned
to SWS solely in accordance with the terms of the Escrow Agreement attached as
Exhibit J hereto. If prior to November 1, 1999, ASBI and SWS cannot reach a
- ---------
mutual agreement on the Environmental Escrow Amount and/or the appropriate
Escrow Period, then either SWS or ASBI may refer such dispute to binding
arbitration in accordance with Section 11.18 of this Agreement.
ARTICLE II.
THE CLOSING AND THE CLOSING DATE
SECTION 2.01 Time and Place of the Closing and Closing Date. On a date
----------------------------------------------
mutually determined by SWS and ASBI (herein called the "Closing Date"), which
date shall be within thirty (30) days after the receipt of all necessary
regulatory, corporate and other approvals and the expiration of any mandatory
waiting periods (unless extended as provided below), a meeting (the "Closing")
will take place at which the parties to this Agreement will exchange
certificates, letters and other documents in order to determine whether all of
the conditions set forth in Articles VII and VIII of this Agreement have been
satisfied or waived or whether any condition exists that would permit a party to
this Agreement to terminate this Agreement. If no such condition then exists or
if no party elects to exercise any right it may have to terminate this
Agreement, then and thereupon the appropriate parties shall execute such
documents and instruments as may be necessary or appropriate in order to effect
the transactions contemplated by this Agreement. The Closing shall take place
at a location mutually agreeable to the parties hereto.
SECTION 2.02 Effective Time. The Merger and the other transactions
--------------
contemplated by this Agreement shall become effective on the date and at the
time the Articles of Merger reflecting the Merger shall become effective with
the Secretary of State of the State of Texas (the "Effective Time"). The
Articles of Merger shall be filed as soon as practicable after the Closing.
SECTION 2.03 Actions to be Taken at the Closing by ASBI. At the Closing,
------------------------------------------
ASBI shall execute and acknowledge (where appropriate) and deliver to SWS, such
documents and certificates necessary to carry out the terms and provisions of
this Agreement, including without limitation, the following (all of such actions
constituting conditions precedent to SWS's obligations to close hereunder):
A. True, correct and complete copies of the Articles of Incorporation
of ASBI and all amendments thereto, duly certified as of a recent date by
the Secretary of State of the State of Texas;
8
B. True, correct and complete copies of the Certificate of
Incorporation of ASBI Delaware and all amendments thereto, duly certified
as of a recent date by the Secretary of State of the State of Delaware;
C. True, correct and complete copies of the Charter of the Bank and
all amendments thereto, duly certified as of a recent date by the Office of
Thrift Supervision ("OTS");
D. Good standing and existence certificates of a recent date, issued
by the appropriate state officials, duly certifying as to the existence and
good standing of ASBI in the State of Texas;
E. A certificate to do business, dated as of a recent date, issued by
the OTS, duly certifying as to the authority of the Bank to transact the
business of operating as a thrift under the laws of the United States;
F. A certificate of good standing, dated as of a recent date, issued
by the Texas Comptroller of Public Accounts, duly certifying as to the good
standing of the Bank in the State of Texas;
G. A certificate, dated as of a recent date, issued by the Federal
Deposit Insurance Corporation (the "FDIC"), duly certifying that the
deposits of the Bank are insured by the FDIC pursuant to the Federal
Deposit Insurance Act (the "FDIA");
H. A certificate, dated as of the Closing Date, duly executed by the
Secretary or an Assistant Secretary of ASBI, acting solely in his or her
capacity as an officer of ASBI, pursuant to which ASBI shall certify (i)
the due adoption by the board of directors of ASBI of corporate resolutions
attached to such certificate authorizing the execution and delivery of this
Agreement and the other agreements and documents contemplated hereby,
including, but not limited to, the Merger Agreement, and the taking of all
actions contemplated hereby and thereby; (ii) the due adoption by the
shareholders of ASBI authorizing the transactions and the execution and
delivery of this Agreement and the other agreements and documents
contemplated hereby and the taking of all actions contemplated hereby and
thereby; (iii) the incumbency and true signatures of those officers of ASBI
duly authorized to act on its behalf in connection with the transactions
contemplated by this Agreement and to execute and deliver this Agreement
and other agreements and documents contemplated hereby and the taking of
all actions contemplated hereby and thereby on behalf of ASBI; and (iv)
that the copy of the Bylaws of ASBI attached to such certificate is true
and correct and such Bylaws have not been amended except as reflected in
such copy;
I. A certificate duly executed by the Cashier or an Assistant Cashier
of the Bank, acting solely in his or her capacity as an officer of the
Bank, pursuant to which the Bank shall certify that the copy of the Bylaws
attached to such certificate is true and correct and such Bylaws have not
been amended except as reflected in such copy;
9
J. A certificate duly executed by a duly authorized officer of ASBI,
acting solely in his or her capacity as an officer of ASBI, dated as of the
Closing Date, pursuant to which ASBI shall certify that all of the
representations and warranties made in Article III of this Agreement are
true and correct on and as of the date of such certificate as if made on
such date and except as expressly permitted by this Agreement there shall
have been no Material Adverse Change since March 31, 1999;
K. All consents and approvals required to be obtained by ASBI from
third parties to consummate the transactions contemplated by this
Agreement, including, but not limited to, those listed on Schedule 3.09;
-------------
and
L. All other documents required to be delivered to SWS by ASBI under
the provisions of this Agreement, and all other documents, certificates and
instruments as are reasonably requested by SWS or its counsel.
SECTION 2.04 Actions to be Taken at the Closing by SWS. At the Closing,
-----------------------------------------
SWS shall execute and acknowledge (where appropriate) and deliver to ASBI, such
documents and certificates necessary to carry out the terms and provisions of
this Agreement, including without limitation, the following (all of such actions
constituting conditions precedent to ASBI's obligations to close hereunder):
A. True, correct and complete copies of SWS's Certificate of
Incorporation and all amendments thereto, duly certified as of a recent
date by the Secretary of State of the State of Delaware;
B. True, correct and complete copies of Newco's Articles of
Incorporation and all amendments thereto, duly certified as of a recent
date by the Secretary of State of the State of Texas;
C. Good standing and existence certificates for SWS, dated as of a
recent date, issued by the appropriate state officials, duly certifying as
to the authority to do business and good standing of SWS in the State of
Delaware and the State of Texas;
D. A certificate, dated as of the Closing Date, executed by the
Secretary or an Assistant Secretary of SWS, acting solely in his or her
capacity as an officer of SWS, pursuant to which SWS shall certify (i) the
due adoption by the board of directors of SWS of corporate resolutions
attached to such certificate authorizing the execution and delivery of this
Agreement and the other agreements and documents contemplated hereby and
the taking of all actions contemplated hereby and thereby; (ii) the due
adoption by the shareholders of SWS authorizing issuance of the shares of
SWS Common Stock and the other transactions contemplated by this Agreement;
(iii) the incumbency and true signatures of those officers of SWS duly
authorized to act on its behalf in connection with the transactions
contemplated by this Agreement and to execute and deliver this Agreement
and other agreements and documents contemplated hereby and the taking of
all actions contemplated hereby and thereby on behalf of SWS; and (iv) that
the copy of the Bylaws of
10
SWS attached to such certificate is true and correct and such Bylaws have
not been amended except as reflected in such copy;
E. A certificate duly executed by the Secretary or an Assistant
Secretary of Newco, acting solely in his or her capacity as an officer of
Newco, pursuant to which Newco shall certify (i) the due adoption by the
board of directors of Newco of corporate resolutions attached to such
certificate authorizing the execution and delivery of the Merger Agreement
and the taking of all actions contemplated thereby; (ii) the due adoption
by the sole shareholder of Newco approving the Merger Agreement and the
Merger; (iii) the incumbency and true signatures of those officers of Newco
duly authorized to act on its behalf in connection with the transactions
contemplated by the Merger Agreement and to execute and deliver the Merger
Agreement and the taking of all actions contemplated thereby on behalf of
Newco; and (iv) that the copy of the Bylaws of Newco attached to such
certificate is true and correct and such Bylaws have not been amended
except as reflected in such copy;
F. True, correct and complete copies of the Certificate of Merger of
Newco with and into ASBI, duly certified as of a recent date by the
Secretary of State of the State of Texas;
G. A certificate, dated as of the Closing Date, executed by a duly
authorized officer of SWS, acting solely in his or her capacity as an
officer of SWS, pursuant to which SWS shall certify that all of the
representations and warranties made in Article IV of this Agreement are
true and correct on and as of the date of such certificate as if made on
such date and except as expressly permitted by this Agreement there shall
have been no Material Adverse Change since March 31, 1999;
H. All consents and approvals required to be obtained by SWS or Newco
from third parties to consummate the transactions contemplated by this
Agreement, including, but not limited to, those listed on Schedule 4.07;
-------------
and
I. All other documents required to be delivered to ASBI by SWS under
the provisions of this Agreement, and all other documents, certificates and
instruments as are reasonably requested by ASBI or its counsel.
SECTION 2.05 Further Assurances. At any time and from time to time after
------------------
the Closing, at the request of any party to this Agreement and without further
consideration, any party so requested will execute and deliver such other
instruments and take such other action as the requesting party may reasonably
deem necessary or desirable in order to effectuate the transactions contemplated
hereby. In the event that, at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each party
hereto shall take or cause to be taken all such action.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ASBI
11
ASBI hereby makes the representations and warranties set forth in this
Article III to SWS. ASBI agrees at the Closing to provide SWS with supplemental
schedules reflecting any material changes thereto between the date of this
Agreement and the Closing Date.
SECTION 3.01 Organization and Qualification. ASBI is a federal unitary
------------------------------
savings and loan holding company registered under the Home Owners' Loan Act
("HOLA"). ASBI is a corporation, duly organized, validly existing and in good
standing under all laws, rules and regulations of the State of Texas. ASBI is
duly qualified to transact business as a foreign entity in each jurisdiction in
which a failure to be so qualified could have a Material Adverse Effect. ASBI
has all requisite corporate power and authority (including all licenses,
franchises, permits and other governmental authorizations as are legally
required) to carry on its business as now being conducted, to own, lease and
operate its properties and assets, including, but not limited to, the ASBI
Subsidiaries, as now owned, leased or operated and to enter into and carry out
its obligations under this Agreement and the Merger Agreement. True and
complete copies of the Articles of Incorporation and Bylaws of ASBI as amended
to date, certified by the Secretary of ASBI, have been delivered to SWS. ASBI
does not own or control any Affiliate (as defined in Section 11.10) or
Subsidiary (as defined in Section 11.10), other than ASBI Subsidiaries disclosed
on Schedule 3.04 hereto. The nature of the business of ASBI and its activities
-------------
do not require it to be qualified to do business in any jurisdiction other than
the State of Texas. Except as set forth on Schedule 3.04, ASBI has no equity
-------------
interest, direct or indirect, in any other bank or corporation or in any
partnership, joint venture or other business enterprise or entity, and the
business carried on by ASBI has not been conducted through any other direct or
indirect Subsidiary or Affiliate of ASBI other than the ASBI Subsidiaries
disclosed on Schedule 3.04 hereto.
-------------
SECTION 3.02 Execution and Delivery. ASBI has taken all corporate action
----------------------
necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by ASBI and each constitutes the legal, valid and binding obligation of
ASBI, enforceable in accordance with its respective terms and conditions, except
as enforceability may be limited by bankruptcy, conservatorship, insolvency,
moratorium, reorganization, receivership or similar laws and judicial decisions
affecting the rights of creditors generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
SECTION 3.03 ASBI Capitalization. The authorized capital stock of ASBI
-------------------
consists of (i) 1,000,000 shares of ASBI Voting Common Stock, (ii) 100,000,000
shares of ASBI Non-Voting Common Stock, and (iii) 5,000,000 shares of preferred
stock, par value $1.00 per share ("ASBI Preferred Stock"), of which 3,500,000 is
designated as Series A Preferred Stock. As of the date hereof, 272,064 shares
of ASBI Voting Common Stock are issued and outstanding and 26,934,336 shares of
ASBI Non-Voting Common Stock are issued and outstanding. All of such issued
shares are validly issued, fully paid and nonassessable. As of the date hereof,
no shares of ASBI Preferred Stock are issued or outstanding. Except as
disclosed on Schedule 3.03, there are no (A) other outstanding equity securities
-------------
of any kind or character, or (B) outstanding subscriptions, options, convertible
securities, rights, warrants, calls or other agreements or commitments of any
kind issued or granted by, or binding upon, ASBI to purchase or otherwise
acquire any security of or equity
12
interest in ASBI, obligating ASBI to issue any shares of, restricting the
transfer of or otherwise relating to shares of its capital stock of any class.
All of the issued and outstanding shares of ASBI Common Stock have been duly
authorized, validly issued and are fully paid and nonassessable, and have not
been issued in violation of the preemptive rights of any person. Such shares of
ASBI Common Stock have been issued in compliance with the securities laws of the
United States and other jurisdictions having applicable securities laws. There
are no restrictions applicable to the payment of dividends on the shares of ASBI
Common Stock except pursuant to applicable laws and regulations, and all
dividends declared prior to the date of this Agreement have been paid.
SECTION 3.04 ASBI Subsidiaries. ASBI has disclosed in Schedule 3.04 all
----------------- -------------
of the ASBI Subsidiaries as of the date of this Agreement. Except as disclosed
on Schedule 3.04, no ASBI Company owns any equity interest in any other
-------------
corporation, partnership, limited liability company, or other entity of any kind
or nature and ASBI or one of the ASBI Subsidiaries owns all of the issued and
outstanding shares of capital stock of each ASBI Subsidiary. No equity
securities of any ASBI Subsidiary are or may become required to be issued (other
than to another ASBI Company) by reason of any outstanding subscriptions,
options, convertible securities, rights, warrants, calls or other agreements or
commitments, and there are no contracts or agreement by which any ASBI
Subsidiary is bound to issue (other than to another ASBI Company) additional
shares of its capital stock or outstanding subscriptions, options, convertible
securities, rights, warrants, calls or other agreements or commitments or by
which any ASBI Company is or may be bound to transfer any shares of the capital
stock of any ASBI Subsidiary (other than to another ASBI Company). There are no
contracts or agreements relating to the rights of any ASBI Company to vote or to
dispose of any shares of the capital stock of any ASBI Subsidiary. All of the
shares of capital stock of each ASBI Subsidiary held by an ASBI Company are duly
authorized, validly issued, and fully paid and, except as provided in statutes
pursuant to which depository institution Subsidiaries are organized,
nonassessable under the applicable corporation law of the jurisdiction in which
such Subsidiary is incorporated or organized and are owned by the ASBI Company
free and clear of any lien or encumbrance. Each ASBI Subsidiary is either a
bank or a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its assets and to carry on its business as now
conducted. Each ASBI Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ASBI. Each ASBI Subsidiary that is a depository institution
is an "insured depository institution" as defined in the FDIA and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund or Savings Association Insurance Fund.
SECTION 3.05 Compliance with Laws, Permits and Instruments. Except as
---------------------------------------------
disclosed on Schedule 3.05, each of the ASBI Companies has in all material
-------------
respects performed and abided by all obligations required to be performed by it
to the date hereof, and has complied with, and is in compliance with, and is not
in default (or with the giving of notice or the passage of time will be in
default) under, or in violation of, (i) any provision of the Articles, Charters,
Certificates or Bylaws of the ASBI Companies, (ii) any material provision of any
contract, agreement or instrument
13
applicable to the ASBI Companies or their respective assets, operations,
properties or businesses now conducted or heretofore conducted or (iii) any
material permit, concession, grant, franchise, license, authorization, judgment,
writ, injunction, order, decree, award, statute, federal, state or local law,
ordinance, rule or regulation of any court, arbitrator or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality applicable to any of the ASBI Companies or their respective
assets, operations, properties or businesses now conducted or heretofore
conducted.
Except as set forth on Schedule 3.05, the execution, delivery and (provided
-------------
the required regulatory and shareholder approvals are obtained) performance of
this Agreement and the other agreements contemplated hereby, including, but not
limited to the Merger Agreement, and the consummation of the transactions
contemplated hereby and thereby will not conflict with, or result, by itself or
with the giving of notice or the passage of time, in any violation of or default
or loss of a benefit under, (i) any provision of the Articles, Charter,
Certificate or Bylaws of the ASBI Companies, (ii) any material contract or
agreement applicable to the ASBI Companies or their respective assets,
operations, properties or businesses or (iii) any material permit, concession,
grant, franchise, license, authorization, judgment, writ, injunction, order,
decree, statute, law, ordinance, rule or regulation applicable to the ASBI
Companies or their respective assets, operations, properties or businesses.
