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AGREEMENT AND PLAN OF MERGER
dated as of January 22, 2001
by and between
CHARTER ONE FINANCIAL, INC.
CHARTER MICHIGAN BANCORP, INC.
and
ALLIANCE BANCORP
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1
TABLE OF CONTENTS
Tab
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions...................................................1
ARTICLE II
THE TRANSACTION
2.01 The Company Merger....................................................8
2.02 Bank Merger...........................................................9
2.03 Effective Date and Effective Time.....................................9
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration..................................................9
3.02 Rights as Alliance Shareholders; Stock Transfers.....................10
3.03 Fractional Shares....................................................10
3.04 Exchange Procedures..................................................10
3.05 Anti-Dilution Provisions.............................................12
3.06 Dissenting Shares....................................................12
3.07 Alliance Stock Options...............................................13
ARTICLE IV
ACTIONS PENDING TRANSACTION
4.01 Forbearances of Alliance.............................................14
4.02 Forbearances of COFI.................................................18
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules.................................................19
5.02 Standard.............................................................19
5.03 Representations and Warranties of Alliance...........................19
5.04 Representations and Warranties of COFI...............................31
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ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts..............................................37
6.02 Alliance Shareholder Approval........................................37
6.03 Registration Statement...............................................37
6.04 Press Releases.......................................................38
6.05 Access; Information..................................................39
6.06 Acquisition Proposal.................................................40
6.07 Affiliate Agreements.................................................40
6.08 Takeover Laws........................................................41
6.09 Conforming Entries...................................................41
6.10 Systems Integration..................................................41
6.11 Listing..............................................................42
6.12 Regulatory Applications..............................................42
6.13 Officers' and Directors' Insurance; Indemnification..................42
6.14 Benefit Plans........................................................44
6.15 Senior Officer Employment and Senior Officer Executive Agreements;
Change in Control Agreements; SERP; Deferred Compensation Plans;
Grantor Trust........................................................45
6.16 Alliance General Severance Plan......................................47
6.17 Advisory Board Membership............................................48
6.18 COFI Liquidated Damages..............................................48
6.19 Notification of Certain Matters......................................48
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE COMPANY MERGER
7.01 Conditions to Each Party's Obligation to Effect the Company Merger...49
7.02 Conditions to Obligation of Alliance.................................50
7.03 Conditions to Obligation of COFI and Charter Michigan................50
ARTICLE VIII
TERMINATION
8.01 Termination..........................................................52
8.02 Effect of Termination and Abandonment................................53
ARTICLE IX
MISCELLANEOUS
9.01 Survival.............................................................53
9.02 Waiver; Amendment....................................................53
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9.03 Counterparts.........................................................53
9.04 Governing Law........................................................53
9.05 Expenses.............................................................53
9.06 Notices..............................................................54
9.07 Entire Understanding; No Third Party Beneficiaries...................55
9.08 Interpretation; Effect...............................................55
LIST OF EXHIBITS
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of Support Agreement
EXHIBIT C Form of Subsidiary Plan of Merger
EXHIBIT D Form of Alliance Affiliate Agreement
EXHIBIT E Form of COFI Employment Agreement with Fredric G. Novy
EXHIBIT F Form of COFI Employment Agreement with Kenne P. Bristol
EXHIBIT G Form of Alliance General Severance Plan
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AGREEMENT AND PLAN OF MERGER, dated as of January 22, 2001 (this
"Agreement"), by and between Charter One Financial, Inc. ("COFI"), Charter
Michigan Bancorp, Inc., a wholly-owned first-tier Subsidiary of COFI ("Charter
Michigan") and Alliance Bancorp ("Alliance").
RECITALS
A. COFI. COFI is a Delaware corporation, having its principal place
of business in Cleveland, Ohio.
B. Charter Michigan. Charter Michigan is a Michigan corporation,
having its principal place of business in Dearborn, Michigan.
C. Alliance. Alliance is a Delaware corporation, having its
principal place of business in Hinsdale, Illinois.
D. Stock Option Agreement. As an inducement to the willingness of
COFI to enter into this Agreement , Alliance has agreed to grant to COFI on the
date hereof an option pursuant to a stock option agreement ("Stock Option
Agreement"), in the form of Exhibit A.
E. Support Agreements. As a further inducement to the willingness of
COFI to enter into this Agreement, each director and executive officer of
Alliance has agreed to enter into a support agreement with COFI (each a "Support
Agreement") on the date hereof, in the form of Exhibit B.
F. Intentions of the Parties. It is the intention of the parties that
the combination of Alliance and Charter Michigan be accounted for under the
"purchase method of accounting" and that each of the business combinations
contemplated herein be treated as a "reorganization" under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
G. Board Action. The Board of Directors of each of the parties has
determined that it is in the best interests of their respective companies and
their shareholders to the consummate business combinations contemplated herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
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"Acquisition Proposal" means a proposal to engage in, or a public
announcement to engage in, or a filing with the SEC or any Regulatory Authority
with respect to, any of the following: (a) a merger, consolidation or any
similar transaction involving Alliance or Liberty Federal (other than the
Transactions), (b) a purchase, lease or other acquisition of all or a
substantial portion of the assets of Alliance or Liberty Federal, (c) a purchase
or other acquisition of "beneficial ownership" by any "person" or "group" (as
such terms are defined in Section 13(d)(3) of the Exchange Act) (including by
way of merger, consolidation, share exchange, or otherwise) which would cause
such person or group to become the beneficial owner of securities representing
more than 15% of the voting power of Alliance, (d) a tender or exchange offer to
acquire securities representing more than 19.9% of the voting power of Alliance
or (e) a public proxy or consent solicitation made to the shareholders of
Alliance seeking proxies in opposition to this Agreement or the Company Merger.
"Administrator" means the chief officer of the Michigan Department of
Commerce.
"Agreement" means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.
"Alliance" has the meaning set forth in the preamble to this Agreement.
"Alliance Affiliate" has the meaning set forth in Section 6.07(a).
"Alliance Arrangements" has the meaning set forth in Section 6.14(a).
"Alliance Board" means the Board of Directors of Alliance.
"Alliance By-Laws" means the Bylaws of Alliance.
"Alliance Certificate" means the Certificate of Incorporation of Alliance.
"Alliance Common Stock" means the common stock, par value $0.01 per share,
of Alliance.
"Alliance Grantor Trust" means the Alliance and Liberty Federal Trust for
the Alliance SERP and the Liberty Federal Deferred Compensation Plans dated June
15, 1998.
"Alliance Meeting" has the meaning set forth in Section 6.02.
"Alliance Preferred Stock" means the preferred stock, par value $0.01 per
share, of Alliance.
"Alliance Senior Officer Employment Agreements" means the employment
agreements between Liberty Federal, Alliance, as guarantor, and each of Fredric
G. Novy and Kenne P. Bristol dated April 16, 1998.
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"Alliance Senior Officer Executive Agreements" means the Alliance executive
agreements between Alliance and each of Fredric G. Novy and Kenne P. Bristol
dated April 16, 1998, as amended on January 18, 2001, respectively.
"Alliance SERP" means the Executive Supplemental Retirement Income
Agreement entered into by Alliance and Liberty Federal, dated April 16, 1998.