SECTION 3.06 ASBI Financial Statements. ASBI has furnished to SWS true
-------------------------
and complete copies of the audited consolidated balance sheets for the fiscal
year-ended as of September 30, 1996, 1997 and 1998, and the related audited
consolidated statements of income, shareholders' equity and cash flows for the
fiscal years ended September 30, 1996, 1997 and 1998 and unaudited consolidated
balance sheets of ASBI as of March 31, 1999, and the related unaudited
consolidated statements of income and cash flows for the six-month period ended
March 31, 1999 (such consolidated balance sheets and the related statements of
income, shareholders' equity and cash flows are collectively referred to herein
as the "ASBI Financial Statements"). Except as described in the notes to the
ASBI Financial Statements, the ASBI Financial Statements fairly present, in all
material respects, the financial position of ASBI as of the respective dates
thereof and the results of operations and changes in financial position of ASBI
for the periods then ended, in conformity with generally accepted accounting
principles ("GAAP"), applied on a basis consistent with prior periods (subject,
in the case of the unaudited interim financial statements, to normal year-end
adjustments and the fact that they do not contain all of the footnote
disclosures required by GAAP), except as otherwise noted therein, and the
accounting records underlying the ASBI Financial Statements accurately and
fairly reflect in all material respects the transactions of ASBI. The ASBI
Financial Statements do not contain any items of special or nonrecurring income
or any other income not earned in the ordinary course of business except as
expressly specified therein or as set forth on Schedule 3.06.
-------------
SECTION 3.07 The Bank.
--------
14
A. The Bank is a federal savings bank, validly existing and in good
standing under the laws of the United States, and duly organized and in
good standing under all laws, rules, and regulations of the United States.
The Bank has all requisite corporate power and authority (including all
licenses, franchises, permits and other governmental authorizations as are
legally required) to carry on its business as now being conducted, to own,
lease and operate its properties and assets as now owned, leased or
operated and to enter into and to carry on the business and activities now
conducted by it. True and complete copies of the Charter and Bylaws of the
Bank, as amended to date, have been delivered to SWS. The Bank is an
insured savings and loan association as defined in the FDIA . The nature
of the business of the Bank does not require it to be qualified to do
business in any jurisdiction other than the State of Texas. Except as set
forth on Schedule 3.07, the Bank has no equity interest, direct or
-------------
indirect, in any other bank or corporation or in any partnership, joint
venture or other business enterprise or entity, except as acquired through
settlement of indebtedness, foreclosure, the exercise of creditors'
remedies or in a fiduciary capacity, and the business carried on by the
Bank has not been conducted through any other direct or indirect Subsidiary
or Affiliate of the Bank.
B. The entire authorized capital stock of the Bank consists solely
of 300,000 shares of common stock of the Bank, par value $8.00 per share
(the "Bank Stock"), all of which are issued and outstanding. All of the
issued and outstanding shares of the Bank Stock have been duly authorized,
validly issued and are fully paid and nonassessable, and have not and will
not have been issued in violation of the preemptive rights of any person.
The securities of the Bank have been issued in compliance with the
securities laws of the United States and applicable state securities laws.
ASBI Delaware is, and as of the Closing Date will be, the lawful record and
beneficial owner of all of the outstanding securities of the Bank, free and
clear of any liens, claims, encumbrances, security interests or
restrictions of any kind. There are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements or arrangements of any character or nature whatever under
which the ASBI Companies are or may become obligated to issue, assign or
transfer any securities of the Bank. There are no restrictions applicable
to the payment of dividends on the shares of the Bank Stock except pursuant
to applicable laws and regulations.
C. ASBI has furnished SWS with a true and complete copy of the
Thrift Financial Reports as of March 31, 1999 and June 30, 1999 (the
"TFRs"), for the Bank. The TFRs fairly presents, in all material respects,
the financial position of the Bank and the results of its operations at the
date and for the period indicated in conformity with the instructions for
the preparation of TFRs as promulgated by applicable regulatory
authorities. The TFRs do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of business
except as expressly specified therein. The Bank has calculated its
allowance for loan losses in accordance with GAAP and, to the extent
applicable, regulatory accounting principles ("RAP") as applied to savings
and loan institutions and in accordance with all applicable rules and
regulations. To the best knowledge of ASBI, the allowance for loan losses
account for the Bank is, and as of the Closing Date should be, adequate in
all material respects to provide for all losses, net of recoveries relating
to loans previously charged off, on all outstanding loans of the Bank.
15
SECTION 3.08 Litigation. Except as set forth on Schedule 3.08, there are
---------- -------------
no actions, claims, suits, investigations, reviews or other legal, quasi-
judicial or administrative proceedings of any kind or nature now pending or
threatened against or affecting the ASBI Companies at law or in equity, or by or
before any federal, state or municipal court or other governmental or
administrative department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that in any manner involve the ASBI Companies or any of
their properties or capital stock that might reasonably be anticipated to result
in a Material Adverse Change or have a Material Adverse Effect on the
transactions contemplated by this Agreement or the Merger Agreement, and none of
the ASBI Companies knows or has any reason to be aware of any basis for the
same. No legal action, suit or proceeding or judicial, administrative or
governmental investigation is pending or, to the knowledge of ASBI, threatened
against the ASBI Companies that questions or might question the validity of this
Agreement or the agreements contemplated hereby, including, but not limited to,
the Merger Agreement, or any actions taken or to be taken by the ASBI Companies
pursuant hereto or thereto or seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby.
SECTION 3.09 Consents and Approvals. ASBI's board of directors (at a
----------------------
meeting duly called and held) has resolved to recommend to the shareholders of
ASBI approval and adoption of the Merger and the Merger Agreement. Except as
disclosed in Schedule 3.09, no approval, consent, order or authorization of, or
-------------
registration, declaration or filing with, any governmental authority or other
third party is required on the part of the ASBI Companies in connection with the
execution, delivery or performance of this Agreement or the agreements
contemplated hereby, including, but not limited to, the Merger Agreement or the
consummation by the ASBI Companies of the transactions contemplated hereby or
thereby.
SECTION 3.10 Undisclosed Liabilities. Except as disclosed on Schedule
----------------------- --------
3.10, none of the ASBI Companies have any material liability or obligation,
- ----
accrued, absolute, contingent or otherwise and whether due or to become due
(including, without limitation, unfunded obligations under any ASBI Employee
Plans (as defined in Section 3.32 of this Agreement) or liabilities for federal,
state or local taxes or assessments or liabilities under any tax sharing
agreements that are not reflected in or disclosed in the Financial Statements or
the TFRs, except those liabilities and expenses incurred in the ordinary course
of business and consistent with prudent business practices since the date of
ASBI Financial Statements or the TFRs, respectively.
SECTION 3.11 Title to Assets. True and complete copies of all existing
---------------
deeds, leases and title insurance policies for all real property owned or leased
by the ASBI Companies, including all other real estate, and all mortgages, deeds
of trust, security agreements and other documents describing encumbrances to
which such property is subject have been made available to SWS. Each of the
ASBI Companies has good and indefeasible title to all of its assets and
properties used or useful in connection with the businesses of the ASBI
Companies including, without limitation, all personal and intangible properties
reflected in the Financial Statements or the TFRs or acquired subsequent
thereto, subject to no liens, mortgages, security interests, encumbrances or
charges of any kind except (A) as described in Schedule 3.11, (B) as noted in
-------------
the Financial Statements or the TFRs or as set forth in the documents delivered
to SWS pursuant to this Section 3.11, (C) statutory liens not yet delinquent,
(D) consensual landlord liens, (E) minor defects and irregularities in title and
encumbrances that do not materially impair the use thereof for the purpose for
which they are
16
held, (F) pledges of assets in the ordinary course of business to secure public
funds deposits, and (G) those assets and properties disposed of for fair value
in the ordinary course of business since the dates of the ASBI Financial
Statements or the TFRs.
SECTION 3.12 Absence of Certain Changes or Events. Except as disclosed on
------------------------------------
Schedule 3.12 or as permitted in writing by SWS, since March 31, 1999, each of
- -------------
the ASBI Companies has conducted its business only in the ordinary course and
has not, other than in the ordinary course of business and consistent with past
practices and safe and sound banking practices:
A. Incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except deposits
taken and federal funds purchased and current liabilities for trade or
business obligations, none of which, individually or in the aggregate,
result in a Material Adverse Change;
B. Discharged or satisfied any lien, charge or encumbrance or paid
any obligation or liability, whether absolute or contingent, due or to
become due;
C. Declared or made any payment of dividends or other distribution
to its shareholders, or purchased, retired or redeemed, or obligated itself
to purchase, retire or redeem, any of its shares of capital stock or other
securities;
D. Issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of its capital stock or other securities or
subscriptions, options, warrants, calls, rights or commitments of any kind
relating to the issuance thereof;
E. Acquired any capital stock or other equity securities or acquired
any ownership interest in any bank, corporation, partnership or other
entity (except (i) through settlement of indebtedness, foreclosure, or the
exercise of creditors' remedies or (ii) in a fiduciary capacity, the
ownership of which does not expose it to any liability from the business,
operations or liabilities of such person);
F. Mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible except (i) as described in
Schedule 3.11, (ii) statutory liens not yet delinquent, (iii) consensual
-------------
landlord liens, (iv) minor defects and irregularities in title and
encumbrances that do not materially impair the use thereof for the purpose
for which they are held, (v) pledges of assets to secure public funds
deposits, and (vi) those assets and properties disposed of for fair value
since the dates of the ASBI Financial Statements or the TFRs;
G. Sold, transferred, leased to others or otherwise disposed of any
of their assets or canceled or compromised any debt or claim, or waived or
released any right or claim, which individually or in the aggregate would
constitute a Material Adverse Change;
H. Terminated, canceled or surrendered, or received any notice of or
threat of termination or cancellation of any contract, lease or other
agreement or suffered any damage,
17
destruction or loss which, individually or in the aggregate, would
constitute a Material Adverse Change;
I. Disposed of, permitted to lapse, transferred or granted any
rights under, or entered into any settlement regarding the breach or
infringement of, any United States or foreign license or Proprietary Right
(as defined in Section 3.17) or modified any existing rights with respect
thereto;
J. Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to or for the benefit of any of their
shareholders, directors, officers, employees or agents, or entered into any
employment or consulting contract or other agreement with any director,
officer or employee or adopted, amended in any material respect or
terminated any pension, employee welfare, retirement, stock purchase, stock
option, stock appreciation rights, termination, severance, income
protection, golden parachute, savings or profit-sharing plan (including
trust agreements and insurance contracts embodying such plans), any
deferred compensation, or collective bargaining agreement, any group
insurance contract or any other incentive, welfare or employee benefit plan
or agreement maintained by the ASBI Companies for the benefit of their
directors, employees or former employees;
K. Except for improvements or betterments relating to Properties (as
defined in Section 11.10) and the completion of the Bank's new branch
facility located at Matlock Road and Stephens Street in Arlington, Texas
consistent with the plans and specifications disclosed to SWS, made any
capital expenditures or capital additions or betterments in excess of an
aggregate of $25,000;
L. Instituted, had instituted against them, settled or agreed to
settle any litigation, action or proceeding before any court or
governmental body relating to their property other than routine collection
suits instituted by them to collect amounts owed or suits in which the
amount in controversy is less than $25,000;
M. Suffered any change, event or condition that, in any case or in
the aggregate, has caused or may result in a Material Adverse Change, or
any Material Adverse Change in earnings or costs or relations with their
employees (provided, however, that the Bank shall continue to have the
right to terminate employees in accordance with their existing policies and
procedures), agents, depositors, loan customers, correspondent banks or
suppliers;
N. Except for the transactions contemplated by this Agreement or as
otherwise permitted hereunder, entered into any transaction, or entered
into, modified or amended any contract or commitment;
O. Entered into or given any promise, assurance or guarantee of the
payment, discharge or fulfillment of any undertaking or promise made by any
person, firm or corporation;
18
P. Sold, or knowingly disposed of, or otherwise divested of the
ownership, possession, custody or control, of any corporate books or
records of any nature that, in accordance with sound business practice,
normally are retained for a period of time after their use, creation or
receipt, except at the end of the normal retention period;
Q. Made any, or acquiesced with any, change in any accounting
methods, principles or material practices except as required by GAAP or
RAP;
R. Except for transactions made through SWS in the ordinary course
of business, sold (provided, however, that payment at maturity is not
deemed a sale) or purchased any Investment Securities (as defined in
Section 11.10);
S. Made, renewed, extended the maturity of, or altered any of the
material terms of any loan to any single borrower and his related interests
in excess of the principal amount of $500,000; or
T. Entered into any agreement or made any commitment whether in
writing or otherwise to take any of the types of action described in
subsections A through S above.
SECTION 3.13 Leases, Contracts and Agreements. Schedule 3.13 sets forth
-------------------------------- -------------
an accurate and complete description of all leases, subleases, licenses,
contracts and agreements to which the ASBI Companies are parties or by which the
ASBI Companies are bound that obligate or may obligate the ASBI Companies in the
aggregate for an amount in excess of $25,000 over the entire term of any such
agreement or related contracts of a similar nature which in the aggregate
obligate or may obligate the ASBI Companies for an amount in excess of $25,000
over the entire term of such related contracts (the "ASBI Contracts"). ASBI has
delivered true and correct copies of all ASBI Contracts to SWS. For the
purposes of this Agreement, the ASBI Contracts shall be deemed not to include
loans made by, repurchase agreements made by, spot foreign exchange transactions
of, bankers acceptances of or deposits by the Bank, but does include unfunded
loan commitments and letters of credit issued by the Bank where the borrowers'
total direct and indirect indebtedness to the Bank is in excess of $50,000.
Except as set forth in Schedule 3.13, no participations or loans have been sold
-------------
that have buy back, recourse or guaranty provisions that create contingent or
direct liabilities of the ASBI Companies. To the knowledge of the ASBI
Companies, all of the ASBI Contracts are legal, valid and binding obligations of
the parties to the ASBI Contracts enforceable in accordance with their terms,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and to general
equitable principles, and are in full force and effect. Except as described in
Schedule 3.13, all rent and other payments by the ASBI Companies under the ASBI
- -------------
Contracts are current, there are no existing defaults by the ASBI Companies
under the ASBI Contracts and no termination, condition or other event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default. Each of the ASBI
Companies, respectively, has good and indefeasible leasehold interest in each
parcel of real property leased by it free and clear of all mortgages, pledges,
liens, encumbrances and security interests.
SECTION 3.14 Taxes.
-----
19
A. Each of the ASBI Companies has duly and timely filed with the
appropriate federal, state and local governmental agencies all tax returns
and reports required to be filed, including, without limitation, income,
excise, property, sales, use, franchise, value added, unemployment,
employees' income withholding and social security taxes, imposed by the
United States or by any foreign country or by any state, municipality,
subdivision or instrumentality of the United States or of any foreign
country, or by any other taxing authority, and has paid, or has established
adequate reserves for the payment of, all taxes and assessments that are or
are claimed to be due, payable or owed by the ASBI Companies, or for which
the ASBI Companies may have liability, whether as a result of their own
activities or by virtue of their affiliation with other entities and all
interest and penalties thereon, whether disputed or not. All such tax
returns and reports are accurately prepared and all deposits required by
law to be made by the ASBI Companies with respect to employees' withholding
taxes have been duly made. No ASBI Company is or has been delinquent in
the payment of any foreign or domestic tax, assessment or governmental
charge or deposit and has no tax deficiency or claim outstanding, proposed
or assessed against it, and there is no basis for any such deficiency or
claim. Within the last four (4) years, no ASBI Company's federal income
tax return has been audited or examined and no such audit is currently
pending or threatened. Except as disclosed in Schedule 3.14, no ASBI
-------------
Company has been granted any extension of time with respect to any ASBI
Company or the date on which any tax return was or is due to be filed by or
with respect to any ASBI Company or any waiver or agreement by any ASBI
Company for the extension of time for the assessment or collection of any
tax. No ASBI Company has committed any violation of any applicable
federal, state, local or foreign tax laws.
B. No claim has ever been made by an authority in a jurisdiction
where the ASBI Companies do not file tax returns that an ASBI Company is or
may be subject to taxation by that jurisdiction. There are no liens for
taxes due and payable on, or any liens that have been improperly or
erroneously filed against, the assets of the ASBI Companies. ASBI has
disclosed on its federal income tax returns all positions taken therein
that could give rise to a substantial understatement of federal income tax
within the meaning of Section 6662 of the Code.
C. The amounts set up as provisions for current or deferred taxes on
the ASBI Financial Statements and the TFRs are sufficient for the payment
of all unpaid federal, state, county, local, foreign or other taxes
(including any interest or penalties) of or on behalf of the ASBI Companies
applicable to the periods covered by each entity's financial statements,
and all years and periods prior thereto.
D. No ASBI Company, nor any director or officer (or employee
responsible for tax matters) of any ASBI Company expects any authority to
assess any additional taxes for any period for which tax returns have been
filed. There is no dispute or claim concerning any tax liability of any
ASBI Company either (i) claimed or raised by any authority in writing or
(ii) as to which ASBI and the directors and officers (and employees
responsible for tax matters) of ASBI has knowledge based upon personal
contact with any agent of such authority. ASBI has delivered to SWS
correct and complete copies of all federal income tax returns filed with
the Internal Revenue Service ("IRS"), examination reports, and statements
20
of deficiencies assessed against or agreed to by any ASBI Company since
December 31, 1995.
E. No ASBI Company has waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax
assessment or deficiency.
F. ASBI has been a validly electing Subchapter S corporation within
the meaning of Sections 1361 and 1362 of the Code at all times after
December 31, 1996 and will be a validly electing Subchapter S corporation
up to and including the Closing Date.
G. Each ASBI Subsidiary has been a validly electing Qualified
Subchapter S Subsidiary ("QSSS") within the meaning of Section 1361(b)(3)
of the Code at all times after December 31, 1997, and each will be a
validly electing QSSS up to and including the Closing Date. Except as
disclosed in Schedule 3.14, the ASBI Subsidiaries have never agreed to
-------------
make, nor is any ASBI Subsidiary required to make, any adjustment under
Section 481(a) of the Code by reason of a change in method of accounting or
otherwise.
SECTION 3.15 Insurance. Schedule 3.15 contains an accurate and complete
--------- -------------
list and brief description of all policies of insurance, including fidelity and
bond insurance, of the ASBI Companies. Except as set forth on Schedule 3.15,
-------------
all such policies (A) are sufficient for compliance by the ASBI Companies with
all requirements of law and all agreements to which the ASBI Companies are a
party, (B) are valid, outstanding and enforceable except as enforceability may
be limited by bankruptcy, conservatorship, insolvency, moratorium,
reorganization, receivership, or similar laws and judicial decisions affecting
the rights of creditors generally and by general principles of equity (whether
applied in a proceeding at law or equity), (C) will not in any significant
respect be affected by, and will not terminate or lapse by reason of, the
transactions contemplated by this Agreement, and (D) are presently in full force
and effect, no notice has been received of the cancellation, or threatened or
proposed cancellation, of any such policy and there are no unpaid premiums due
thereon. To the best of their knowledge, no ASBI Company is in default with
respect to the provisions of any such policy and has not failed to give any
notice or present any claim thereunder in a due and timely fashion. Each
material property of the ASBI Companies is insured for the benefit of the ASBI
Companies in amounts deemed adequate by ASBI's management against risks
customarily insured against. Except as set forth on Schedule 3.15, there have
-------------
been no claims under any fidelity bonds of the ASBI Companies within the last
three (3) years, and ASBI is not aware of any facts that would form the basis of
a claim under such bonds.
SECTION 3.16 No Adverse Change. Except as disclosed in the
-----------------
representations and warranties made in this Article III, there has not been any
Material Adverse Change since March 31, 1999, nor has any event or condition
occurred that has resulted in, or has a reasonable possibility of resulting in
the future, in a Material Adverse Change.
SECTION 3.17 Proprietary Rights. Except as set forth on Schedule 3.17, no
------------------ -------------
ASBI Company owns or requires the use of any patent, patent application, patent
right, invention, process, trademark (whether registered or unregistered),
trademark application, trademark right, trade name, service name, service mark,
copyright or any trade secret ("Proprietary Rights") for the business or
operations of the ASBI Companies. To the best knowledge of ASBI, no ASBI
Company is
21
infringing upon or otherwise acting adversely to, and have not in the past three
(3) years infringed upon or otherwise acted adversely to, any Proprietary Right
owned by any other person or persons. There is no claim or action by any such
person pending, or to the knowledge of ASBI threatened, with respect thereto.
SECTION 3.18 Transactions with Certain Persons and Entities. Except as
----------------------------------------------
disclosed in Schedule 3.18, no ASBI Company owes any amount to (excluding
-------------
deposit liabilities), or has any loan, contract, lease, commitment or other
obligation from or to any of the present or former directors or officers (other
than compensation for current services not yet due and payable and reimbursement
of expenses arising in the ordinary course of business) of the ASBI Companies,
and none of such persons owes any amount to the ASBI Companies. Except as set
forth on Schedule 3.18, there are no agreements, instruments, commitments,
-------------
extensions of credit, tax sharing or allocation agreements or other contractual
agreements of any kind between or among any ASBI Company, whether on their own
behalf or in their capacity as trustee or custodian for the funds of any ASBI
Employee Plan (as defined in the Section 3.32 of this Agreement) and any of
their Affiliates.
SECTION 3.19 Evidences of Indebtedness. All evidences of indebtedness and
-------------------------
leases that are reflected as assets of the ASBI Companies are legal, valid and
binding obligations of the respective obligors thereof, enforceable in
accordance with their respective terms (except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors generally and the availability of injunctive relief, specific
performance and other equitable remedies) and are not subject to any known or
threatened defenses, offsets or counterclaims that may be asserted against, the
ASBI Companies or the present holder thereof, except as disclosed in Schedule
--------
3.19; provided, however, that the foregoing sentence shall not be deemed to be a
- ----
representation or warranty of collectibility of any of the assets. The credit
files of the Bank contain all material information (excluding general, local or
national industry, economic or similar conditions) known to the ASBI Companies
that is reasonably required to evaluate in accordance with generally prevailing
practices in the banking industry the collectibility of the loan portfolio of
the Bank (including loans that will be outstanding if any of them advances funds
they are obligated to advance). ASBI has disclosed all of the substandard,
doubtful, loss, nonperforming or problem loans on the internal watch list of the
Bank, a copy of which as of March 31, 1999, has been provided to SWS.
SECTION 3.20 Employee Relationships. Each of the ASBI Companies has
----------------------
complied with all applicable material laws relating to its relationships with
its employees, and ASBI believes that the relationships between the ASBI
Companies and their respective employees are good. To the best knowledge of
ASBI, no key executive officer or manager of any of the operations operated by
the ASBI Companies or any group of employees of the ASBI Companies has or have
any present plans to terminate their employment with the ASBI Companies.
SECTION 3.21 Condition of Assets. Except as set forth on Schedule 3.21,
------------------- -------------
all furniture, fixtures and equipment used by the ASBI Companies are in good
operating condition, ordinary wear and tear excepted, and conform with all
material ordinances, regulations, zoning and other laws, whether federal, state
or local. No ASBI Company's premises or equipment are in need of
22
maintenance or repairs other than ordinary routine maintenance and repairs that
are not material in nature or cost.
SECTION 3.22 Environmental Compliance. Except as disclosed on Schedule
------------------------ --------
3.22:
- ----
A. The ASBI Companies and all of their respective Properties and the
ASBI Companies' operations are in material compliance with all
Environmental Laws (as defined in Section 11.10). The ASBI Companies are
not aware of, nor has any ASBI Company received notice of, any past,
present, or future conditions, events, activities, practices or incidents
that may interfere with or prevent the compliance of the ASBI Companies
with all Environmental Laws.
B. The ASBI Companies have obtained all material permits, licenses
and authorizations that are required under all Environmental Laws.
C. No Hazardous Materials (as defined in Section 11.10) exist on,
about or within any of the Properties, nor have any Hazardous Materials
previously existed on, about or within or been used, generated, stored,
transported, disposed of, on or released from any of the Properties. The
use that the ASBI Companies make and intend to make of the Properties will
not result in the use, generation, storage, transportation, accumulation,
disposal or release of any Hazardous Material on, in or from any of the
Properties.
D. Except as disclosed on Schedule 3.22, there is no action, suit,
-------------
proceeding, investigation, or inquiry before any court, administrative
agency or other governmental authority pending or, to the knowledge of
ASBI, threatened against the ASBI Companies relating in any way to any
Environmental Law. No ASBI Company has any liability for remedial action
under any Environmental Law. No ASBI Company has received any request for
information by any governmental authority with respect to the condition,
use or operation of any of the Properties nor has any ASBI Company received
any notice of any kind from any governmental authority or other person with
respect to any violation of or claimed or potential liability of any kind
under any Environmental Law (including, without limitation, any letter,
notice or inquiry from any person or governmental entity informing the ASBI
Companies that they are or may be liable in any way under CERCLA (as
defined in Section 11.10) or requesting information to enable such a
determination to be made).
SECTION 3.23 Regulatory Compliance. Except as set forth on Schedule 3.23,
--------------------- -------------
all reports, records, registrations, statements, notices and other documents or
information required to be filed by the ASBI Companies with any federal or state
regulatory authority, including, without limitation, the OTS, the FDIC and the
IRS have been duly and timely filed and all information and data contained in
such reports, records or other documents are substantially true, accurate,
correct and complete. Except as set forth on Schedule 3.23, no ASBI Company is
-------------
now or has been within the last four (4) years subject to any commitment letter,
memorandum of understanding, cease and desist order, written agreement or other
formal or informal administrative action with any such regulatory bodies. ASBI
does not believe any such regulatory bodies have any present intent to place the
ASBI Companies under any such administrative action. Except as set forth on
Schedule 3.23, there are no actions or proceedings pending or threatened against
- -------------
any ASBI Company by or before any such
23
regulatory bodies or any other nation, state or subdivision thereof, or any
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
SECTION 3.24 Absence of Certain Business Practices. To the best knowledge
-------------------------------------
of ASBI, none of the ASBI Companies, nor any officer, employee or agent of the
ASBI Companies, nor any other person acting on their behalf, has, directly or
indirectly, within the past five (5) years, given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the business of the ASBI
Companies (or assist the ASBI Companies in connection with any actual or
proposed transaction) that (A) might subject the ASBI Companies to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (B) if
not given in the past, might have resulted in a Material Adverse Change or (C)
if not continued in the future might result in a Material Adverse Change or
might subject the ASBI Companies to suit or penalty in any private or
governmental litigation or proceeding.
SECTION 3.25 Information for Proxy Statements. None of the information
--------------------------------
supplied or to be supplied by the ASBI Companies, or any of their directors,
officers, employees or agents for inclusion in the SWS Proxy Statement or the
ASBI Proxy Statement/PPM, or any amendment thereof or supplement thereto, will
be false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or at the time of the
SWS Shareholders' Meeting or the ASBI Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the SWS Shareholders' Meeting or the ASBI
Shareholders' Meeting. All documents that the ASBI Companies are responsible
for filing with any regulatory or governmental agency in connection with the
Merger will comply in all material respects with the provisions of applicable
law.
SECTION 3.26 Dissenting Shareholders. ASBI has no knowledge of any plan
-----------------------
or intention on the part of any ASBI shareholders to make written demand for
payment of the fair value of their shares of the ASBI Common Stock in the manner
provided by applicable law.
SECTION 3.27 Books and Records. The minute books, stock certificate books
-----------------
and stock transfer ledgers of the ASBI Companies (A) have been kept accurately
in the ordinary course of business, (B) are complete and correct in all material
respects, (C) the transactions entered therein represent bona fide transactions,
and (D) there have been no transactions involving the business of the ASBI
Companies that properly should have been set forth therein and that have not
been accurately so set forth.
SECTION 3.28 Forms of Instruments, Etc. ASBI has made, and will make,
-------------------------
available to SWS copies of all standard forms of notes, mortgages, deeds of
trust and other routine documents of a like nature used on a regular and
recurring basis by the ASBI Companies in the ordinary course of their business.
SECTION 3.29 Fiduciary Responsibilities. The ASBI Companies have
--------------------------
performed in all material respects all of their respective duties as a trustee,
custodian, guardian or as an escrow agent
24
in a manner that complies in all material respects with all applicable laws,
regulations, orders, agreements, instruments and common law standards, where the
failure to so perform would result in a Material Adverse Change or have a
Material Adverse Effect on transactions contemplated by this Agreement, and no
ASBI Company has any reason to be aware of any basis for the same.
SECTION 3.30 Guaranties. Except for items in the process of collection in
----------
the ordinary course of the Bank's business, none of the obligations or
liabilities of the ASBI Companies are guaranteed by any other person, firm or
corporation, nor, except in the ordinary course of business, according to
prudent business practices and in compliance with applicable law, have the ASBI
Companies guaranteed the obligations or liabilities of any other person, firm or
corporation.
SECTION 3.31 Voting Trust or Buy-Sell Agreements. Except as set forth on
------------------------------------
Schedule 3.31, ASBI is not aware of any agreement between any of its
- -------------
shareholders relating to a right of first refusal with respect to the purchase
or sale by any such shareholder of capital stock of ASBI or any voting agreement
or voting trust with respect to shares of capital stock of ASBI. All of such
agreements will be terminated or canceled at or prior to the Effective Time.
SECTION 3.32 Employee Benefit Plans.
----------------------
A. Set forth on Schedule 3.32 is a complete and correct list of all
-------------
"employee benefit plans" (as defined in the Employee Retirement Income
Security Act of 1974, as amended ["ERISA"]), all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus,
incentive, compensation, deferred compensation, profit sharing, stock
option, stock appreciation right, stock bonus, stock purchase, employee
stock ownership, savings, severance, supplemental unemployment, layoff,
salary continuation, retirement, pension, health, life insurance,
disability, group insurance, vacation, holiday, sick leave, fringe benefit
or welfare plan, or any other similar plan, agreement, policy or
understanding (whether written or oral, qualified or nonqualified,
currently effective or terminated), and any trust, escrow or other
agreement related thereto, which (a) is currently or has been at any time
within the last sixty months, maintained or contributed to by the ASBI
Companies, or with respect to which any ASBI Company has any liability, and
(b) provides benefits, or describes policies or procedures applicable to
any officer, employee, service provider, former officer or former employee
of the ASBI Company, or the dependents of any thereof, regardless of
whether funded (the "ASBI Employee Plans").
B. No ASBI Employee Plan is a defined benefit plan within the
meaning of Section 3(35) of ERISA. ASBI has delivered or made available to
SWS true, accurate and complete copies of the documents comprising each
ASBI Employee Plan and any related trust agreements, annuity contracts or
any other funding instruments ("Funding Arrangements"), any contracts with
independent contractors (without limitation, actuaries, investment
managers, etc.) that relate to any ASBI Employee Plan, the Form 5500 filed
in each of the most recent plan years with respect to each ASBI Employee
Plan, and related schedules and opinions, and such other documents, records
or other materials related thereto reasonably requested by SWS. There have
been no prohibited transactions (described under Section 406 of ERISA or
Section 4975(c) of the Code) breaches of fiduciary duty or any other
breaches or violations of any law applicable to the ASBI Employee Plans and
related
25
Funding Arrangements that would subject SWS or the ASBI Companies to any
liabilities in excess of $25,000 in the aggregate. Each ASBI Employee Plan
intended to be qualified under Code Section 401(a) has a current favorable
determination letter and has been operated in compliance with applicable
law, and in accordance with its terms, and all reports and filings required
by any government agency with respect to each ASBI Employee Plan have been
timely and completely filed. There are no pending claims, lawsuits or
actions relating to any ASBI Employee Plan (other than ordinary course
claims for benefits) and, to the best knowledge of ASBI, none are
threatened. No written or oral representations have been made to any
employee or former employee of the ASBI Companies promising or guaranteeing
any employer payment or funding for the continuation of medical, dental,
life or disability coverage for any period of time beyond the end of the
current plan year, or beyond termination of employment, (except to the
extent of coverage required under Code Section 4980B). Compliance with FAS
106 will not create any material change to the ASBI Financial Statements.
Except as required in connection with qualified plan amendments required by
tax law changes, the consummation of the transactions contemplated by this
Agreement will not accelerate the time of payment or vesting, or increase
the amount, of compensation due to any employee, officer, former employee
or former officer of the ASBI Companies and there are no contracts or
arrangements providing for payments that will be subject to excise tax
under Code Section 4999.