"Alliance Stock" means, collectively, Alliance Common Stock and Alliance
Preferred Stock.
"Alliance Stock Option" has the meaning set forth in Section 3.07(a).
"Alliance Stock Option Exchange Ratio" means .7200 plus a decimal amount
(not to exceed four digits) determined by dividing $5.25 by the average closing
sale price of a share of COFI Common Stock on the NYSE for the 10 trading days
immediately preceding the Effective Date (as reported in The Wall Street Journal
or, if not reported therein, in another authoritative source).
"Alliance Stock Plans" means the stock option plans disclosed pursuant to
Section 5.03(m) of Alliance's Disclosure Schedule.
"Bank Merger" has the meaning set forth in Section 2.02.
"Burns Employment Agreement" means that certain Employment Agreement
between Alliance and Edward J. Burns dated February 10, 1997, as amended
pursuant to a written amendment dated January 18, 2001.
"Cash Consideration" has the meaning set forth in Section 3.01(a).
"Charter" has the meaning set forth in Section 6.13(b).
"Charter Michigan" has the meaning set forth in the preamble to this
Agreement.
"Charter Michigan Board" means the Board of Directors of Charter Michigan.
"Charter One Bank" has the meaning set forth in Section 2.02.
"Code" has the meaning set forth in the Recitals to this Agreement.
"COFI" has the meaning set forth in the preamble to this Agreement.
"COFI Board" means the Board of Directors of COFI.
"COFI Common Stock" means the common stock, par value $0.01 per share, of
COFI.
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"COFI Rights Agreement" means that certain Rights Agreement between COFI
and The First National Bank of Boston, as Rights Agent, dated November 20, 1989,
as amended and restated on October 20, 1999.
"Commissioner" means the Illinois Commissioner of Banks and Real Estate.
"Company Merger" has the meaning set forth in Section 2.01(a).
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
"Continuing Employees" has the meaning set forth in Section 6.14(c).
"Delaware Secretary" means the Secretary of State of the State of Delaware.
"DGCL" means the Delaware General Corporation Law.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means any shares of Alliance Common Stock whose holder
becomes entitled to the fair value of such shares under the DGCL.
"DOJ" means the United States Department of Justice.
"DOL" means the United States Department of Labor.
"Effective Date" has the meaning set forth in Section 2.03.
"Effective Time" has the meaning set forth in Section 2.03.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Authority relating to (a) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (b) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (ii) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"ERISA Affiliate Plan" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04(a).
"Exchange Fund" has the meaning set forth in Section 3.04(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"FRB" means the Board of Governors of the Federal Reserve System.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Parties" has the meaning set forth in Section 6.13(c).
"Insurance Amount" has the meaning set forth in Section 6.13(a).
"IRS" means the Internal Revenue Service.
"Liberty Federal" has the meaning set forth in Section 2.02.
"Liberty Federal Change in Control Agreements" means the 16 Special
Termination Agreements between Liberty Federal and certain of its employees,
each dated January 10, 2001, as disclosed pursuant to Section 5.03(m) of the
Alliance Disclosure Schedule.
"Liberty Federal Deferred Compensation Plans" means the Director Deferred
Compensation Plan and Executive Deferred Compensation Plan of Liberty Federal,
each dated April 16, 1998.
"Lien" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to COFI or Alliance, any
effect that (i) is material and adverse to the financial position, results of
operations, business, or operations of COFI and its Subsidiaries taken as a
whole or Alliance and its Subsidiaries taken as a whole, respectively, or (ii)
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would materially impair the ability of COFI, Charter Michigan or Alliance to
perform its obligations under this Agreement or the Stock Option Agreement, or
otherwise materially impede the consummation of the Transactions; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in thrift, banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, or other changes
affecting depository institutions generally, including changes in general
economic conditions and changes in prevailing interest and deposit rates, (b)
changes in generally accepted accounting principles or regulatory accounting
requirements applicable to thrifts, banks and their holding companies generally,
(c) any modifications or changes to valuation policies and practices or
restructuring charges, in each case taken pursuant to this Agreement by any of
the parties hereto or their respective Subsidiaries or otherwise by COFI or its
Subsidiaries in accordance with generally accepted accounting principles, (d)
changes resulting from transaction expenses (legal, accounting and investment
bankers' fees only) incurred in connection with this Agreement, (e) additional
accruals under the Alliance SERP in accordance with Section 6.15(c), and (f)
actions or omissions of COFI or Alliance taken with the prior written consent of
the other party in contemplation of the Transactions.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum, petroleum products and any other materials
regulated under Environmental Laws.
"MBCA" means the Michigan Business Corporation Act.
"Merger Consideration" has the meaning set forth in Section 3.01(a).
"NASDAQ" means The Nasdaq National Market.
"New Certificates" has the meaning set forth in Section 3.04(a).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning set forth in Section 3.04(a).
"OTS" means the Office of Thrift Supervision.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, bank, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, business
trust or unincorporated organization.
"Previously Disclosed" means information set forth in the Disclosure
Schedule of a party.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
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"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, accountants, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock or other equity interests of such Person.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.03(g).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Specified Representations" has the meaning set forth in Section 5.02.
"Stock Consideration" has the meaning set forth in Section 3.01(a).
"Stock Option Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Subsidiary" has the meaning ascribed to it in Rule 1-02 of Regulation S-X
of the SEC.
"Support Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts, in each case imposed by any taxing or
Governmental Authority whether arising before, on or after the Effective Date.
7
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with any Governmental Authority with respect to
any Tax.
"Transactions" means the Company Merger and the Bank Merger.
"Treasury Stock" means shares of Alliance Stock held by Alliance or any of
its Subsidiaries or by COFI or any of its Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted in good
faith.
"Webber Consultant Agreement" means that certain Restated Consultant
Agreement between Alliance and Richard E. Webber dated June 30, 1998.
ARTICLE II
THE TRANSACTIONS
2.01 The Company Merger.
(a) Company Merger. At the Effective Time, Alliance shall
merge with and into Charter Michigan (the "Company Merger"), the
separate corporate existence of Alliance shall cease and Charter
Michigan shall survive and continue to exist as a Michigan corporation
(Charter Michigan, as the surviving corporation in the Company Merger
is sometimes referred to herein as the "Surviving Corporation").
(b) Corporate Law Filings. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the Company Merger
shall become effective upon the occurrence of the filing in the office
of the Delaware Secretary of a certificate of merger in accordance with
Section 252 of the DGCL and the filing in the office of and endorsement
by the Administrator of a certificate of merger in accordance with
Section 735 of the MBCA or such later date and time as may be set forth
in such certificates of merger.
(c) Effects of Company Merger. The Company Merger shall have
the effects prescribed in the DGCL and the MBCA, including but not
limited to, Charter Michigan, as the Surviving Corporation, thereupon
and thereafter possessing all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of each of the
corporations so merged and Charter Michigan, as the Surviving
Corporation, becoming responsible and liable for all the liabilities,
obligations and penalties of each of the corporations so merged. All
rights of creditors and obligors and all Liens on the property of each
of Alliance and Charter Michigan shall be preserved unimpaired.