C. With respect to each "employee benefit plan" (as defined in
ERISA) maintained or contributed to or required to be contributed to,
currently or in the past, by any trade or business with which any ASBI
Company is required by any of the rules contained in the Code or ERISA to
be treated as a single employer (the "Controlled Group Plans"):
(i) All Controlled Group Plans which are "group health plans" (as defined
in the Code and ERISA) have been operated to the Closing such that
failures to operate such group health plans in full compliance with
Part 6 of Subtitle B of Title 1 of ERISA and Section 4980B of the
Code would not subject the ASBI Companies to liability in excess of
$25,000 in the aggregate; and
(ii) There is no Controlled Group Plan that is a defined benefit plan (as
defined in Section 3(35) of ERISA), nor has there been in the last
five (5) calendar years.)
(iii) There is no Controlled Group Plan that is a "multiple employer plan"
or "multiemployer plan" (as either such term is defined in ERISA),
nor has there been since 1974.
D. Each ASBI Company is completely insured for all health insurance
claims. No event has occurred or circumstances exist that could result in a
material increase in premium costs of ASBI Employee Plans that are insured
or a material increase in self-insured costs.
SECTION 3.33 Year 2000.
---------
26
A. ASBI has disclosed to SWS a complete and accurate copy of ASBI's
plan (the "Year 2000 Plan"), including an estimate of the anticipated
associated costs, for implementing modifications to the ASBI Companies'
hardware, software, and computer systems, chips, and microprocessors, to
ensure proper execution and accurate processing of all date-related data,
whether from years in the same century or in different centuries. ASBI
represents and warrants to SWS that all ASBI Companies are "Year 2000
Compliant." The term "Year 2000 Compliant" means that all programs,
systems, services, or other technology will: (i) accept and process date
and time data accurately and without interruption (including, but not
limited to, calculating, comparing, and sequencing) from, into, and between
the years 1999 and 2000, using the correct century and year, and accurately
calculating leap year dates; (ii) when used in combination with other
information technology, process date and time data accurately and without
interruption if the other information technology properly exchanges date
and time data with it; (iii) respond to two-digit-year date input in a way
that resolves the ambiguity as to century in a disclosed, defined, and
predetermined manner; and (iv) store and provide output of date information
in ways that are unambiguous as to century.
B. In accordance with those certain guidances and statements issued
by the Federal Financial Institutions Examination Council ("FFIEC") in
connection with the century date change that will take place on January 1,
2000, dated as of June 1996, May 5, 1997, December 17, 1997, March 17,
1998, April 10, 1998, May 13, 1998, August 31, 1998, September 2, 1998,
October 15, 1998, December 11, 1998, February 17, 1999, and May 6, 1999
(together with any subsequent FFIEC issuances on the Year 2000, the
"Interagency Statements"), ASBI has:
(i) Inventoried and assessed the technologies it uses, particularly its
computer hardware and software, to identify potential problems areas
related to the Year 2000;
(ii) Developed and implemented a Year 2000 Plan, including comprehensive
testing plans, to prepare its information technology to: (a) process
date/time data accurately and without interruption (including, but
not limited to, calculating, comparing, and sequencing) from, into,
and between the years 1999 and 2000, and leap year calculations; (b)
when used in combination with other information technology, process
date/time data accurately and without interruption if the other
information technology properly exchanges date/time data with it; (c)
respond to two-digit year-date input in a way that resolves the
ambiguity as to century in a disclosed, defined, and predetermined
manner; and (d) store and provide output of date information in ways
that are unambiguous as to century; and
(iii) Developed contingency plans to ensure continuity of business in the
event of: (a) failure to complete any tasks required by the Year 2000
Plan, such as remediation or validation; or (b) any externally caused
business interruption related to the century date change.
C. ASBI is in compliance with the Interagency Statements.
27
D. If the Bank has been examined by the OTS for Year 2000 readiness,
it has not received a rating that would cause delay or denial of any
regulatory approval of this Agreement.
E. ASBI's estimate of the costs (on a consolidated basis) to complete
its Year 2000 compliance efforts is $10,000.
F. Between the date of this Agreement and the Effective Time, ASBI
shall endeavor to continue its efforts to implement such Year 2000 Plan.
SECTION 3.34 Accounting, Tax, and Regulatory Matters. No ASBI Company or
---------------------------------------
any Affiliate thereof has taken or agreed to take any action, and ASBI has no
knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Code, or (ii) materially impede or delay
receipt of any of the consents and approvals referred to on Schedules 3.09 and
------------------
4.07 of this Agreement.
- ----
SECTION 3.35 Nonaccredited Investors. To the best knowledge of ASBI, no
-----------------------
more than thirty-five (35) of the ASBI shareholders will not qualify as
"Accredited Investors" as such term is defined in Rule 501(a) of Regulation D
of the 1933 Act.
SECTION 3.36 Information Systems. Each of the ASBI Companies has the
-------------------
ability to provide all computer, telecommunications, software and other
equipment and technology or resources (collectively, "Systems") necessary to
conduct its current and planned business, and the Systems possess the necessary
capacity, functionality, and compatibility for such purposes. Qualified
maintenance personnel, employed by or on contract with ASBI, are available to
keep the Systems in good working order. The Systems and the Bank's
transactional web site incorporate security measures that are at least as good
as those that are standard in the banking industry, and the Bank's web site is
reasonably available and accessible by Internet users. None of the ASBI
Companies has received a rating lower than "satisfactory" in its most recent
information systems examination by banking regulators.
SECTION 3.37 Representations Not Misleading. To the best knowledge of
------------------------------
ASBI, all material facts relating to the business operations, properties,
assets, liabilities (contingent or otherwise) and financial condition of the
ASBI Companies have been disclosed to SWS in or in connection with this
Agreement. No representation or warranty by ASBI contained in this Agreement,
nor any statement, exhibit or schedule furnished to SWS by ASBI under and
pursuant to, or in anticipation of this Agreement, contains or will contain on
the Closing Date any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which it was or will be made, not
misleading and such representations and warranties would continue to be true and
correct following disclosure to any governmental authority having jurisdiction
over ASBI or its properties of the facts and circumstances upon which they were
based. Except as disclosed herein, there is no matter that will have a Material
Adverse Effect on the ASBI Companies or ASBI's ability to perform the
transactions contemplated by this Agreement or the other agreements contemplated
hereby, or to the knowledge of ASBI, will in the future result in a Material
Adverse Change, other than general
28
economic conditions. No information material to the Merger, and that is
necessary to make the representations and warranties herein contained not
misleading, has been withheld by ASBI.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SWS
SWS hereby makes the representations and warranties set forth in this
Article IV to ASBI.
SECTION 4.01 Organization and Qualification. SWS is a corporation, duly
------------------------------
organized, validly existing and in good standing under all laws, rules, and
regulations applicable to corporations located or organized in the State of
Delaware. SWS is duly qualified to transact business as a foreign entity in
each jurisdiction in which a failure to be so qualified could have a Material
Adverse Effect. SWS has all requisite corporate power and authority (including
all licenses, franchises, permits and other governmental authorizations as are
legally required) to carry on its business as now being conducted, to own, lease
and operate its properties and assets as now owned, leased or operated and to
enter into and carry out its obligations under this Agreement.
SECTION 4.02 Execution and Delivery. SWS has taken all corporate action
----------------------
necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other agreements and documents contemplated hereby to which it is a
party, including, but not limited to, the Merger Agreement. This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not limited to, the Merger Agreement, have been or at Closing will be, duly
executed by SWS and each constitutes the valid and binding obligation of SWS,
enforceable in accordance with its respective terms and conditions, except as
enforceability may be limited by bankruptcy, conservatorship, insolvency,
moratorium, reorganization, receivership or similar laws and judicial decisions
affecting the rights of creditors generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
SECTION 4.03 Authorized and Outstanding Stock of SWS. The authorized
---------------------------------------
capital stock of SWS consists of (i) 20,000,000 shares of common stock, par
value $0.10 per share (the "SWS Common Stock"), and (ii) 100,000 shares of
preferred stock, par value $1.00 per share ("SWS Preferred Stock"). As of the
date hereof, 11,813,780 shares of SWS Common Stock are issued and outstanding.
All of such issued shares are validly issued, fully paid and nonassessable. As
of the date hereof, none of the SWS Preferred Stock is issued or outstanding.
Except as set forth on Schedule 4.03, SWS does not have outstanding, and is not
-------------
bound by, any subscriptions, options, warrants, calls, commitments or agreements
to issue any additional shares of its capital stock, including any right of
conversion or exchange under any outstanding security or other instrument, and
SWS is not obligated to issue any shares of its capital stock for any purpose.
There are no unsatisfied preemptive rights in respect to the capital stock of
SWS. SWS has no obligation to repurchase any of its securities, and there are
no agreements restricting the transfer of or otherwise relating to shares of its
capital stock of any class.
SECTION 4.04 Authorized and Outstanding Stock of Newco. The authorized
-----------------------------------------
capital stock of Newco will consist of 100,000 shares of common stock, par value
$1.00 per share (the "Newco
29
Common Stock") and 1,000 shares of the Newco Common Stock will be issued and
outstanding and held by SWS.
SECTION 4.05 Compliance with Laws, Permits and Instruments. The
---------------------------------------------
execution, delivery and (provided the required regulatory approvals are
obtained) performance of this Agreement and the other agreements contemplated
hereby, including, but not limited to the Merger Agreement, and the consummation
of the transactions contemplated hereby and thereby, will not conflict with, or
result, by itself or with the giving of notice or the passage of time, in any
violation of or default or loss of a benefit under, (A) any provision of the
Certificate of Incorporation or Bylaws of SWS, (B) any material provision of any
mortgage, indenture, lease, contract, agreement or other instrument applicable
to SWS or its assets, operations, properties or businesses now conducted or
heretofore conducted or (C) any statute, law, ordinance, rule or regulation
applicable to SWS.
SECTION 4.06 Litigation. Except as set forth on Schedule 4.06, there are
---------- -------------
no actions, claims, suits, investigations, reviews or other legal, quasi-
judicial or administrative proceedings of any kind or nature now pending or
threatened against or affecting any SWS Company at law or in equity, or by or
before any federal, state or municipal court or other governmental or
administrative department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that in any manner involve any SWS Company or any of their
properties or capital stock that might reasonably be anticipated to result in a
Material Adverse Change or have a material Adverse Effect on the transactions
contemplated by this Agreement or the Merger Agreement, and SWS does not know or
have any reason to be aware of any basis for the same. No legal action, suit or
proceeding or judicial, administrative or governmental investigation is pending
or, to the knowledge of SWS, threatened against any SWS Company that questions
or might question the validity of this Agreement or the agreements contemplated
hereby, including, but not limited to, the Merger Agreement, or any actions
taken or to be taken by SWS or its Subsidiaries pursuant hereto or thereto or
seeks to enjoin or otherwise restrain the transactions contemplated hereby or
thereby.
SECTION 4.07 Consents and Approvals. SWS's board of directors (at a
----------------------
meeting duly called and held) has resolved to recommend to the shareholders of
SWS approval for the issuance of the SWS Common Stock and other transactions
contemplated pursuant to this Agreement. Except for regulatory approvals as
disclosed in Schedule 4.07, no approval, consent, order or authorization of, or
-------------
registration, declaration or filing with, any governmental authority or other
third party is required on the part of SWS in connection with the execution,
delivery or performance of this Agreement or the agreements contemplated hereby,
including, but not limited to, the Merger Agreement or the consummation by SWS
of the transactions contemplated hereby or thereby.
SECTION 4.08 SEC Filings; SWS Financial Statements.
-------------------------------------
A. SWS has timely filed with the SEC all forms, reports and financial
statements and documents required to be filed by it since December 31,
1995. SWS has made available to ASBI all forms, reports, financial
statements (the "SWS Financial Statements") and documents required to be
filed by SWS with the SEC since December 31, 1998 (collectively, the "SWS
SEC Reports"). The SWS SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the 1933 Act and the
1934 Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a
30
filing prior to the date of this Agreement, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such SWS SEC Reports or necessary in
order to make the statements in such SWS SEC Reports, in light of the
circumstances under which they were made, not misleading. Except for SWS
Subsidiaries that are registered as a broker, dealer, or investment advisor
or filings required due to fiduciary holdings of the SWS Subsidiaries, none
of SWS Subsidiaries is required to file any forms, reports, or other
documents with the SEC.
B. Each of the SWS Financial Statements (including, in each case, any
related notes) contained in the SWS SEC Reports, including any SWS SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was or will be prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC), and fairly presented or will fairly
present the consolidated financial position of SWS and its Subsidiaries as
at the respective dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount or
effect.
SECTION 4.09 Proxy Statement. None of the information supplied or to be
---------------
supplied by SWS or any of its directors, officers, employees or agents for
inclusion in the ASBI Proxy Statement/PPM, or any amendment thereof or
supplement thereto, will be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or at the time of the ASBI Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy or offering of SWS Common Stock for the ASBI
Shareholders' Meeting. All documents that SWS is responsible for filing with
any regulatory or governmental agency in connection with the Merger will comply
in all material respects with the provisions of applicable law.
SECTION 4.10 Representations Not Misleading. No representation or
------------------------------
warranty by SWS contained in this Agreement, or any statement, exhibit or
schedule furnished to ASBI by SWS under and pursuant to, or in anticipation of
this Agreement, contains or will contain on the Closing Date any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which it was or will be made, not misleading and such
representations and warranties would continue to be true and correct following
disclosure to any governmental authority having jurisdiction over SWS of the
facts and circumstances upon which they were based. Except as disclosed herein,
there is no matter that will have a Material Adverse Effect on the SWS Companies
or SWS's ability to perform the transactions contemplated by this Agreement or
the other agreements contemplated hereby, or to the knowledge of SWS, will in
the future result in a Material Adverse Change, other than general economic
conditions. No information material to the Merger, and that is necessary to
make the representations and warranties herein contained not misleading, has
been withheld by SWS.
31
ARTICLE V.
COVENANTS OF ASBI
ASBI hereby makes the covenants set forth in this Article V to SWS.
SECTION 5.01 Best Efforts. ASBI will use its best efforts to cause the
------------
consummation of the transactions contemplated hereby in accordance with the
terms and conditions of this Agreement.
SECTION 5.02 Merger Agreement. ASBI will, as soon as practicable after
----------------
the execution of this Agreement, duly authorize and enter into the Merger
Agreement, the form of which is attached hereto as Exhibit A, and perform all of
---------
its obligations thereunder.
SECTION 5.03 Information for Regulatory Applications and Proxy Statements.
------------------------------------------------------------
ASBI will, and will cause the ASBI Subsidiaries to, promptly furnish to SWS all
information concerning the ASBI Companies, including, but not limited to,
financial statements required for inclusion in (A) any proxy statement to be
used by SWS in connection with the approval of the shareholders of SWS of the
transactions contemplated hereby and (B) any application or statement to be made
by SWS or filed by SWS with any governmental body in connection with the
transactions contemplated by this Agreement, or in connection with any unrelated
transactions during the pendency of this Agreement, and ASBI represents and
warrants that all information so furnished for such statements and applications
shall be true and correct in all material respects and shall not omit any
material fact required to be stated therein or necessary to make the statements
made, in light of the circumstances under which they were made, not misleading.
The ASBI Companies shall otherwise fully cooperate with SWS in the filing of any
applications or other documents necessary to consummate the transactions
contemplated by this Agreement.
SECTION 5.04 Required Acts of the ASBI Companies. Prior to the Closing,
------------------------------------
each of the ASBI Companies shall, unless otherwise permitted in writing by SWS:
A. Operate only in the ordinary course of business and consistent
with normal banking practices;
B. Except as required by normal business practices, use all
reasonable efforts to preserve its business organization intact and to
retain its present customers, depositors, suppliers, correspondent banks,
officers, directors, employees and agents;
C. Act in a manner intended to preserve or attempt to preserve its
goodwill;
D. Perform all of its obligations under contracts, leases and
documents relating to or affecting its assets, properties and business
except such obligations as ASBI may in good faith reasonably dispute;
E. Except as required by normal business practices, maintain all
offices, machinery, equipment, materials, supplies, inventories, vehicles
and other properties owned, leased or used by it (whether under its control
or the control of others), in good operating condition and repair, ordinary
wear and tear excepted;
32
F. Maintain in full force and effect all insurance policies now in
effect or renewals thereof and, except as required by normal business
practices that do not jeopardize insurance coverage, give all notices and
present all claims under all insurance policies in due and timely fashion;
G. Timely file all reports required to be filed with governmental
authorities and observe and conform to all applicable laws, rules,
regulations, ordinances, codes, orders, licenses and permits, except those
being contested in good faith by appropriate proceedings;
H. Timely file all tax returns required to be filed by it and
promptly pay all taxes, assessments, governmental charges, duties,
penalties, interest and fines that become due and payable, except those
being contested in good faith by appropriate proceedings;
I. Withhold from each payment made to each of its employees the
amount of all taxes (including, but not limited to, federal income taxes,
FICA taxes and state and local income and wage taxes) required to be
withheld therefrom and pay the same to the proper tax receiving officers;
J. Continue to follow and implement policies, procedures and
practices regarding the identification, monitoring, classification and
treatment of all assets in substantially the same manner as it has in the
past; and
K. Account for all transactions in accordance with GAAP (unless
otherwise instructed by RAP, in which instance account for such transaction
in accordance with RAP), and maintain the allowance for loan losses account
for the Bank in an adequate amount to provide for all losses, net of
recoveries relating to loans previously charged off, on all outstanding
loans of the Bank.
SECTION 5.05 Prohibited Acts of the ASBI Companies. After the date of
-------------------------------------
this Agreement and prior to the Closing, ASBI shall not (and cause the ASBI
Subsidiaries to not), without the prior written consent of SWS (which consent
shall be deemed to have been given five (5) business days after actual receipt
by SWS of notice given pursuant to Section 11.07 with respect to such act,
unless SWS sooner objects to such act):
A. Introduce any new material method of management or operation;
B. Other than actions required by this Agreement, take any action
that could reasonably be anticipated to result in a Material Adverse
Change;
C. Take or fail to take any action that would reasonably cause or
permit the representations and warranties made in Article III hereof to be
inaccurate at the time of the Closing or preclude ASBI from making such
representations and warranties at the time of the Closing;
33
D. Mortgage, pledge or subject to lien, charge, security interest or
any other encumbrance or restriction any of its property, business or
assets, tangible or intangible except in the ordinary course of business
and consistent with normal banking practices;
E. Cause or allow the loss of insurance coverage, unless replaced
with coverage which is substantially similar (in amount and insurer) to
that now in effect;
F. Incur any obligation or liability, whether absolute or contingent,
except in the ordinary course of business and consistent with normal
banking practices;
G. Discharge or satisfy any lien, charge or encumbrance or pay any
obligation or liability, whether absolute or contingent, due or to become
due, except in the ordinary course of business consistent with normal
banking practices;
H. Issue, reserve for issuance, grant, sell or authorize the issuance
of any shares of its capital stock or other securities or subscriptions,
options, warrants, calls, rights or commitments of any kind relating to the
issuance thereto;
I. Purchase or redeem any of its stock or options thereon or declare
or pay any distribution on its outstanding capital stock, except for
dividends by the Bank to and from ASBI and dividends paid in accordance
and consistent with past practices of ASBI not to exceed 60% of ASBI's
taxable income, on a consolidated basis, calculated in accordance with
GAAP; provided, however, that ASBI shall not declare or pay any dividend
without the prior written consent of KPMG, LLP, the accountants for SWS,
confirming that such dividend payments, if any, will not prevent the
transactions contemplated by this Agreement from qualifying for pooling-of-
interests accounting treatment;
J. Change its Articles, Charter, Certificate or Bylaws or its
authorized capital stock;
K. Sell, transfer, lease to others or otherwise dispose of any of its
assets or cancel or compromise any debt or claim, or waive or release any
right or claim, which, individually or in the aggregate, would constitute a
Material Adverse Change, except in the ordinary course of business and
consistent with past practices and safe and sound banking principles;
L. Enter into any transaction other than in the ordinary course of
business;
M. Except in the ordinary course of the ASBI Companies' business and
consistent with past practices, enter into or give any promise, assurance
or guarantee of the payment, discharge or fulfillment of any undertaking
or promise made by any other person, firm or corporation;
N. Sell or knowingly dispose of, or otherwise divest itself of the
ownership, possession, custody or control, of any corporate books or
records of any nature that, in accordance with sound business practice,
normally are retained for a period of time after their use, creation or
receipt, except at the end of the normal retention period;
34
O. Make any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or pay or agree or orally
promise to pay, conditionally or otherwise, any bonus, extra compensation,
extra pension or extra severance or extra vacation pay, to or for the
benefit of any of its shareholders, directors, officers, employees or
agents, or enter into any employment or consulting contract (other than as
contemplated by this Agreement) or other agreement with any director,
officer or employee or adopt, amend in any material respect or terminate
any pension, employee welfare, retirement, stock purchase, stock option,
stock appreciation rights, termination, severance, income protection,
golden parachute, savings or profit-sharing plan (including trust
agreements and insurance contracts embodying such plans), any deferred
compensation, or collective bargaining agreement, any group insurance
contract or any other incentive, welfare or employee benefit plan or
agreement maintained by it for the benefit of its directors, employees or
former employees, except in the ordinary course of business and consistent
with past practices and safe and sound banking principles, and except
normal periodic increases in the compensation payable to officers or
salaried employees, consistent with past practices and made in the ordinary
course of business;
P. Engage in any transaction with any affiliated person or create any
liability of the ASBI Companies owed to such persons other than in the form
of loans, deposits, wages, salaries and reimbursement of expenses created
in the ordinary course of business and consistent with past practices;
Q. Acquire any capital stock or other equity securities or acquire
any equity or ownership interest in any bank, corporation, partnership or
other entity (except (i) through settlement of indebtedness, foreclosure,
or the exercise of creditors' remedies or (ii) in a fiduciary capacity, the
ownership of which does not expose it to any liability from the business,
operations or liabilities of such person);
R. Terminate, cancel or surrender any contract, lease or other
agreement or suffer any damage, destruction or loss that, in any case or in
the aggregate, would constitute a Material Adverse Change;
S. Dispose of, permit to lapse, transfer or grant any rights under,
or breach or infringe upon, any United States or foreign license or
Proprietary Right or modify any existing rights with respect thereto,
except in the ordinary course of business and consistent with past
practices and safe and sound banking principles;
T. Make any capital expenditures or capital additions or betterments
in excess of an aggregate of $20,000, except for expenditures in connection
with the construction of the new branch location of the Bank at Matlock
Road and Stephens Street in Arlington, Texas consistent with the plans and
specifications disclosed to SWS;
U. Hire or employ any person with an annual salary equal to or
greater than $50,000;
35
V. Make any, or acquiesce with any, change in any accounting methods,
principles or material practices;
W. Except for transactions through SWS in the ordinary course of
business, between the date of the Agreement and the Closing Date, sell any
Investment Securities or purchase any Investment Securities in excess of an
aggregate amount of $100,000 (other than U.S. Treasuries with a maturity of
less than one year);
X. Other than loans fully secured by certificates of deposit or
liquid, readily marketable collateral, make or alter any of the material
terms of any loan to any single borrower and his related interests in
excess of the principal amount of $500,000, or renew or extend the maturity
of any loan to any single borrower and his related interests in excess of
the principal amount of $500,000; or
Y. Make, or renew or extend the maturity of, or alter any of the
material terms of any classified loan in excess of the principal amount of
$100,000.
SECTION 5.06 Access; Pre-Closing Investigation. Subject to the
----------------------------------
provisions of Article XI, ASBI shall afford the officers, directors, employees,
attorneys, accountants, investment bankers and authorized representatives of SWS
full access to the properties, books, contracts and records of the ASBI
Companies, permit SWS to make such inspections (including without limitation
with regard to such properties physical inspection of the surface and subsurface
thereof and any structure thereon) as they may require and furnish to SWS during
such period all such information concerning the ASBI Companies and their
respective affairs as SWS may reasonably request, in order that SWS may have
full opportunity to make such reasonable investigation as it shall desire to
make of the affairs of the ASBI Companies, including, without limitation, access
sufficient to verify the value of the assets and the liabilities of the ASBI
Companies and the satisfaction of the conditions precedent to SWS's obligations
described in Article VIII of this Agreement; provided that such investigation
shall be conducted in the manner least disruptive to the business and operations
of the ASBI Companies. ASBI agrees at any time, and from time to time, to
furnish to SWS as soon as practicable, any additional information that SWS may
reasonably request.
SECTION 5.07 Invitations to and Attendance at Directors' and Committee
---------------------------------------------------------
Meetings. ASBI shall give notice, and shall cause the ASBI Subsidiaries to
- ---------
give notice, to two (2) designees of SWS (which designees shall be reasonably
acceptable to ASBI), and shall invite such persons to attend all regular and
special meetings of the board of directors of the ASBI Companies and all regular
and special meetings of any senior management committee (including but not
limited to the executive committee and the loan and discount committee of the
Bank) of the ASBI Companies. If the Merger is finally disapproved by any
appropriate regulatory authority or if this Agreement is terminated pursuant to
its terms, SWS's designees will no longer be entitled to notice of and
permission to attend such meetings.
SECTION 5.08 Additional Financial Statements. ASBI shall promptly
-------------------------------
furnish, when available, SWS with (A) unaudited statements of condition and
income of ASBI as of June 30, 1999 and September 30, 1999, and (B) true and
complete copies of additional TFRs prepared by the Bank.
36
SECTION 5.09 Untrue Representations. ASBI shall promptly notify SWS in
----------------------
writing if ASBI becomes aware of any fact or condition that makes untrue, or
shows to have been untrue, in any material respect, any schedule or any other
information furnished to SWS or any representation or warranty made in or
pursuant to this Agreement or that results in ASBI's failure to comply with any
covenant, condition or agreement contained in this Agreement.
SECTION 5.10 Litigation and Claims. ASBI shall promptly notify SWS in
---------------------
writing of any litigation, or of any claim, controversy or contingent liability
that might be expected to become the subject of litigation, against any ASBI
Company or affecting any of their properties, if such litigation or potential
litigation might, in the event of an unfavorable outcome, result in a Material
Adverse Change, and ASBI shall promptly notify SWS of any legal action, suit or
proceeding or judicial, administrative or governmental investigation, pending
or, to the knowledge of ASBI, threatened against any ASBI Company that questions
or might question the validity of this Agreement or the agreements contemplated
hereby, including, but not limited to, the Merger Agreement, or any actions
taken or to be taken by the ASBI Companies pursuant hereto or thereto or seeks
to enjoin or otherwise restrain the transactions contemplated hereby or thereby.
SECTION 5.11 Notice of Material Adverse Changes. ASBI shall promptly
----------------------------------
notify SWS in writing if any change shall have occurred or been threatened (or
any development shall have occurred or been threatened involving a prospective
change) in the business, financial condition, operations or prospects of the
ASBI Companies that has or may reasonably be expected to have or lead to a
Material Adverse Change.
SECTION 5.12 No Negotiation with Others. ASBI shall not, directly or
--------------------------
indirectly, nor shall it permit the ASBI Subsidiaries or their officers,
directors, employees, representatives or agents to, directly or indirectly (A)
encourage, solicit or initiate discussions or negotiations with, or (B) except
upon advice of counsel to the extent required to fulfill the fiduciary duties
owed to the shareholders of ASBI, entertain, discuss or negotiate with, or
provide any information to, or cooperate with, any corporation, partnership,
person or other entity or group (other than SWS or its Affiliates or associates
or officers, partners, employees or other authorized representatives of SWS or
such Affiliates or associates) concerning any merger, tender offer or other
takeover offer, sale of substantial assets, sale of shares of capital stock or
similar transaction involving the ASBI Companies. Immediately upon receipt of
any unsolicited offer, ASBI will communicate to SWS the terms of any proposal or
request for information and the identity of the parties involved.
SECTION 5.13 Consents and Approvals. ASBI shall use its best efforts to
----------------------
obtain all consents and approvals from third parties, including those listed on
Schedule 3.09, at the earliest practicable time.
- -------------
SECTION 5.14 Environmental Investigation; Right to Terminate Agreement.
---------------------------------------------------------
37
A. SWS and its consultants, agents and representatives, at the sole
cost and expense of SWS, shall have the right to the same extent that the
ASBI Companies have such right, but not the obligation or responsibility,
to inspect any Property, including, without limitation, conducting asbestos
surveys and sampling, environmental assessments and investigation, and
other environmental surveys and analyses including soil and ground sampling
("Environmental Inspections") at any time on or prior to August 31, 1999.
SWS shall notify ASBI prior to any physical inspections of the Property,
and ASBI may place reasonable restrictions on the time of such inspections.
If, as a result of any such Environmental Inspection, further investigation
("secondary investigation") including, without limitation, test borings,
soil, water and other sampling is deemed desirable by SWS, SWS shall (i)
notify ASBI of any Property for which it intends to conduct such a
secondary investigation and the reasons for such secondary investigation,
and (ii) at the sole cost and expense of SWS, commence such secondary
investigation, on or prior to September 30, 1999. SWS shall give
reasonable notice to ASBI of such secondary investigations, and ASBI may
place reasonable time and place restrictions on such secondary
investigations.
B. ASBI agrees to indemnify and hold harmless SWS for any claims for
damage to property, or injury or death to persons, made as a result of any
Environmental Inspection or secondary investigation conducted by SWS or its
agents, which damage or injury is attributable to the negligent actions of
the ASBI Companies or their agents. SWS agrees to indemnify and hold
harmless ASBI for any claims for damage to property, or injury or death to
persons, attributable to the negligent actions of SWS or its agents in
performing any Environmental Inspection or secondary investigation except
to the extent caused in whole or in part by the negligence of the ASBI
Companies. SWS shall not have any liability or responsibility of any
nature whatsoever for the results, conclusions or other findings related to
any Environmental Inspection, secondary investigation or other
environmental survey. If this Agreement is terminated, then except as
otherwise required by law, reports to any governmental authority of the
results of any Environmental Inspection, secondary investigation or other
environmental survey shall not be made by SWS. SWS shall make no such
report prior to Closing unless required to do so by law, and in such case
will give ASBI reasonable notice of SWS's intentions.
C. SWS shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section
3.22 is not materially true and accurate; (ii) the results of such
Environmental Inspection, secondary investigation or other environmental
survey are disapproved by SWS because the environmental inspection,
secondary investigation or other environmental survey identifies material
violations or potential violations of Environmental Laws; (iii) the ASBI
Companies have refused to allow SWS to conduct an Environmental Inspection
or secondary investigation in a manner that SWS reasonably considers
necessary; (iv) the Environmental Inspection, secondary investigation or
other environmental survey identifies any past or present event, condition
or circumstance that would or potentially would require remedial or cleanup
action or result in a Material Adverse Change; (v) the Environmental
Inspection, secondary investigation or other environmental survey
identifies the presence of any underground or above ground storage tank in,
on or under any Property that is not shown to be in compliance with all
Environmental Laws applicable to the tank either now or at a future time
certain, or that has
38
had a release of petroleum or some other Hazardous Material that has not
been cleaned up to the satisfaction of the relevant governmental authority
or any other party with a legal right to compel cleanup; or (vi) the
Environmental Inspection, secondary investigation or other environmental
survey identifies the presence of any asbestos-containing material in, on
or under any Property, the removal of which would result in a Material
Adverse Change. On or prior to October 31, 1999, SWS shall advise ASBI in
writing as to whether SWS intends to terminate this Agreement because SWS
disapproves of the results of the Environmental Inspection, secondary
investigation or other environmental survey. ASBI shall have the
opportunity to correct any objected to violations or conditions to SWS's
reasonable satisfaction prior to November 30, 1999. In the event that ASBI
fails to demonstrate its satisfactory correction of the violations or
conditions to SWS, SWS may terminate the Agreement on or before December
15, 1999.
D. ASBI agrees to make available to SWS and its consultants, agents
and representatives all documents and other material relating to
environmental conditions of any Property including, without limitation, the
results of other environmental inspections and surveys. ASBI also agrees
that all engineers and consultants who prepared or furnished such reports
may discuss such reports and information with SWS and shall be entitled to
certify the same in favor of SWS and its consultants, agents and
representatives and make all other data available to SWS and its
consultants, agents and representatives.
SECTION 5.15 Proxies. Within ten (10) days of the date of the execution
-------
of this Agreement, ASBI and each of the persons set forth on Schedule 5.15 shall
-------------
execute the Voting Agreement and Irrevocable Proxy in the form of Exhibit B
---------
attached hereto, and ASBI acknowledges that such persons have agreed that they
will vote the shares of the ASBI Common Stock owned by them in favor of the
Merger Agreement and the Merger and the transactions contemplated hereby and
thereby, subject to required regulatory approvals.
SECTION 5.16 S Corporation Termination. The ASBI Companies shall
-------------------------
terminate their respective Subchapter S and Qualified Subchapter S Subsidiary
elections under the Code as of the Closing Date. In connection with the
foregoing, each of the ASBI Companies agrees to make an election to close the
books of ASBI Companies with all federal tax items allocable to the "S short
year" and the "C short year" (as those terms are defined in Section 1362(e)(3)
of the Code).