(d) Articles of Incorporation and By-Laws of Surviving
Corporation. The Articles of Incorporation and By-Laws of Charter
Michigan, as the Surviving Corporation, immediately after the Company
Merger shall be those of Charter Michigan as in effect immediately
prior to the Effective Time.
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(e) Directors and Officers of the Surviving Corporation. The
directors and officers of Charter Michigan, as the Surviving
Corporation, immediately after the Company Merger shall be the
directors and officers of Charter Michigan immediately prior to the
Effective Time, until such time as their successors shall be duly
elected and qualified.
(f) Service of Process. At and after the Effective Time,
Charter Michigan, as the Surviving Corporation, consents to be sued and
served with process in the State of Delaware and irrevocably appoints
the Delaware Secretary as its agent to accept service of process in any
proceeding in the State of Delaware to enforce against it any
obligation of Alliance.
(g) Principal Office. The location of the principal office of
Charter Michigan, as the Surviving Corporation, in the State of
Michigan is 13606 Michigan Avenue, 2nd Floor, Dearborn, Michigan 48126.
(h) Plan of Merger. At the reasonable request of any party,
COFI, Charter Michigan and Alliance shall enter into a separate plan of
merger reflecting the terms of the Company Merger for purposes of any
state law filing requirement.
2.02 Bank Merger. As soon as practicable at or after the Effective
Time, unless otherwise determined by COFI, Liberty Federal Bank, a federally
chartered savings bank and wholly owned Subsidiary of Alliance ("Liberty
Federal"), shall be merged with and into Charter One Bank, F.S.B., a federally
chartered savings bank and wholly-owned Subsidiary of Charter Michigan ("Charter
One Bank"). Such merger is sometimes referred to herein as the "Bank Merger".
The Bank Merger shall be implemented pursuant to the Subsidiary Plan of Merger,
in substantially the form of Exhibit C. In order to obtain the necessary
regulatory approvals for the Bank Merger, the parties shall cause the following
to be accomplished prior to the filing of applications for regulatory approval:
(a) Alliance shall cause the Board of Directors of Liberty Federal to approve
the Subsidiary Plan of Merger, Alliance as the sole shareholder of Liberty
Federal shall approve the Subsidiary Plan of Merger, and Alliance shall cause
the Subsidiary Plan of Merger to be duly executed by Liberty Federal and
delivered to COFI; and (b) Charter Michigan shall cause the Board of Directors
of Charter One Bank to approve the Subsidiary Plan of Merger, Charter Michigan
as the sole shareholder of Charter One Bank shall approve the Subsidiary Plan of
Merger, and Charter Michigan shall cause the Subsidiary Plan of Merger to be
duly executed by Charter One Bank and delivered to Alliance. At the request of
COFI, Alliance shall cause Liberty Federal, and Charter Michigan shall cause
Charter One Bank, to execute articles of combination to make effective the Bank
Merger and cause such articles to be timely and appropriately filed and endorsed
by the OTS so that the Bank Merger shall become effective at or as soon as
practicable after the Effective Time.
2.03 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Company Merger (the "Effective Date") to occur on (i) the
fifth business day to occur after the last of the conditions set forth in
Article VII to be satisfied prior to the Effective Date shall have been
satisfied or waived in accordance with the terms of this Agreement (or, at the
election of COFI by written notice to Alliance not later than two business days
after the last such condition in Article VII is satisfied, on the last business
day of the month in which such fifth business day occurs) or (ii) such other
date to which the parties may agree in writing. Notwithstanding the foregoing,
the Effective Date shall not occur prior to July 1, 2001 without the prior
written consent of COFI. The time on the Effective Date when the Company Merger
becomes effective is referred to as the "Effective Time."
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ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Company Merger
and without any action on the part of any Person:
(a) Outstanding Alliance Common Stock. Each share, excluding
Treasury Stock and Dissenting Shares, of Alliance Common Stock issued
and outstanding immediately prior to the Effective Time shall become
and be converted into, subject to Sections 3.03 and 3.05 hereof, .72 of
a share of COFI Common Stock (the "Stock Consideration"), including the
corresponding number of Rights associated with the COFI Common Stock
pursuant to the COFI Rights Agreement, plus $5.25 in cash (the "Cash
Consideration"). The Stock Consideration and Cash Consideration are
sometimes collectively referred to herein as the "Merger
Consideration". The Stock Consideration shall be subject to adjustment
as set forth in Section 3.05.
(b) Treasury Stock. Each share of Alliance Common Stock held
as Treasury Stock immediately prior to the Effective Time shall be
canceled and retired at the Effective Time, and no consideration shall
be issued in exchange therefor.
.
(c) Charter Michigan Common Stock. Each share of Charter
Michigan common stock issued and outstanding or held in treasury
immediately prior to the Effective Time shall remain issued and
outstanding or held in treasury and continue to be an identical issued
and outstanding or treasury share of Charter Michigan common stock
after the Effective Time.
(d) COFI Common Stock. Each share of COFI Common Stock issued
and outstanding or held in treasury immediately prior to the Effective
Time shall remain issued and outstanding or held in treasury and shall
be unaffected by the Company Merger.
3.02 Rights as Alliance Shareholders; Stock Transfers. At the
Effective Time, holders of Alliance Stock shall cease to be, and shall have no
rights as, shareholders of Alliance, other than to receive any dividend or
other distribution with respect to such Alliance Common Stock permitted under
this Agreement with a record date occurring prior to the Effective Date and the
Merger Consideration under this Article III. After the Effective Time, there
shall be no transfers on the stock transfer books of Alliance or the Surviving
Corporation of shares of Alliance Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof,
no fractional shares of COFI Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Company Merger;
instead, COFI shall pay to each holder of Alliance Common
10
Stock who would otherwise be entitled to a fractional share of COFI Common Stock
(after taking into account all Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction by the
closing sale price of COFI Common Stock, on the NYSE (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative source),
for the last trading day immediately preceding the Effective Date.
3.04 Exchange Procedures.
(a) Deposit of New Certificates and Cash Consideration, Etc.
At the Effective Time or upon the request of the independent exchange
agent selected by COFI who shall be reasonably acceptable to Alliance
(the "Exchange Agent"), COFI shall deposit or shall cause to be
deposited with the Exchange Agent for the benefit of the holders of
certificates formerly representing shares of Alliance Common Stock
other than certificates representing Treasury Stock and Dissenting
Shares ("Old Certificates"), for exchange in accordance with this
Article III, (i) certificates representing shares of COFI Common Stock
("New Certificates") for the aggregate Stock Consideration without any
interest thereon, (ii) the aggregate Cash Consideration without any
interest thereon, (iii) an estimated amount of cash for fractional
share interests without any interest thereon, plus (iv) any dividends
or distributions with a record date occurring after the Effective Date
with respect to New Certificates that are being held by the Exchange
Agent for exchange against Old Certificates (without any interest
thereon) (the "Exchange Fund").