SECTION 5.17 Conforming Accounting and Reserve Policies; Restructuring
---------------------------------------------------------
Expenses.
- --------
A. From and after the date of this Agreement to the Effective Time,
ASBI and SWS shall consult and cooperate with each other with respect to
conforming, as specified in a written notice from SWS to ASBI as provided
in Section 5.17D, the loan, accrual and reserve policies of the Bank to
those policies of SWS.
B. In addition, from and after the date of this Agreement to the
Effective Time, ASBI and SWS shall consult and cooperate with each other
with respect to determining, as specified in a written notice from SWS to
ASBI, as provided in Section 5.17D, appropriate accruals, reserves and
charges to establish and take in respect of excess equipment write-off
39
or write-down of various assets and other appropriate charges and
accounting adjustments taking into account the parties' business plans
following the Merger.
C. ASBI and SWS shall consult and cooperate with each other with
respect to determining, as specified in a written notice from SWS to ASBI,
as provided in Section 5.17D, the amount and the timing for recognizing for
financial accounting purposes the expenses of the Merger and the
restructuring charges related to or to be incurred in connection with the
Merger.
D. At the written request of SWS given within ten calendar days of
Closing, ASBI shall establish and take such reserves and accruals
immediately prior to the Effective Time as SWS shall request to conform the
ASBI's loan, accrual and reserve policies to SWS's policies, shall
establish and take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and equipment
capacity, severance costs, litigation matters, write-off or write-down of
various assets and other appropriate accounting adjustments, and to
recognize for financial accounting purposes such expenses of the Merger and
restructuring charges related to or to be incurred in connection with the
Merger, in each case at such times as are mutually agreeable to SWS and
ASBI; provided, however, that ASBI shall not be required to take any such
action that is not consistent with GAAP; and provided further, however,
that any such accrual, reserve or charge made at the request of SWS in
accordance with this Section 5.17 shall not constitute a Material Adverse
Change or be deemed to have a Material Adverse Effect and shall not be
considered for the purposes of calculating the taxable income for purposes
of Section 5.05I.
SECTION 5.18 Affiliate Agreements. ASBI has disclosed in Schedule 5.18
-------------------- -------------
each person or entity whom it reasonably believes may be deemed an "affiliate"
of ASBI for purposes of Rule 145 under the 1933 Act. ASBI shall use its
reasonable efforts to cause each such person or entity to deliver to SWS not
later than 30 days prior to the Effective Time, a written agreement, in
substantially the form of Exhibit G, providing that such person or entity will
---------
not sell, pledge, transfer, or otherwise dispose of the shares of ASBI Common
Stock held by such person or entity except as contemplated by such agreement or
by this Agreement and will not sell, pledge, transfer, or otherwise dispose of
the shares of SWS Common Stock to be received by such person or entity upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder and applicable rules and
pronouncements relating to pooling-of-interest accounting.
SECTION 5.19 Environmental Matters. On or before November 1, 1999, ASBI
---------------------
shall use its best efforts to eliminate any Environmental Liability relating to
the Environmental Properties.
ARTICLE VI.
COVENANTS OF SWS
SWS hereby makes the covenants set forth in this Article VI to ASBI.
40
SECTION 6.01 Best Efforts. SWS agrees to use its best efforts to cause
------------
the consummation of the transactions contemplated hereby in accordance with the
terms and conditions of this Agreement.
SECTION 6.02 Incorporation and Organization of Newco. SWS will
---------------------------------------
incorporate, charter and organize Newco as a Texas corporation.
SECTION 6.03 Merger Agreement. SWS will, as soon as practicable after the
----------------
execution of this Agreement, enter into the Merger Agreement, the form of which
is attached hereto as Exhibit A, and shall perform all of its obligations
---------
thereunder. SWS will, as soon as practicable after the execution of this
Agreement, cause Newco to duly authorize and enter into the Merger Agreement and
shall cause Newco to perform all of its obligations thereunder. SWS shall vote
all of the stock of Newco in favor of the Merger and the Merger Agreement.
SECTION 6.04 Information for Regulatory Applications and Proxy Statements.
------------------------------------------------------------
SWS will promptly furnish to ASBI all information concerning SWS and the SWS
Subsidiaries, including, but not limited to, financial statements, required for
inclusion in (A) any proxy statement to be used by ASBI in connection with the
approval of the shareholders of ASBI of the transactions contemplated hereby and
(B) any application or statement to be made by ASBI or filed by ASBI with any
governmental body in connection with the transactions contemplated by this
Agreement, or in connection with any unrelated transactions during the pendency
of this Agreement, and SWS represents and warrants that all information so
furnished for such statements and applications shall be true and correct in all
material respects and shall not omit any material fact required to be stated
therein or necessary to make the statements made, in light of the circumstances
under which they were made, not misleading. SWS shall otherwise fully cooperate
with the ASBI Companies in the filing of any applications or other documents
necessary to consummate the transactions contemplated by this Agreement,
including the Merger.
SECTION 6.05 Acts of Newco. Prior to the Closing, SWS shall not cause
-------------
Newco to take any action or execute any agreement, document or certificate
except as contemplated by this Agreement and the other agreements contemplated
hereby, including, but not limited to, the Merger Agreement.
SECTION 6.06 Untrue Representations. SWS shall promptly notify ASBI in
----------------------
writing if SWS becomes aware of any fact or condition that makes untrue, or
shows to have been untrue, in any material respect, any schedule or any other
information furnished to ASBI or any representation or warranty made in or
pursuant to this Agreement or that results in SWS's failure to comply with any
covenant, condition or agreement contained in this Agreement.
SECTION 6.07 Litigation and Claims. SWS shall promptly notify ASBI of any
---------------------
legal action, suit or proceeding or judicial, administrative or governmental
investigation, pending or, to the knowledge of SWS, threatened against any SWS
Company that questions or might question the validity of this Agreement or the
agreements contemplated hereby, including, but not limited to, the Merger
Agreement, or any actions taken or to be taken by the SWS Companies pursuant
hereto or thereto or seeks to enjoin or otherwise restrain the transactions
contemplated hereby or thereby.
41
SECTION 6.08 Regulatory and Other Approvals. SWS shall promptly, but in
------------------------------
no event later than thirty (30) days after execution of this Agreement, file or
cause to be filed applications for all regulatory approvals required to be
obtained by SWS in connection with this Agreement and the other agreements
contemplated hereby. SWS shall promptly furnish ASBI with copies of all such
regulatory filings and all correspondence for which confidential treatment has
not been requested. SWS shall use its best efforts to obtain all such
regulatory approvals and any other approvals from third parties, including those
listed on Schedule 4.07, at the earliest practicable time.
-------------
SECTION 6.09 Adverse Change. SWS shall promptly notify ASBI in writing if
--------------
any change shall have occurred or been threatened (or any development shall have
occurred or been threatened involving a prospective change) that would adversely
affect, prevent or delay consummation of the transactions contemplated by this
Agreement or the other agreements contemplated hereby.
SECTION 6.10 Employee Benefits and Contracts. Following the Effective
-------------------------------
Time, SWS shall provide generally to officers and employees of the ASBI
Companies, who after the Effective Time remain employees of an ASBI Company,
employee benefits under employee benefit plans (other than stock option or other
plans involving the potential issuance of SWS Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the SWS Companies to their similarly situated officers and
employees. For purposes of participation and vesting (but not accrual of
benefits) under such employee benefit plans, (i) service under any qualified
defined contribution plans of ASBI shall be treated as service under SWS's
qualified defined contribution plans, and (ii) service under any other employee
benefit plans of ASBI shall be treated as service under any similar employee
benefit plans maintained by SWS. SWS also shall cause ASBI and its Subsidiaries
to honor all employment, severance, consulting, and other compensation related
agreement or contracts disclosed on Schedule 3.32 between any ASBI Company and
-------------
any current or former director, officer, or employee thereof, and all provisions
for vested benefits or other vested amounts earned or accrued through the
Effective Time under the ASBI Employee Plans.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ASBI
All obligations of ASBI under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any or all of which may be waived in whole or in part by ASBI:
SECTION 7.01 Compliance with Representations, Warranties and Agreements.
----------------------------------------------------------
All representations and warranties made by SWS in this Agreement or in any
document or schedule delivered to ASBI pursuant hereto shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if such
representations and warranties were made at and as of the Closing, except with
respect to those representations and warranties specifically made as of an
earlier date (in which case such representations and warranties shall be true as
of such earlier date). SWS shall have performed or complied in all material
respects with all agreements, terms, covenants and conditions required by this
Agreement to be performed or complied with by SWS prior to or at the Closing.
42
SECTION 7.02 Shareholder Approvals. The Merger and other transaction
---------------------
contemplated by this Agreement shall have been approved by the shareholders of
ASBI and SWS, and the sole shareholder of Newco.
SECTION 7.03 Government and Other Approvals. SWS shall have received
------------------------------
approvals, acquiescence or consents of the transactions contemplated by this
Agreement and the Merger Agreement, from all necessary governmental agencies and
authorities and other third parties, including but not limited to the OTS, and
all applicable waiting periods shall have expired, and the approvals and
consents of all third parties required to consummate this Agreement and the
other agreements contemplated hereby, including, but not limited to, the Merger
Agreement and the transactions contemplated hereby and thereby, including all
consents described on Schedules 3.09 and 4.07. Such approvals and the
-----------------------
transactions contemplated hereby shall not have been contested or threatened to
be contested by any federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
rights) by formal proceedings.
SECTION 7.04 No Litigation. No action shall have been taken, and no
-------------
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to the acquisition by any federal, state
or foreign government or governmental authority or by any court, domestic or
foreign, including the entry of a preliminary or permanent injunction, that
would (A) make the Agreement or any other agreement contemplated hereby,
including, but not limited to, the Merger Agreement, or the transactions
contemplated hereby or thereby illegal, invalid or unenforceable, (B) impose
material limits in the ability of any party to this Agreement to consummate the
Agreement or any other agreement contemplated hereby, including, but not limited
to, the Merger Agreement, or the transactions contemplated hereby or thereby, or
(C) if the Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby are consummated, subject the ASBI Companies or subject any officer,
director, shareholder or employee of the ASBI Companies to criminal or civil
liability. No action or proceeding before any court or governmental authority,
domestic or foreign, by any government or governmental authority or by any other
person, domestic or foreign, shall be threatened, instituted or pending that
would reasonably be expected to result in any of the consequences referred to in
clauses (A) through (C) above.
SECTION 7.05 Pooling Letter. ASBI shall have received a letter, dated as
--------------
of the Effective Time, in a form reasonably acceptable to ASBI, from Fisk &
Robinson, LLP to the effect that ASBI qualifies as an entity that may be a party
to a business combination that will qualify for pooling-of-interests accounting
treatment and, to the effect that the Merger, as it impacts ASBI, will qualify
for pooling-of-interests accounting treatment. In addition, there shall have
been no determination by any court, tribunal, regulatory agency or other
governmental entity, that the Merger fails or will fail to qualify for pooling-
of-interests accounting treatment.
SECTION 7.06 SWS Common Stock. The shares of SWS Common Stock to be issued
----------------
in connection herewith shall be duly authorized and validly issued and, fully
paid and nonassessable, issued free of preemptive rights and free and clear of
all liens and encumbrances created by or through SWS. The SWS Common Stock to
be issued pursuant to the Merger shall have been authorized for listing on the
New York Stock Exchange.
43
SECTION 7.07 Tax Opinion. ASBI shall have received an opinion of Jenkens &
-----------
Gilchrist, P.C. or ASBI's independent public accountants, on or before the
Closing Date, to the effect, among others, that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that no gain
or loss will be recognized by the shareholders of ASBI to the extent that they
receive SWS Common Stock in exchange for their ASBI Common Stock in the Merger.
SECTION 7.08 Opinion of Counsel. ASBI shall have received an opinion of
------------------
counsel from Gardere & Wynne or other counsel to SWS acceptable to ASBI in
substantially the form set forth in Exhibit E hereof.
---------
SECTION 7.09 Registration Rights Agreement. ASBI and such Shareholders of
-----------------------------
ASBI shall have received a duly executed Registration Rights Agreement in the
form attached as Exhibit H hereof.
---------
SECTION 7.10 No Material Adverse Change. There shall have been no
--------------------------
Material Adverse Change in SWS since March 31, 1999.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SWS
All obligations of SWS under this Agreement are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part by SWS.
SECTION 8.01 Compliance with Representations, Warranties and Agreements.
----------------------------------------------------------
All representations and warranties made by ASBI in this Agreement or in any
schedule delivered to SWS pursuant hereto shall have been true and correct when
made and shall be true and correct as of the Closing with the same force and
effect as if such representations and warranties were made at and as of the
Closing, except with respect to those representations and warranties
specifically made as of an earlier date (in which case such representations and
warranties shall be true as of such earlier date). ASBI shall have performed or
complied in all material respects with all agreements, terms, covenants and
conditions required by this Agreement to be performed or complied with by ASBI
prior to or at the Closing.
SECTION 8.02 Shareholder Approvals. The Merger and other transactions
---------------------
contemplated by this Agreement shall have been approved by the shareholders of
ASBI and SWS, and the sole shareholder of Newco in the manner prescribed by
applicable law and the Board of Directors of SWS and/or the Special Committee of
the Board of Directors ("SWS Special Committee") established for the purposes of
evaluating the terms of the Merger. All shares of SWS Common Stock owned by Mr.
Don Buchholz, Buchholz Arlington Bancshares, a limited partnership, and
Buchholz Investments, a partnership, will be voted proportionately at such SWS
Shareholder Meeting in the same manner as the other shareholders of SWS Common
Stock vote on the Merger.
44
SECTION 8.03 Government and Other Approvals. SWS shall have received
------------------------------
approvals, acquiescence or consents, all on terms and conditions acceptable to
SWS in its sole discretion, of the transactions contemplated by this Agreement
and the Merger Agreement from all necessary governmental agencies and
authorities, including but not limited to the OTS, and all applicable waiting
periods shall have expired, and the approvals and consents of all third parties
required to consummate this Agreement and the other agreements contemplated
hereby, including, but not limited to, the Merger Agreement and the transactions
contemplated hereby and thereby, including all consents described on Schedules
---------
3.09 and 4.07. Such approvals and consents shall not have imposed, in the
- -------------
judgment of SWS, any material requirement upon SWS or the SWS Subsidiaries,
including, without limitation, any requirement that SWS sell or dispose of any
significant amount of its assets or any SWS Subsidiary. Such approvals and the
transactions contemplated hereby shall not have been contested or threatened to
be contested by any federal or state governmental authority or by any other
third party (except shareholders asserting statutory dissenters' appraisal
rights) by formal proceedings. It is understood that, if such contest is
brought by formal proceedings, the SWS may, but shall not be obligated to,
answer and defend such contest or otherwise pursue this transaction over such
objection.
SECTION 8.04 No Litigation. No action shall have been taken, and no
-------------
statute, rule, regulation or order shall have been promulgated, enacted,
entered, enforced or deemed applicable to this Agreement, the Merger, or the
transactions contemplated hereby or thereby by any federal, state or foreign
government or governmental authority or by any court, domestic or foreign,
including the entry of a preliminary or permanent injunction, that would (A)
make this Agreement or any other agreement contemplated hereby, including, but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby illegal, invalid or unenforceable, (B) require the divestiture of a
material portion of the assets of any ASBI Company, (C) impose material limits
in the ability of any party to this Agreement to consummate the Agreement or any
other agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby, (D) otherwise
result in a Material Adverse Change or (E) if this Agreement or any other
agreement contemplated hereby, including, but not limited to, the Merger
Agreement, or the transactions contemplated hereby or thereby are consummated,
subject the SWS Companies or subject any officer, director, shareholder or
employee of the SWS Companies to criminal or civil liability. No action or
proceeding before any court or governmental authority, domestic or foreign, by
any government or governmental authority or by any other person, domestic or
foreign, shall be threatened, instituted or pending that would reasonably be
expected to result in any of the consequences referred to in clauses (A) through
(E) above.
SECTION 8.05 Accounting Treatment. All accounting and tax treatment,
--------------------
entries and adjustments in connection with the transactions contemplated by this
Agreement and the other agreements contemplated hereby shall be satisfactory to
SWS. SWS shall not have received notification from any proper regulatory
authority that SWS's accounting and tax treatment, entries and adjustments used
in connection with the Merger are improper, and SWS shall not have been required
by any such regulatory authority to make any accounting or tax adjustments that
would constitute a Material Adverse Change.
SECTION 8.06 No Material Adverse Change. There shall have been no
--------------------------
Material Adverse Change in ASBI since March 31, 1999.
45
SECTION 8.07 Dissenters. The holders of not more than a certain percentage
----------
(not to exceed 9.9%) of the issued and outstanding shares of ASBI Common Stock
shall have elected to exercise their right to dissent from the Merger and demand
payment in cash for the fair or appraised value of their shares under the
applicable provision of the TBCA such that their receipt of cash pursuant to the
exercise of their appraisal rights, when combined with all other cash
transactions required to be considered under GAAP, would result in the Merger
not qualifying for pooling-of-interests accounting treatment under GAAP.
SECTION 8.08 Tax Opinion. SWS shall have received an opinion of Jenkens &
-----------
Gilchrist, P.C. or ASBI's independent public accountants, on or before the
Closing Date, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and that no gain or loss will
be recognized by any SWS Company or ASBI Company as a result of the Merger.
SECTION 8.09 Pooling Letter. SWS shall have received a letter, dated as
--------------
of the Effective Time, in a form reasonably acceptable to SWS, from Fisk &
Robinson, LLP, independent public accountant to ASBI, to the effect that ASBI
qualifies as an entity that may be a party to a business combination that will
qualify for pooling-of-interests accounting treatment. SWS shall have received
a letter, dated as of the Effective Time, in a form reasonably acceptable to
SWS, from KPMG, LLP to the effect that the Merger, as it impacts SWS, will
qualify for pooling-of-interests accounting treatment. In addition, there shall
have been no determination by any court, tribunal, regulatory agency or other
governmental entity, that the Merger fails or will fail to qualify for pooling-
of-interests accounting treatment.
SECTION 8.10 Fairness Opinion. SWS shall have received an opinion from
----------------
Friedman, Billings, Ramsey & Co., Inc. dated as of the date of this Agreement
to the effect that in the opinion of such firm, the Exchange Ratio contemplated
by this Agreement is fair to all the shareholders of SWS from a financial point
of view.
SECTION 8.11 Releases of Directors and Officers of ASBI Companies. SWS
----------------------------------------------------
shall have received from each of the directors of the ASBI Companies an
instrument dated the Closing Date releasing the ASBI Companies from any and all
claims of such directors (except to certain matters described therein), the form
of which is attached as Exhibit C. SWS shall have received from each officer
---------
with a title of senior vice president or higher of the ASBI Companies an
instrument dated the Closing Date releasing the ASBI Companies from any and all
claims of such officers (except as to certain matters described therein), the
form of which is attached as Exhibit D.
---------
SECTION 8.12 Non Compete and Employment Agreements. SWS shall have reached
-------------------------------------
satisfactory non compete agreements with respect to those individuals listed on
Schedule 8.12 of this Agreement in form and substance as Exhibit I attached
- ------------- ---------
hereto. Within thirty (30) days from the date of this Agreement, SWS and
Richard J. Driscoll shall have agreed to the terms and conditions of a mutually
agreeable employment and noncompete agreement.
SECTION 8.13 Affiliate Agreements. SWS shall have received from each
--------------------
affiliate of ASBI the affiliates agreement referred to in Section 5.18 of this
Agreement in the form attached as Exhibit
-------
46
G to this Agreement, to the extent necessary to assure in the reasonable
- -
judgment of SWS that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
SECTION 8.14 Opinion of Counsel. SWS shall have received an opinion of
------------------
counsel from Haynie, Rake & Repass, P.C. or other counsel to ASBI acceptable to
SWS in substantially the form set forth in Exhibit F hereof.
---------
SECTION 8.15 Compliance with the 1933 Act. SWS shall have received
----------------------------
satisfactory evidence that the offering of the SWS Common Stock pursuant to this
Agreement shall have qualified for an exemption from registration under the 1933
Act and any applicable state securities laws.
SECTION 8.16 Termination of Shareholder Agreement and Voting Agreement.
---------------------------------------------------------
SWS shall have received satisfactory evidence that each agreement listed on
Schedule 3.31 of this Agreement has been duly terminated in accordance with the
- -------------
provisions thereof.
SECTION 8.17 Escrow Agreement; Environmental Liabilities. ASBI shall have
-------------------------------------------
taken all steps required under Section 5.19 of this Agreement and SWS shall have
determined, in its sole discretion, that upon consummation of the transactions
contemplated by this Agreement, none of the SWS Companies or the ASBI Companies
shall have any Environmental Liability of any kind or nature relating to the
Environmental Properties; or SWS shall have received an executed Escrow
Agreement referred to in Section 1.13 of this Agreement in the form attached as
Exhibit J to this Agreement.
- ---------
ARTICLE IX.
TERMINATION AND ABANDONMENT
SECTION 9.01 Right of Termination. This Agreement and the transactions
--------------------
contemplated hereby may be terminated and abandoned at any time prior to or at
the Closing (notwithstanding approval thereof by the shareholders of ASBI or
SWS), as follows, and in no other manner:
A. By the mutual consent of ASBI and SWS, duly authorized by the
board of directors of each of ASBI and SWS.
B. By either ASBI or SWS if the conditions precedent to such
parties' obligations to close specified in Articles VII and VIII,
respectively, hereof have not been met or waived by June 6, 2000, or such
later date as has been approved by ASBI and SWS.
C. By either ASBI or SWS if any of the transactions contemplated by
this Agreement or the Merger Agreement are disapproved by any regulatory
authority whose approval is required to consummate such transactions or if
any court of competent jurisdiction in the United States or other United
States (federal or state) governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining,
invalidating or otherwise prohibiting the Agreement or the transactions
contemplated hereby and such order, decree, ruling or other action shall
have been final and nonappealable.
47
D. By SWS if it reasonably determines, in good faith and after
consulting with counsel, there is substantial likelihood that any necessary
regulatory approval will not be obtained or will be obtained only upon a
condition or conditions that make it inadvisable to proceed with the
transactions contemplated by this Agreement.
E. By SWS if there shall have been any Material Adverse Change with
respect to ASBI, or by ASBI if there shall have been any Material Adverse
Change with respect to SWS.
F. By SWS if the board of directors of SWS or the SWS Special
Committee has determined, in good faith and following consultation with
and after considering the advice of outside counsel, that in order to
comply with its fiduciary duties to shareholders under applicable law, it
is advisable for the SWS Special Committee or the full board of directors
of SWS to withdraw or modify, in a manner materially adverse to ASBI, its
approval or recommendation of the Merger; provided that such a
determination shall not constitute a breach of Section 4.07 of this
Agreement.
G. By SWS if ASBI shall fail to comply in any material respect with
any of its covenants or agreements contained in this Agreement or in any
other agreement contemplated hereby, including, but not limited to, the
Merger Agreement, and such failure shall not have been cured within a
period of thirty (30) calendar days after notice from SWS, or if any of the
representations or warranties of ASBI contained herein or therein shall be
inaccurate in any material respect.
H. By ASBI if SWS shall fail to comply in any material respect with
any of its covenants or agreements contained in this Agreement or in any
other agreement contemplated hereby and such failure shall not have been
cured within a period of thirty (30) calendar days after notice from ASBI,
or if any of the representations or warranties of SWS contained herein or
therein shall be inaccurate in any material respect.
I. By SWS, if the holders of more than a certain percentage (not to
exceed 9.9%) of the issued and outstanding shares of ASBI Common Stock
shall have elected to exercise their right to dissent from the Merger and
demand payment in cash for the fair or appraised value of their shares
under the applicable provision of the TBCA such that their receipt of cash
pursuant to the exercise of their appraisal rights, when combined with all
other cash transactions required to be considered under GAAP, would result
in the Merger not qualifying for pooling-of-interests accounting treatment
under GAAP.
SECTION 9.02 Notice of Termination. The power of termination provided for
---------------------
by Section 9.01 hereof may be exercised only by a notice given in writing, as
provided in Section 11.07 of this Agreement.
SECTION 9.03 Effect of Termination. Without limiting any other relief to
---------------------
which either party hereto may be entitled for breach of this Agreement, in the
event of the termination and abandonment of this Agreement pursuant to the
provisions of Section 9.01 hereof, no party to this
48
Agreement shall have any further liability or obligation in respect of this
Agreement, except for (A) liability of a party for expenses pursuant to Section
11.02 hereof, and (B) the provisions of Article X hereof shall remain
applicable.
SECTION 9.04 Break-Up Fee. Nothing contained in this Agreement shall be
------------
deemed to prohibit any director or officer of ASBI or SWS from fulfilling his
or her fiduciary duties to the ASBI or SWS shareholders or from taking any
action required by law. Except for a breach of the covenant in Section 5.12, in
lieu of any payment required by Section 9.03 of this Agreement and as the sole
and exclusive remedy for any actual damages resulting from wrongful termination,
misrepresentation or other breach of this Agreement, in the event that this
Agreement is terminated by:
(i) SWS pursuant to (a) Sections 9.01G, 9.01I or (b) pursuant 9.01B
as a result of the failure of conditions set forth in 8.01, 8.07, 8.11,
8.12, 8.13, 8.14, 8.15, 8.16, and 8.17 to be satisfied, ASBI shall
immediately, upon receipt of such written notice of termination from SWS,
pay to SWS, by wire transfer, $2,500,000; or
(ii) ASBI pursuant to (a) Sections 9.01H or (b) pursuant 9.01B as a
result of the failure of conditions set forth in Sections 7.01, 7.06, 7.08,
and 7.09 to be satisfied, SWS shall immediately, upon receipt of such
written notice of termination from ASBI, pay to ASBI, by wire transfer,
$2,500,000; or
(iii) SWS pursuant to Section 9.01F, SWS shall immediately, upon
delivery of such written notice of termination to ASBI, pay to ASBI, by
wire transfer, $2,500,000.
Notwithstanding the foregoing, no break-up fee shall be payable by either SWS or
ASBI under this Section 9.04 in the event that the Agreement is terminated as a
result of a breach of the representations or warranties made by either party, if
such representation or warranty was true and correct as of the date of this
Agreement and became untrue or inaccurate after the date of this Agreement,
except for breaches and misrepresentations caused by the intentional acts or
omissions of a party.
49
ARTICLE X.
CONFIDENTIAL INFORMATION
SECTION 10.01 Definition of "Recipient," "Disclosing Party" and
-------------------------------------------------
"Representative". For purposes of this Article X, the term "Recipient" shall
--------------
mean the party receiving the Subject Information (as defined in Section 10.02)
and the term "Disclosing Party" shall mean the party furnishing the Subject
Information. The terms "Recipient" or "Disclosing Party", as used herein,
include: (A) all persons and entities related to or affiliated in any way with
the Recipient or the Disclosing Party, as the case may be, and (B) any person or
entity controlling, controlled by or under common control with the Recipient or
the Disclosing Party, as the case may be. The term "Representative" as used
herein, shall include all directors, officers, shareholders, employees,
representatives, advisors, attorneys, accountants and agents of any of the
foregoing. The term "person" as used in this Article X shall be broadly
interpreted to include, without limitation, any corporation, company, group,
partnership, governmental agency or individual.
SECTION 10.02 Definition of "Subject Information". For purposes of this
-----------------------------------
Article X, the term "Subject Information" shall mean all information furnished
to the Recipient or its Representatives (whether prepared by the Disclosing
Party, its Representatives or otherwise and whether or not identified as being
non public, confidential or proprietary) by or on behalf of the Disclosing Party
or its Representatives relating to or involving the business, operations or
affairs of the Disclosing Party or otherwise in possession of the Disclosing
Party. The term "Subject Information" shall not include information that (A)
was already in the Recipient's possession at the time it was first furnished to
Recipient by or on behalf of Disclosing Party, provided that such information is
not known by the Recipient to be subject to another confidentiality agreement
with or other obligation of secrecy to the Disclosing Party, its Subsidiaries or
another party, or (B) becomes generally available to the public other than as a
result of a disclosure by the Recipient or its Representatives, or (C) becomes
available to the Recipient on a non-confidential basis from a source other than
the Disclosing Party, its Representative or otherwise, provided that such source
is not known by the Recipient to be bound by a confidentiality agreement with or
other obligation of secrecy to the Disclosing Party, its Representative or
another party.
SECTION 10.03 Confidentiality. Each Recipient hereby agrees that the
---------------
Subject Information will be used solely for the purpose of reviewing and
evaluating the transactions contemplated by this Agreement and the other
agreements contemplated hereby, including the Merger Agreement, and that the
Subject Information will be kept confidential by the Recipient and the
Recipient's Representatives; provided, however, that (A) any of such Subject
Information may be disclosed to the Recipient's Representatives (including, but
not limited to, the Recipient's accountants, attorneys and investment bankers)
who need to know such information for the purpose of evaluating any such
possible transaction between the Disclosing Party and the Recipient (it being
understood that such Representatives shall be informed by the Recipient of the
confidential nature of such information and that the Recipient shall direct and
cause such persons to treat such information confidentially); and (B) any
disclosure of such Subject Information may be made to which the Disclosing Party
consents in writing prior to any such disclosure by Recipient.
SECTION 10.04 Securities Law Concerns. Each Recipient hereby acknowledges
-----------------------
that the Recipient is aware, and the Recipient will advise the Recipient's
Representatives who are informed
50
as to the matters that are the subject of this Agreement, that the United States
securities laws prohibit any person who has received material, non-public
information from an issuer of securities from purchasing or selling securities
of such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
SECTION 10.05 Return of Subject Information. In the event of termination
-----------------------------
of this Agreement or the Merger Agreement, for any reason, the Recipient shall
promptly return to the Disclosing Party all written material containing or
reflecting any of the Subject Information other than information contained in
any application, notice or other document filed with any governmental agency and
not returned to the Recipient by such governmental agency. In making any such
filing, the Recipient will request confidential treatment of such Subject
Information included in any application, notice or other document filed with any
governmental agency.
SECTION 10.06 Specific Performance/Injunctive Relief. Each Recipient
--------------------------------------
acknowledges that the Subject Information constitutes valuable, special and
unique property of the Disclosing Party critical to its business and that any
breach of Article X of this Agreement by it will give rise to irreparable injury
to the Disclosing Party that is not compensable in damages. Accordingly, each
Recipient agrees that the Disclosing Party shall be entitled to obtain specific
performance and/or injunctive relief against the breach or threatened breach of
Article X of this Agreement by the Recipient or its Representatives. Each
Recipient further agrees to waive, and use its reasonable efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of Article X of this Agreement, but shall be in
addition to all other remedies available at law or in equity to the Disclosing
Party.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01 Survival of Representations and Warranties. The parties
------------------------------------------
hereto agree that all of their respective representations and warranties
contained in this Agreement shall not survive the Closing Date.
SECTION 11.02 Expenses. SWS shall pay all of its expenses and costs
--------
(including, without limitation, all counsel fees and expenses), and ASBI shall
pay all of its expenses and costs (including, without limitation, all counsel
fees and expenses), incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 11.03 Brokerage Fees and Commissions. SWS hereby represents to
------------------------------
ASBI that no agent, representative or broker has represented SWS in connection
with the transactions described in this Agreement. ASBI shall not have any
responsibility or liability for any fees, expenses or commissions payable to any
agent, representative or broker of SWS, and SWS hereby agrees to indemnify and
hold ASBI harmless for any amounts owed to any agent, representative or broker
of SWS. ASBI hereby represents to SWS that, no agent, representative or broker
has represented any of the ASBI Companies or any or all of the shareholders in
connection with the transactions
51
described in this Agreement and provided, however, that ASBI's previous
agreement with Keefe, Bruyette and Woods, Inc. ("KBW") has been terminated and
no fee or commission is payable to KBW as a result of the transactions
contemplated by the Agreement. SWS shall have no responsibility or liability for
any fees, expenses or commissions payable to any agent, representative or broker
of the ASBI Companies or any shareholder of ASBI, and ASBI hereby agrees to
indemnify and hold SWS harmless for any amounts owed to any agent,
representative or broker of the ASBI Companies or any shareholder of ASBI.
SECTION 11.04 Entire Agreement. This Agreement and the other agreements,
----------------
documents, schedules and instruments executed and delivered by the parties to
each other at the Closing constitute the full understanding of the parties, a
complete allocation of risks between them and a complete and exclusive statement
of the terms and conditions of their agreement relating to the subject matter
hereof and supersede any and all prior agreements, whether written or oral, that
may exist between the parties with respect thereto. Except as otherwise
specifically provided in this Agreement, no conditions, usage of trade, course
of dealing or performance, understanding or agreement purporting to modify,
vary, explain or supplement the terms or conditions of this Agreement shall be
binding unless hereafter or contemporaneously herewith made in writing and
signed by the party to be bound, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement.