(b) Transmittal and Deliveries. As promptly as practicable
after the Effective Date, but not later than 10 business days
thereafter, COFI shall send or cause to be sent to each former holder
of record of Old Certificates transmittal materials (which shall
specify that risk of loss and title to Old Certificates shall pass only
upon acceptance of such Old Certificates by COFI or the Exchange Agent)
for use in exchanging such shareholder's Old Certificates for the
Merger Consideration. Upon delivery to the Exchange Agent of Old
Certificates representing shares of Alliance Common Stock (or indemnity
reasonably satisfactory to COFI and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder,
the Exchange Agent shall deliver to such shareholder New Certificates
for the Stock Consideration, a check for the Cash Consideration and any
cash in lieu of a fractional share interest, and any dividends or
distributions such shareholder is entitled to receive with respect to
such New Certificates, if any. No interest will be paid on the Merger
Consideration, any cash in lieu of a fractional share interest or in
respect of dividends or distributions which any such Person shall be
entitled to receive pursuant to this Article III. Old Certificates
surrendered for exchange by any Person identified by Alliance pursuant
to Section 6.07 as an Alliance Affiliate shall not be exchanged for New
Certificates representing COFI Common Stock until COFI has received a
written agreement from such Person as specified in Section 6.07. COFI
and the Exchange Agent shall be entitled to rely upon the stock
transfer books of Alliance to establish the identity of those Persons
entitled to receive the Merger Consideration, which books shall be
conclusive with respect thereto. In the event of a dispute with respect
to ownership of stock represented by any Old Certificate, COFI or the
Exchange Agent shall be entitled to deposit any consideration in
11
respect thereof in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
(c) Escheat. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to any former
holder of Alliance Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar
laws.
(d) Restrictions on the Payment of Dividends. No dividends or
other distributions with respect to COFI Common Stock to be issued as
Stock Consideration in the Company Merger with a record date occurring
after the Effective Time shall be paid to the holder of any
unsurrendered Old Certificates until the holder thereof shall be
entitled to receive New Certificates in exchange therefor in accordance
with the procedures set forth in this Section 3.04. After becoming so
entitled in accordance with this Section 3.04, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofor had
become payable with respect to shares of COFI Common Stock such holder
had the right to receive upon surrender of the Old Certificates.
Registered holders of unsurrendered Old Certificates shall be entitled
to vote after the Effective Time at any meeting of COFI shareholders
with a record date after the Effective Time the number of whole shares
of COFI Common Stock represented by such Old Certificates (i.e., the
portion of the Stock Consideration represented by the Old
Certificates), regardless of whether such holders have exchanged their
Old Certificates.
(e) Return of Exchange Fund to COFI. Any portion of the
Exchange Fund that remains unclaimed by the shareholders of Alliance
for twelve months after the Effective Time shall be delivered to COFI.
Any shareholder of Alliance who has not theretofor complied with this
Article III shall thereafter look only to COFI for payment of the
Merger Consideration, cash in lieu of any fractional share and unpaid
dividends and distributions on COFI Common Stock deliverable in respect
of shares of Alliance Common Stock such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
3.05 Anti-Dilution Provisions. In the event COFI changes (or
establishes a record date for changing) the number of shares of COFI Common
Stock issued and outstanding on or prior to the Effective Date as a result of a
stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding COFI Common Stock and the record date therefor shall
be after the date hereof and on or prior to the Effective Date, the Stock
Consideration shall be proportionately adjusted.
3.06 Dissenting Shares
(a) Any holders of Dissenting Shares shall be entitled to
payment for such shares only to the extent permitted by and in
accordance with the DGCL; provided, however, that if any holder of
Dissenting Shares shall forfeit such right to payment, such shares
shall thereupon be deemed to have been converted into and to have
become exchangeable for, as
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of the Effective Time, the right to receive the Merger Consideration
from COFI without interest. Dissenting Shares shall not, after the
Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such
rights as are afforded in respect of Dissenting Shares pursuant to the
DGCL.
(b) Alliance shall give COFI (i) prompt notice of any written
objections to the Company Merger and any written demands for the
payment of the fair value of any shares, withdrawals of such demands,
and any other instruments served upon or received by Alliance pursuant
to Section 262 of the DGCL and (ii) the opportunity to participate in
all negotiations and proceedings with respect to such demands under the
DGCL. Alliance shall not voluntarily make any payment with respect to
any demands for payment of fair value and shall not, except with the
prior written consent of COFI or Charter Michigan, settle or offer to
settle any such demands.
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3.07 Alliance Stock Options.
(a) Conversion. At the Effective Time, each option outstanding
on the date of this Agreement to purchase shares of Alliance Common
Stock under the Alliance Stock Plans (each, a "Alliance Stock Option")
and remaining outstanding immediately prior to the Effective Time
shall, at the Effective Time, be assumed by COFI and each such Alliance
Stock Option shall continue to be outstanding, but shall represent an
option to purchase shares of COFI Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to
the terms of the applicable Alliance Stock Plan and stock option
agreement pursuant to which the Alliance Stock Option was granted):
(i) the number of shares of COFI Common Stock to be
subject to the continuing Alliance Stock Option shall be equal
to the product of the number of shares of Alliance Common
Stock subject to the Alliance Stock Option immediately prior
to the Effective Time and the Alliance Stock Option Exchange
Ratio, provided that any fractional share of COFI Common Stock
resulting from such multiplication shall be rounded down to
the nearest whole share; and
(ii) the exercise price per share of COFI Common
Stock under the continuing Alliance Stock Option shall be
equal to the exercise price per share of Alliance Common Stock
under the Alliance Stock Option immediately prior to the
Effective Time divided by the Alliance Stock Option Exchange
Ratio, provided that such exercise price shall be rounded down
to the nearest cent.
To the extent permitted by law, it is intended that the
foregoing assumption shall be undertaken consistent with and in a
manner that will not constitute a "modification" under Section 424 of
the Code as to any Alliance Stock Option which is an "incentive stock
option". COFI does hereby agree and acknowledge, consistent with
Alliance's Board interpretation and understanding of the Alliance Stock
Option Plans, that a continuing Alliance Stock Option, to the extent
vested on the date of termination of employment or service of the
optionee, may be exercised within one year after such termination of
employment or service, whichever is applicable (but to preserve
incentive stock option treatment within 3 months after termination of
employment), and that service on the Alliance Bancorp Advisory Board
will be deemed continuing service.
(b) Reservation of COFI Common Stock and Securities Filings.
At all times after the Effective Time, COFI shall reserve for issuance
such number of shares of COFI Common Stock as necessary so as to permit
the exercise of continuing Alliance Stock Options in the manner
contemplated by this Agreement and the instruments pursuant to which
such options were granted. COFI shall make all filings required under
federal and state securities laws promptly after the Effective Time so
as to permit the exercise of such continuing Alliance Stock Options and
the sale of the shares received by the optionee upon such exercise at
and after the Effective Time and COFI shall continue to make such
filings thereafter as may be necessary to permit the continued exercise
of continuing Alliance Stock Options and sale of such shares.
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ARTICLE IV
ACTIONS PENDING TRANSACTION
4.01 Forbearances of Alliance. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of COFI (which consent under subsections (h), (i), (m) and (q)
shall not be unreasonably withheld or delayed), Alliance will not, and will
cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Alliance and its
Subsidiaries other than in the ordinary and usual course consistent
with past practice or fail to use best efforts to (i) preserve intact
in any material respect their business organizations and assets and
(ii) maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any
action reasonably likely to materially impair Alliance's ability to
perform any of its obligations under this Agreement.
(b) Alliance Stock. Other than pursuant to Alliance Stock
Options outstanding on the date hereof as Previously Disclosed or the
Stock Option Agreement (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of
Alliance Stock or any Rights, (ii) enter into any agreement with
respect to the foregoing, or (iii) permit any additional shares of
Alliance Stock to become subject to new grants of employee or director
stock options, other Rights or similar stock-based employee rights.
(c) Other Securities. Issue any other capital securities,
including trust preferred or other similar securities, capital stock or
other securities of any Subsidiary, debentures, or subordinated notes.
(d) Dividends, Etc. (i) Make, declare, pay or set aside for
payment any dividend or distribution (other than (A) quarterly cash
dividends on Alliance Common Stock in an amount not to exceed $0.14 per
share with record and payment dates consistent with past practice
(provided the declaration of the last quarterly dividend by Alliance
prior to the Effective Time and the payment thereof shall be
coordinated with COFI so that holders of Alliance Common Stock do not
receive dividends on both Alliance Common Stock and COFI Common Stock
received in the Company Merger in respect of such quarter or fail to
receive a dividend on at least one of the Alliance Common Stock or COFI
Common Stock received in the Company Merger in respect of such quarter)
and (B) dividends from wholly owned Subsidiaries to Alliance or to
another wholly owned Subsidiary of Alliance) on or in respect of, any
shares of Alliance Stock or any of the capital stock or ownership
interests of any Alliance Subsidiary or (ii) directly or indirectly
adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock or Rights.
(e) Compensation; Employment Agreements, Etc. Enter into or
amend or renew any employment, consulting, severance, change in
control, or similar agreements or arrangements with any director,
officer or employee of Alliance or its Subsidiaries, or, except
15
as Previously Disclosed, grant any salary or wage increase or increase
any employee benefit (including incentive or bonus payments) except (i)
for oral at will employment agreements, (ii) for normal individual
increases in compensation to non-senior management employees in the
ordinary course of business consistent with past practice, (iii) for
other changes that are required by applicable law or (iv) to satisfy
contractual obligations existing as of the date hereof that are
Previously Disclosed; provided, however, that Alliance and its
Subsidiaries may consistent with past practice extend Previously
Disclosed employment, change in control, and severance agreements in
effect on the date hereof that contain evergreen provisions for an
additional one year period.
(f) Benefit Plans. Enter into, establish, adopt, renew, or
amend (except as may be required by existing contractual obligations
existing as of the date hereof that are Previously Disclosed or
applicable law) any pension, profit sharing, employee stock ownership,
retirement, stock option, stock appreciation, phantom stock, stock
purchase, savings, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement (or similar arrangement)
related thereto, in respect of any director, officer or employee of
Alliance or its Subsidiaries, or take any action to accelerate the
vesting of benefits payable thereunder.
(g) Dispositions. Sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue any of its assets or properties
except in the ordinary course of business for fair value consistent
with past practice, or sell or transfer any of its deposits.
(h) Acquisitions. Acquire (other than by way of foreclosures
or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts contracted prior to the date hereof in good
faith, in each case in the ordinary and usual course of business
consistent with past practice) all or any portion of, the assets,
business, deposits or properties of any Person.
(i) Loans, Loan Participations and Servicing Rights. Sell or
acquire, whether or not in the ordinary course of business, any loans
(excluding originations), any loan participations or servicing rights.
With respect to each participation construction loan in excess of
$3,000,000 where Alliance is the lead lender, Alliance agrees to
administer such loan in accordance with commercial loan disbursement
standards approved in writing by COFI and to submit each disbursement
made thereunder to COFI for ratification within three business days
after each such disbursement.
(j) Governing Documents. Amend the Alliance Certificate,
Alliance By-Laws or the certificate or articles of incorporation,
charter or by-laws(or similar governing documents) of any of Alliance's
Subsidiaries.
(k) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles.
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(l) Contracts. Except to satisfy Previously Disclosed written
commitments outstanding on the date hereof, enter into or terminate any
material agreement or amend or modify in any material respect or renew
any of its existing material agreements.
(m) Claims. Except in the ordinary course of business
consistent with past practice and involving an amount not in excess of
$100,000, settle any claim, action or proceeding. Notwithstanding the
foregoing, no settlement shall be made if it involves a precedent for
other similar claims, which in the aggregate, could be material to
Alliance and its Subsidiaries, taken as a whole.
(n) Foreclose. Foreclose upon or otherwise take title to or
possession or control of any real property without first obtaining a
phase one environmental report thereon; provided, however, that
Alliance and its Subsidiaries shall not be required to obtain such a
report with respect to one-to four-family, non-agricultural residential
property of five acres or less to be foreclosed upon unless it has
reason to believe that such property might be in violation of or
require remediation under Environmental Laws.
(o) Deposit Taking and Other Bank Activities. In the case of
Liberty Federal (i) voluntarily make any material changes in or to its
deposit mix; (ii) increase or decrease the rate of interest paid on
time deposits or on certificates of deposit, except in a manner and
pursuant to policies consistent with past practice; (iii) incur any
liability or obligation relating to retail banking and branch
merchandising, marketing and advertising activities and initiatives
materially in excess of the amounts Previously Disclosed; (iii) open
any new branch or deposit taking facility; or (iv) close or relocate
any existing branch or other facility.
(p) Investments. Enter into any securities transaction for its
own account or purchase or otherwise acquire any investment security
for its own account other than investments with maturities of less than
one year and consistent with past practices; enter into or acquire any
derivatives contract or structured note; enter into any new, or modify,
amend or extend the terms of any existing contracts relating to the
purchase or sale of financial or other futures, or any put or call
option relating to cash, securities or commodities or any interest rate
swap agreements or other agreements relating to the hedging of interest
rate risk.
(q) Capital Expenditures. Purchase or lease fixed assets
where the amount paid or committed thereof is in excess of $100,000
individually or $300,000 in the aggregate, except for amounts
Previously Disclosed or for emergency repairs or replacements.
(r) Lending. (i) Make any material changes in its policies
concerning loan underwriting or which Persons may approve loans or fail
to comply with such policies as Previously Disclosed; (ii) make or
commit to make any new loan or letter of credit, or any new or
additional discretionary advance under any existing loan or line of
credit, or restructure any existing loan or line of credit (other than
(A) in the case of a consumer loan or extension of credit with full
personal recourse to the borrower in a principal amount not in excess
of $100,000, (B) in the case of a loan secured by a first mortgage on
an owner
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occupied one-to-four single-family principal residence which provides
full personal recourse to the borrower in a principal amount not in
excess of $2,000,000, (C) in the case of a loan secured by a first
mortgage on commercial real property in a principal amount not in
excess of $1,000,000, (D) in the case of a commercial loan secured by a
first lien on accounts receivable, inventory or other tangible assets
which also provides full personal recourse to the borrower in a
principal amount not in excess of $250,000, or (E) in the case of loans
(other than commercial construction loans) outstanding on the date
hereof to one borrower (or group of affiliated borrowers) the
restructuring of loans with an aggregate principal balance not in
excess of $1,000,000; provided in the case of subparts (A)-(D) the loan
exposure to one borrower (or group of affiliated borrowers) shall not
exceed $7,500,000); or (iii) make or commit to make any new or
additional discretionary advance under any existing commercial
construction loan or line of credit, or restructure or modify in any
manner any existing commercial construction loan or line of credit,
including but not limited to any restructure or modification relating
to the term, interest rate, guarantee, guarantor, disbursement schedule
or disbursement line item, or administration of a commercial
construction loan; in each case under subsections (ii) and (iii) above,
without the prior written consent of COFI acting through its Chief
Executive Officer or Executive Vice President of Lending in a written
notice to Alliance, which approval or rejection shall be given within
three business days after delivery by Alliance to such officer of COFI
of the complete loan package. Notwithstanding anything herein to the
contrary, Alliance shall not make or commit to make any new lease,
whether direct financing, sales-type or otherwise, loan or letter of
credit, or any new or additional discretionary advance under any such
existing lease, loan or line of credit, or restructure any existing
lease, loan or line of credit with Varilease Corporation or any of its
subsidiaries or affiliates.