SECTION 11.05 Further Cooperation. The parties agree that they will, at
-------------------
any time and from time to time after the Closing, upon request by the other and
without further consideration, do, perform, execute, acknowledge and deliver all
such further acts, deeds, assignments, assumptions, transfers, conveyances,
powers of attorney, certificates and assurances as may be reasonably required in
order to fully consummate the transactions contemplated hereby in accordance
with this Agreement or to carry out and perform any undertaking made by the
parties hereunder.
SECTION 11.06 Severability. In the event that any provision of this
------------
Agreement is held to be illegal, invalid or unenforceable under present or
future laws, then (A) such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision were not a part hereof; (B) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement; and
(C) there shall be added automatically as a part of this Agreement a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and still be legal, valid and enforceable.
SECTION 11.07 Notices. Any and all payments (other than payments at the
-------
Closing), notices, requests, instructions and other communications required or
permitted to be given under this Agreement after the date hereof by any party
hereto to any other party may be delivered personally or by nationally
recognized overnight courier service or sent by mail or (except in the case of
payments) by telex or facsimile transmission, at the respective addresses or
transmission numbers set forth below and shall be effective (A) in the case of
personal delivery, telex or facsimile transmission, when received; (B) in the
case of mail, upon the earlier of actual receipt or five (5) business days after
deposit in the United States Postal Service, first class certified or registered
mail, postage prepaid, return receipt requested; and (C) in the case of
nationally-recognized overnight courier service, one (1) business day after
delivery to such courier service together with all
52
appropriate fees or charges and instructions for such overnight delivery. The
parties may change their respective addresses and transmission numbers by
written notice to all other parties, sent as provided in this Section 11.07. All
communications must be in writing and addressed as follows:
IF TO ASBI:
Mr. Don Buchholz
Chairman of the Board
ASBI Holdings, Inc.
301 S. Center
P.O. Box 1959
Arlington, Texas 76004-1959
Telecopy: (214)859-9309
WITH A COPY TO:
Mr. Mark Haynie
Haynie, Rake & Repass, P.C.
14651 Dallas Parkway, Suite 136
Dallas, Texas 75240
Telecopy: (972) 716-1850
IF TO SWS:
Mr. David Glatstein
President and Chief Executive Officer
Southwest Securities Group, Inc.
Suite 3500
1201 Elm Street
Dallas, Texas 75270
Telecopy: (214)859-9309
WITH A COPY TO:
Mr. Kenneth R. Hanks
Southwest Securities Group, Inc.
Suite 3500
1201 Elm Street
Dallas, Texas 75270
Telecopy: (214)859-6020
53
Mr. Chris Knox
Southwest Securities Group, Inc.
Suite 3500
1201 Elm Street
Dallas, Texas 75270
Telecopy: (214)859-9441
Ms. Dianne Capps Saslaw
Southwest Securities Group, Inc.
Suite 3500
1201 Elm Street
Dallas, Texas 75270
Telecopy: (214)859-6020
Mr. Charles E. Greef
Jenkens & Gilchrist,
a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Telecopy: (214) 855-4300
SECTION 11.08 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLYING TO
CONTRACTS ENTERED INTO AND TO BE PERFORMED WITHIN THE STATE OF TEXAS, WITHOUT
REGARD FOR THE PROVISIONS THEREOF REGARDING CHOICE OF LAW.
SECTION 11.09 Multiple Counterparts. For the convenience of the parties
---------------------
hereto, this Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all counterparts hereof so executed by the
parties hereto, whether or not such counterpart shall bear the execution of each
of the parties hereto, shall be deemed to be, and shall be construed as, one and
the same Agreement. A telecopy or facsimile transmission of a signed
counterpart of this Agreement shall be sufficient to bind the party or parties
whose signature(s) appear thereon.
SECTION 11.10 Certain Definitions.
-------------------
A. "Affiliate" means, with respect to any person, any person that,
directly or indirectly, controls, is controlled by, or is under common
control with, such person in question. For the purposes of this
definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with") as used with respect to
any person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities or by contract
or otherwise.
B. "ASBI Companies" shall mean, collectively, ASBI and all ASBI
Subsidiaries.
54
C. "ASBI Subsidiaries" shall mean the Subsidiaries of ASBI, which
shall include the ASBI Subsidiaries described in Section 3.04 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of ASBI in the future and owned by
ASBI at the Effective Time.
D. "Average Closing Price" shall mean the average of the daily last
sales prices of SWS Common Stock as reported on the New York Stock Exchange
(as reported by The Wall Street Journal or, if not reported thereby,
another authoritative source as chosen by SWS) for the ten (10) consecutive
full trading days in which such shares are traded on the New York Stock
Exchange.
E. "Environmental Laws" mean all federal, state and local laws,
regulations, statutes, ordinances, codes, rules, decisions, orders or
decrees relating or pertaining to the public health and safety or the
environment, or otherwise governing the generation, use, handling,
collection, treatment, storage, transportation, recovery, recycling,
removal, discharge or disposal of Hazardous Materials, including, without
limitation, (i) the Solid Waste Disposal Act, 42 U.S.C. 6901 et seq., as
-------
amended ("SWDA," also known as "RCRA" for a subsequent amending act), (ii)
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. (S)9601 et seq., as amended ("CERCLA"), (iii) the Clean Water
-------
Act, 33 U.S.C. (S)1251 et seq., as amended ("CWA"), (iv) the Clean Air Act,
-------
42 U.S.C. (S)7401 et seq., as amended ("CAA"), (v) the Toxic Substances
-------
Control Act, 15 U.S.C. (S)2601 et seq., as amended ("TSCA"), (vi) the
-------
Emergency Planning and Community Right to Know Act, 15 U.S.C. (S)2601 et
--
seq., as amended ("EPCRKA"), and (vii) the Occupational Safety and Health
----
Act, 29 U.S.C. (S) 651 et seq., as amended.
------
F. "Environmental Liabilities" mean any and all damages, costs,
losses (including without limitation, diminution in value), liabilities,
judgments, penalties, fines, lawsuits, obligations, deficiencies, demands
and expenses (whether or not arising out of third-party claims) including,
without limitation, interest, penalties, cost of mitigation, clean-up or
remedial action, damages to the environment, attorneys' fees and related
expenses, expert fees and all amounts paid in investigation, defense, audit
or settlement of any of the foregoing relating to relating to or associated
with the Environmental Properties or to any Hazardous Materials that exist
or have previously existed on, about or within such properties or have been
used, generated, stored, transported, disposed of on, or released from,
such properties.
G. "Hazardous Material" means, without limitation, (i) any
"hazardous wastes" as defined under RCRA, (ii) any "hazardous substances as
defined under CERCLA, (iii) any toxic pollutants as defined under CWA, (iv)
any hazardous air pollutants as defined under CAA, (v) any hazardous
chemicals as defined under TSCA, (vi) any hazardous substances or extremely
hazardous substances as defined under EPCRKA, (vii) asbestos, (viii)
polychlorinated biphenyls, (ix) underground storage tanks, whether empty,
filled or partially filled with any substance, (x) any substance the
presence of which on the property in question is prohibited under any
Environmental Law, and (xi) any other substance which under any
Environmental Law requires special handling or notification of or reporting
to any federal, state or local governmental entity in its generation, use,
handling, collection,
55
treatment, storage, re-cycling, treatment, transportation, recovery,
removal, discharge or disposal.
H. "Investment Securities" means all securities held by the Bank and
reflected as an asset of the Bank in accordance with RAP.
I. "Material Adverse Change" means, with respect to a particular
party, any material adverse change in the financial condition, assets,
properties, key employees, liabilities (absolute, accrued, contingent or
otherwise), reserves, business or results of operations or prospects of the
ASBI Companies or the SWS Companies, as applicable, and specifically
includes any change that reduces the shareholders' equity of SWS (on a
consolidated basis) by an amount equaling or exceeding $10,000,000 in the
case of SWS (excluding any changes or fluctuations in the market price of
SWS Common Stock or the valuation of the Knight/Trimark Group, Inc. Class A
Common Stock held by SWS) or in the case of ASBI any change that reduces
the shareholders' equity of ASBI (on a consolidated basis) by an amount
equaling or exceeding $2,500,000 and/or the resignation of Richard J.
Driscoll as an officer of ASBI or the Bank. Further an event or change
affecting the banking industry or securities industry as a whole shall not
be considered a Material Adverse Change unless it affects the ASBI
Companies or the SWS Companies, as the case may be, to a greater degree
than other similar size companies or banks.
J. "Material Adverse Effect" on a party shall mean an event, change,
or occurrence which, individually or together with any other event, change,
or occurrence, has a material adverse impact on (i) the financial
condition, results of operations, or business of such party and its
Subsidiaries, taken as a whole, or (ii) the ability of such party to
perform its obligations under this Agreement or to consummate the Merger or
the other transactions contemplated by this Agreement.
K. The term "Property" or "Properties" shall include all real
property owned or leased by the ASBI Companies, including, but not limited
to properties that the Bank has foreclosed on as well as their respective
premises and all improvements and fixtures thereon.
L. "Subsidiary" means, when used with reference to an entity, any
corporation, partnership or limited liability company, twenty percent (20%)
of the outstanding voting securities of which are owned directly or
indirectly by such entity or any partnership, joint venture or other
enterprise in which any entity has, directly or indirectly, any equity
interest.
M. "SWS Companies" shall mean, collectively, SWS and all SWS
Subsidiaries.
N. "SWS Subsidiaries" shall mean the Subsidiaries of SWS and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of SWS in the future and owned by SWS at the Effective Time.
SECTION 11.11 Specific Performance. Each of the parties hereto
--------------------
acknowledges that the other party would be irreparably damaged and would not
have an adequate remedy at law for money damages in the event that any of the
covenants contained in this Agreement were not performed in
56
accordance with its terms or otherwise were materially breached. Each of the
parties hereto therefore agrees that, without the necessity of proving actual
damages or posting bond or other security, the other party shall be entitled to
temporary and/or permanent injunction or injunctions to prevent breaches of such
performance and to specific enforcement of such covenants in addition to any
other remedy to which they may be entitled, at law or in equity.
SECTION 11.12 Attorneys' Fees and Costs. In the event attorneys' fees or
--------------------------
other costs are incurred to secure performance of any of the obligations herein
provided for, or to establish damages for the breach thereof, or to obtain any
other appropriate relief, whether by way of prosecution or defense, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
SECTION 11.13 Rules of Construction. Each use herein of the masculine,
---------------------
neuter or feminine gender shall be deemed to include the other genders. Each
use herein of the plural shall include the singular and vice versa, in each case
as the context requires or as it is otherwise appropriate. The word "or" is
used in the inclusive sense. All articles and sections referred to herein are
articles and sections, respectively, of this Agreement and all exhibits and
schedules referred to herein are exhibits and schedules, respectively, attached
to this Agreement. Descriptive headings as to the contents of particular
sections are for convenience only and shall not control or affect the meaning,
construction or interpretation of any provision of this Agreement. Any and all
schedules, exhibits, annexes, statements, reports, certificates or other
documents or instruments referred to herein or attached hereto are and shall be
incorporated herein by reference hereto as though fully set forth herein
verbatim.
SECTION 11.14 Binding Effect; Assignment. All of the terms, covenants,
--------------------------
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors, representatives and permitted assigns. Nothing
expressed or referred to herein is intended or shall be construed to give any
person other than the parties hereto any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provision herein contained,
it being the intention of the parties hereto that this Agreement, the assumption
of obligations and statements of responsibilities hereunder, and all other
conditions and provisions hereof are for the sole benefit of the parties to this
Agreement and for the benefit of no other person, except the Shareholders of
ASBI. Nothing in this Agreement shall act to relieve or discharge the
obligation or liability of any third party to any party to this Agreement, nor
shall any provision give any third party any right of subrogation or action over
or against any party to this Agreement. No party to this Agreement shall assign
this Agreement, by operation of law or otherwise, in whole or in part, without
the prior written consent of the other parties. Any assignment made or
attempted in violation of this Section 11.14 shall be void and of no effect.
SECTION 11.15 Public Disclosure. Neither ASBI nor SWS will make, issue or
-----------------
release any announcement, statement, press release, acknowledgment or other
public disclosure of the existence of, or reveal the terms, conditions or the
status of, this Agreement or the transactions contemplated hereby without the
prior written consent of the other party to this Agreement; provided, however,
that notwithstanding the foregoing, ASBI and SWS will be permitted to make any
public disclosures or governmental filings as legal counsel may deem necessary
to maintain compliance with or to
57
prevent violations of applicable federal or state laws or regulations or that
may be necessary to obtain regulatory approval for the transactions contemplated
hereby.
SECTION 11.16 Extension; Waiver. At any time prior to the Closing Date,
-----------------
the parties may (A) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (B) waive any inaccuracies
in the representations and warranties contained herein or in any document,
certificate or writing delivered pursuant hereto, or (C) waive compliance with
any of the agreements or conditions contained herein. Such action shall be
evidenced by a signed written notice given in the manner provided in Section
11.07 hereof. No party to this Agreement shall by any act (except by a written
instrument given pursuant to Section 11.07 hereof) be deemed to have waived any
right or remedy hereunder or to have acquiesced in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising any right, power or privilege hereunder by any party hereto shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver of any party of
any right or remedy on any one occasion shall not be construed as a bar to any
right or remedy that such party would otherwise have on any future occasion or
to any right or remedy that any other party may have hereunder.
SECTION 11.17 Amendments. To the extent permitted by applicable law, this
----------
Agreement may be amended by action taken by or on behalf of the board of
directors of SWS and ASBI at any time before or after adoption of this Agreement
by the shareholders of ASBI and SWS, but, after any submission of this Agreement
to such shareholders for approval, no amendment shall be made that decreases the
consideration to be paid for the ASBI Common Stock as set forth in Section 1.05
or that materially and adversely affects the rights of the shareholders of
either ASBI or SWS hereunder without the requisite approval of such
shareholders. This Agreement may be amended, modified or supplemented only by
an instrument in writing executed by the party against which enforcement of the
amendment, modification or supplement is sought.
SECTION 11.18 Binding Arbitration Relating to Environmental Escrow. Any
----------------------------------------------------
dispute submitted to arbitration pursuant to Section 1.13 shall be determined by
the decision of a board of arbitration consisting of three members ("Board of
Arbitration") selected as hereinafter provided. ASBI shall select an arbitrator
and SWS shall select an arbitrator, each of whom shall be a member of the Board
of Arbitration, and each of whom shall be independent of the parties and shall
be experienced in arbitrating complex commercial transactions. A third Board of
Arbitration member, independent of the parties, shall be selected by mutual
agreement of the other two Board of Arbitration members. If the other two Board
of Arbitration members fail to reach agreement on such third member within 10
days after their selection, such third member shall thereafter be selected by
the American Arbitration Association upon application made to it for such
purpose by any party to the arbitration. The Board of Arbitration shall meet in
Dallas, Texas or such other place as a majority of the members of the Board of
Arbitration determines more appropriate, and shall reach and render a decision
in writing with respect to items in dispute. The decision shall state the facts
on which it is based, be approved by at least a majority of the members of the
Board of Arbitration, and shall be based on the law governing the Agreement. In
connection with rendering its decisions, the Board of Arbitration shall adopt
and follow the Commercial Rules of Arbitration of the American Arbitration
Association in effect as of the date of the arbitration. To the extent
practical, decisions of the Board of Arbitration shall be rendered and delivered
to ASBI and SWS no more than
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30 calendar days following commencement of proceedings with respect thereto, but
in any event no later than December 30, 1999. The arbitrators shall limit their
award to a determination of the Environmental Escrow Amount and the appropriate
Escrow Period to adequately protect the SWS Companies and ASBI Companies (after
the Closing Date) from any Environmental Liabilities relating to the
Environmental Properties. Any decision made by the Board of Arbitration shall be
final, binding and conclusive on ASBI and SWS. Each party to this Agreement
shall be responsible for its own legal, expert and consultant fees and expenses
incurred in connection with the arbitration proceedings. The fees and expenses
of the Board of Arbitration shall be shared equally between SWS and ASBI.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SWS: SOUTHWEST SECURITIES GROUP, INC.
By: /s/ David Glatstein
-------------------------------------
David Glatstein
President and Chief Executive Officer
ASBI: ASBI HOLDINGS, INC.
By: /s/ Don Buchholz
-------------------------------------
Don Buchholz
Chairman of the Board
60