(s) Joint Ventures and Real Estate Development Operations.
Engage in any new joint venture, partnership or similar activity; make
any new or additional investment in any existing joint venture or
partnership, except for written commitments outstanding on the date
hereof as Previously Disclosed; engage in any new real estate
development or construction activity; or disburse any funds relating to
the 1201 West Adams project without the prior written consent of COFI
acting through its Chief Executive Officer or Executive Vice President
of Lending in a written notice to Alliance, which approval or rejection
shall be given within three business days after delivery by Alliance to
such officer of COFI of verification that at least 35% of the project's
units have been pre-sold and that the required down payments to be paid
thereon have been received.
(t) Adverse Actions. (i) Take any action or fail to take any
action while knowing that such action or inaction would, or is
reasonably likely to, prevent or impede the Company Merger or the Bank
Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (ii) knowingly take any action or fail to
take any action that is intended or is reasonably likely to result in
(A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (B) any of the conditions to the
Company Merger set forth in Article VII not being satisfied except as
expressly permitted by this Agreement or (C) a
18
material violation of any provision of this Agreement except, in each
case, as may be required by applicable law or regulation.
(u) Risk Management. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest
rate and other risk management policies, procedures or practices; (ii)
fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risk; or (iii) fail to
use commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk.
(v) Indebtedness. Incur any indebtedness for borrowed money
other than Federal Home Loan Bank advances in the ordinary course of
business with a term not in excess of one year.
(w) Commitments. Agree or commit to do any of the foregoing.
4.02 Forbearances of COFI. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of Alliance, COFI will not, and will cause each of its
Subsidiaries not to:
(a) Preservation. Fail to use best efforts to (i) preserve
intact in any material respect their business organizations and assets
and (ii) maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any
action reasonably likely to materially impair the ability of COFI or
Charter Michigan to perform any of its obligations under this
Agreement.
(b) Extraordinary Dividends. Make, declare, pay or set aside
for payment any extraordinary cash dividend or cash distribution on
COFI Common Stock.
(c) Adverse Actions. (i)Take any action or fail to take any
action while knowing that such action or inaction would, or is
reasonably likely to, prevent or impede the Company Merger or the Bank
Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (ii) knowingly take any action or fail to
take any action that is intended or is reasonably likely to result in
(A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (B) any of the conditions to the
Company Merger set forth in Article VII not being satisfied except as
expressly permitted by this Agreement or (C) a material violation of
any provision of this Agreement except, in each case, as may be
required by applicable law or regulation; provided, however, that
nothing contained herein shall limit the ability of COFI to exercise
its rights under the Stock Option Agreement.
(d) Accounting Methods. Implement or adopt any material
change in its accounting principles, practices or methods, other than
as may be required by generally accepted accounting principles.
19
(e) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, COFI has
delivered to Alliance a schedule and Alliance has delivered to COFI a schedule
(respectively, its "Disclosure Schedule") which sets forth, among other things,
items the disclosure of which are necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section 5.03
(other than Sections 5.03(f)(ii)(A)-(C) and 5.03(g)(iii) for which no disclosure
exceptions are permitted) or 5.04 (other than Sections 5.04(f)(ii)(A)-(C) and
5.04(g)(ii) for which no disclosure exceptions are permitted) or to one or more
of its covenants contained in Article IV; provided, that (a) no such item is
required to be set forth in a Disclosure Schedule as an exception to a Specified
Representation if its absence would not be reasonably likely to result in the
Specified Representation(s) being deemed untrue or incorrect under the standard
established by Section 5.02 and (b) the mere inclusion of an item in a
Disclosure Schedule as an exception to a Specified Representation shall not be
deemed an admission by a party that such item individually, or when aggregated
with other facts, events and circumstances, has resulted in or is reasonably
likely to result in a Material Adverse Effect on the party making the
representation, and Alliance's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached as a
result of effects arising solely from actions taken in compliance with a written
request of COFI.
5.02 Standard. No representation or warranty of Alliance or COFI
contained in Section 5.03(a), (c)(iii), (d), (f)(i), (n) (but excluding the last
sentence thereof), (o), and (v) or 5.04(a), (c), (d), (f)(i), (k) and (r) (but
excluding the last sentence thereof) (collectively, the "Specified
Representations") shall be deemed untrue or incorrect, and no party hereto shall
be deemed to have breached a Specified Representation, as a consequence of the
existence of any fact, event or circumstance unless such fact, circumstance or
event, individually, or taken together with all other facts, events and
circumstances inconsistent with the representations of such party, has had or is
reasonably likely to have a Material Adverse Effect on such party.
5.03 Representations and Warranties of Alliance. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed (which exception shall not
apply to Section 5.03(f)(ii)(A)-(C) and 5.03(g)(iii)) in its Disclosure Schedule
corresponding to the relevant paragraph below, Alliance hereby represents and
warrants to COFI:
(a) Organization, Standing and Authority. Alliance is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Alliance is duly qualified to do
business and is in good standing in the states of the United States and
any foreign jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
The Alliance Certificate and Alliance By-Laws are Previously Disclosed.
20
(b) Alliance Stock. The authorized capital stock of Alliance
consists solely of (i) 21,000,000 shares of Alliance Common Stock, of
which 9,243,575 shares were outstanding, and 2,458,822 shares were held
in treasury, as of the business day prior to the date hereof, and (ii)
1,500,000 shares of Alliance Preferred Stock, of which no shares are
outstanding. The outstanding shares of Alliance Stock have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable, subject to no preemptive rights (and were not issued in
violation of any preemptive rights), and were issued in compliance with
all applicable federal and state securities laws and regulations. As of
the date hereof, there are no shares of Alliance Stock authorized and
reserved for issuance, Alliance does not have any Rights issued or
outstanding with respect to Alliance Stock, and Alliance does not have
any commitment to authorize, issue or sell any Alliance Stock or
Rights, other than the issuance of Alliance Common Stock upon the
proper exercise of Alliance Stock Options outstanding on the date
hereof and pursuant to the Stock Option Agreement. The number of shares
of Alliance Common Stock which are issuable upon exercise of each
Alliance Stock Option outstanding as of the date hereof, the vesting
dates thereof, and the exercise price per share are Previously
Disclosed. Alliance does not have a dividend reinvestment plan.
(c) Subsidiaries. (i)(A) Alliance has Previously Disclosed a
list of all of its Subsidiaries together with the jurisdiction of
organization of each such Subsidiary, Alliance owns, directly or
indirectly, all the issued and outstanding equity securities of each of
its Subsidiaries, no equity securities of any of Alliance's
Subsidiaries are or may become required to be issued (other than to
Alliance or its wholly-owned Subsidiaries) by reason of any Right or
otherwise, there are no contracts, commitments, understandings or
arrangements by which any Alliance Subsidiary is or may become bound to
sell or otherwise transfer any equity securities of any such Subsidiary
(other than to Alliance or to another wholly-owned Alliance
Subsidiary), there are no contracts, commitments, understandings, or
arrangements relating to Alliance's rights to vote or to dispose of
such securities of its Subsidiaries and all the equity securities of
each Alliance Subsidiary are held by Alliance or its Subsidiaries, are
fully paid and nonassessable and are owned by Alliance or its
Subsidiaries free and clear of any Liens. The Charter and By-Laws of
Liberty Federal are Previously Disclosed.
(ii) Except for stock in the Federal Home Loan Bank
of Chicago and readily marketable securities, neither Alliance
nor any Alliance Subsidiary owns beneficially any equity
securities or similar interests of any Person, other than a
Alliance Subsidiary.
(iii) Each of Alliance's Subsidiaries has been duly
organized and is validly existing in good standing under the
laws of the jurisdiction of its organization, and is duly
qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified.
(d) Corporate Power. Each of Alliance and each of its
Subsidiaries has the corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and
assets; and Alliance has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby
and thereby.
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(e) Corporate Authority. Subject in the case of this Agreement
(not the Stock Option Agreement) to receipt of the requisite adoption
of this Agreement by the holders of a majority of the outstanding
shares of Alliance Common Stock entitled to vote thereon (which is the
only Alliance shareholder vote required), this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby
have been duly authorized, deemed advisable and approved by all
necessary corporate action of Alliance and the Alliance Board (by
unanimous vote) on or prior to the date hereof. This Agreement is a
valid and legally binding obligation of Alliance, enforceable against
it in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
(f) Regulatory Filings; No Defaults. (i) No consents or
approvals of, or filings or registrations with, any Governmental
Authority or any third party are required to be made or obtained by
Alliance or any of its Subsidiaries in connection with the execution,
delivery or performance by Alliance of this Agreement or the Stock
Option Agreement or the consummation of the Transactions except in this
case of the consummation of the Transactions for (A) filings of
applications or notices with Regulatory Authorities, (B) filings with
the SEC and state securities authorities, and (C) the filing of (and
endorsement of, if required) certificates of merger and articles of
combination with the Delaware Secretary, the Administrator and the OTS.
As of the date hereof, Alliance is not aware of any reason why the
approvals set forth in Section 7.01(b) will not be received in a timely
manner without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
(ii) Subject to receipt from Regulatory Authorities
of the regulatory approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, and
required filings under federal and state securities laws
relating to the consummation of, and the issuance of COFI
Common Stock in, the Company Merger, the execution, delivery
and performance of this Agreement and the Stock Option
Agreement and the consummation of the Transactions and the
exercise of rights under the Stock Option Agreement do not and
will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation
or any judgment, decree, order, governmental permit or
license, or any material agreement, license, indenture or
instrument to which Alliance or of any of its Subsidiaries is
a party or to which Alliance or any of its Subsidiaries or
properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the Alliance Certificate or
the Alliance By-Laws, or the governing documents or
instruments of any Alliance Subsidiary, (C) require any
consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license, or
material agreement, license, indenture or instrument or (D)
result in any penalty payment relating to borrowed funds,
advances or financial instruments of Alliance or any Alliance
Subsidiary.
22
(g) Financial Reports, SEC Documents; Material Adverse Effect.
(i) Alliance's 1999 Form 10-K and all other reports, registration
statements, definitive proxy statements or information statements filed
or to be filed by it or any of its Subsidiaries subsequent to December
31, 1999 under the Securities Act, or under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed or to be filed
(collectively, Alliance's "SEC Documents") with the SEC, as of the date
filed, (A) complied and will comply in all material respects with the
applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
and each of the balance sheets or statements of condition contained in
or incorporated by reference into any such SEC Document (including the
related notes and schedules thereto) fairly presents, or will fairly
present, the financial position of Alliance and its Subsidiaries as of
its date, and each of the statements of income or results of operations
and changes in shareholders' equity and cash flows or equivalent
statements in Alliance's SEC Documents (including any related notes and
schedules thereto) fairly presents, or will fairly present, the results
of operations, changes in shareholders' equity and cash flows, as the
case may be, of Alliance and its Subsidiaries for the periods to which
they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to non-material,
normal year-end audit adjustments and the absence of footnotes in the
case of unaudited statements.
(ii) Except for liabilities incurred in connection
with negotiation of and compliance with this Agreement and
otherwise in connection with the transactions contemplated
hereby, since December 31, 1999 to the date hereof, Alliance
and its Subsidiaries have not incurred any liability other
than in the ordinary course of business consistent with past
practice.
(iii) Since December 31, 1999 to the date hereof, (A)
Alliance and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent
with past practice (excluding matters related to this
Agreement and the transactions contemplated hereby) and (B)
there has not occurred any fact, event or circumstance that,
individually or taken together with all other facts, events
and circumstances (described in any paragraph of Section 5.03
or otherwise), would constitute, or is reasonably likely to
result in, a Material Adverse Effect with respect to Alliance.
(h) Litigation. Neither Alliance nor any Alliance Subsidiary
is a party to any pending or, to the best knowledge of Alliance,
threatened with any, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, involving a monetary claim in
excess of $25,000 or involving a claim for equitable relief.
23
(i) Regulatory Matters. (i) Neither Alliance nor any of its
Subsidiaries or properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or
authority charged with the supervision or regulation of financial
institutions (or their holding companies) or issuers of securities or
engaged in the insurance of deposits (including, without limitation,
the FRB, the OTS, the Commissioner, the DOJ, and the FDIC) or the
supervision or regulation of it or any of its Subsidiaries
(collectively, the "Regulatory Authorities").
(ii) Neither Alliance nor any of its Subsidiaries has
been advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(iii) As of the date hereof, Liberty Federal has a
Community Reinvestment Act rating of "satisfactory" or better.
(j) Compliance with Laws. Each of Alliance and each Alliance
Subsidiary:
(i) is in substantial compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable to
it, its properties, assets and deposits, its business, its
conduct of business and its employees, including, without
limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act of 1977, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(ii) has all material permits, licenses,
authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental
Authorities that are required in order to permit it to own or
lease its properties and to conduct its business as presently
conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect
and, to the best knowledge of Alliance, no suspension or
cancellation of any such permit, license, certificate, order
or approval is threatened or will result from the consummation
of the Transactions; and
(iii) has not received, since December 31, 1998, any
notification or communication from any Governmental Authority
(A) asserting that it is not in compliance in any material
respect with any of the statutes, regulations, or ordinances
which such Governmental Authority enforces or (B) threatening
to revoke any material license, franchise, permit, or
governmental authorization (nor, to the best knowledge of
Alliance, do any grounds for any of the foregoing exist).
24
(k) Material Contracts; Real Estate Leases; Defaults. As of
the date hereof, except for this Agreement, the Stock Option Agreement
and those agreements and other documents filed as exhibits to
Alliance's SEC Documents, neither Alliance nor any of its Subsidiaries
is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i)
that is a "material contract" within the meaning of Item 601(b)(10) of
the SEC's Regulation S-K or (ii) that restricts or limits in any
material way the conduct of business by Alliance or any of its
Subsidiaries (it being understood that any non-compete or similar
provision shall be deemed material). Each real estate lease that may
require the consent of the lessor or its agent resulting from the
Company Merger or the Bank Merger by virtue of a prohibition or
restriction relating to assignment, by operation of law or otherwise,
or change in control, is listed in the Alliance Disclosure Schedule
identifying the section of the lease that contains such prohibition or
restriction. Neither Alliance nor any Alliance Subsidiary is in default
in any material respect under any material contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to
which it is a party, by which its assets, business, or operations may
be bound or affected, or under which it or its assets, business, or
operations receive benefits, and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would
constitute such a default.
(l) Brokers. No action has been taken by Alliance or any of
its Subsidiaries that would give rise to any valid claim for a
brokerage commission, finder's fee or other like payment with respect
to the Transactions, except the Previously Disclosed fee to be paid by
Alliance to Keefe, Bruyette & Woods, Inc.
(m) Employee Benefit Plans. (i) Alliance has Previously
Disclosed a descriptive list of and copies of all existing bonus,
incentive, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare and fringe benefit plans, employment, severance and
change in control agreements and all other benefit practices, policies
and arrangements maintained by Alliance or any of its Subsidiaries in
which any employee or former employee, consultant or former consultant
or director or former director of Alliance or any of its Subsidiaries
participates or to which any such employee, consultant or director is a
party or is otherwise entitled to receive benefits other than plans and
programs involving immaterial obligations (the "Compensation and
Benefit Plans"). Neither Alliance nor any of its Subsidiaries has any
commitment to create any additional Compensation and Benefit Plan or to
modify, change or renew any existing Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been
operated and administered in all material respects in
accordance with its terms and with applicable law, including,
but not limited to, ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act, and
any regulations or rules promulgated thereunder, and all
material filings, disclosures and notices required by ERISA,
the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other applicable law
have been timely made. Each
25
Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the IRS, and Alliance is not aware
of any circumstances which are reasonably likely to result in
revocation of any such favorable determination letter. There
is no material pending or, to the best knowledge of Alliance,
threatened action, suit or claim relating to any of the
Compensation and Benefit Plans (other than routine claims for
benefits). Neither Alliance nor any of its Subsidiaries has
engaged in a transaction, or omitted to take any action, with
respect to any Compensation and Benefit Plan that would
reasonably be expected to subject Alliance or any of its
Subsidiaries to a tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA, assuming for
purposes of Section 4975 of the Code that the taxable period
of any such transaction expired as of the date hereof and
subsequently expires as of the day next preceding the
Effective Date.
(iii) Neither Alliance, nor any Alliance Subsidiary
or any entity which is considered one employer with Alliance
under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of
the Code (an "ERISA Affiliate") is a sponsor of or maintains a
defined benefit Pension Plan or any Compensation and Benefit
Plan subject to Title IV of ERISA, or has any liability under
any such plan that was previously sponsored or maintained by
it. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed
for any Compensation and Benefit Plan or by any single
employer plan of an ERISA Affiliate (an "ERISA Affiliate
Plan") within the 12-month period ending on the date hereof.
To the best knowledge of Alliance, there is no pending
investigation or enforcement action by any Governmental
Authority with respect to any Compensation and Benefit Plan or
any ERISA Affiliate Plan.
(iv) All material contributions required to be made
under the terms of any Compensation and Benefit Plan or ERISA
Affiliate Plan or any employee benefit arrangements to which
Alliance or any of its Subsidiaries is a party or a sponsor
have been timely made, and all anticipated contributions and
funding obligations are accrued monthly on Alliance's
consolidated financial statements. Alliance and its
Subsidiaries have expensed and accrued as a liability the
present value of future benefits under each applicable
Compensation and Benefit Plan for financial reporting purposes
as required by generally accepted accounting principles.
Neither any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302
of ERISA. None of Alliance, any of its Subsidiaries or any
ERISA Affiliate (x) has provided, or would reasonably be
expected to be required to provide, security to any Pension
Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, or (y) has taken any action, or
omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a Lien
under Section 412(n) of the Code or pursuant to ERISA.
26
(v) Neither Alliance nor any of its Subsidiaries has
any obligations to provide retiree health, life insurance,
disability insurance, or other retiree death benefits under
any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. There has been no
communication to employees by Alliance or any of its
Subsidiaries that would reasonably be expected to promise or
guarantee such employees retiree health, life insurance,
disability insurance, or other retiree death benefits.
(vi) Alliance and its Subsidiaries do not maintain
any Compensation and Benefit Plans covering foreign employees.
(vii) With respect to each Compensation and Benefit
Plan, if applicable, Alliance has provided or made available
to COFI copies of the: (A) trust instruments and insurance
contracts; (B) two most recent Forms 5500 filed with the IRS;
(C) most recent actuarial report and financial statement; (D)
the most recent summary plan description; (E) most recent
determination letter issued by the IRS; (F) any Form 5310 or
Form 5330 filed with the IRS; (G) most recent
nondiscrimination tests performed under ERISA and the Code
(including 401(k) and 401(m) tests); and (H) the determination
letter for termination of Alliance's terminated employee stock
ownership plan.
(viii) The consummation of the Transactions or either
of them will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or
service at any time prior to or following the Effective Time),
(A) entitle any employee, consultant or director to any
payment or benefit (including severance pay, change in control
benefit, or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan or (C) result
in any material increase in benefits payable under any
Compensation and Benefit Plan.
(ix) Neither Alliance nor any of its Subsidiaries
maintains any compensation plans, programs or arrangements
under which any payment is reasonably likely to become
non-deductible, in whole or in part, for tax reporting
purposes as a result of the limitations under Section 162(m)
of the Code and the regulations issued thereunder.
(x) To the best knowledge of Alliance, the
consummation of the Transactions or either of them will not,
directly or indirectly (including without limitation, as a
result of any termination of employment or service at any time
prior to or following the Effective Time), entitle any current
or former employee, director or independent contractor of
Alliance or any Alliance Subsidiary to any actual or deemed
payment (or benefit) which would constitute a "parachute
payment" (as such term is defined in Section 280G of the
Code), without regard to whether such payment is reasonable
compensation for personal services performed or to be
performed in the future.
27
(xi) There are no stock appreciation or similar
rights, earned dividends or dividend equivalents, or shares of
restricted stock, outstanding under any of the Alliance Stock
Plans or otherwise as of the date hereof and none will be
granted, awarded, or credited after the date hereof.
(n) Labor Matters. Neither Alliance nor any of its
Subsidiaries is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor
union or labor organization, nor is Alliance or any of its Subsidiaries
the subject of a proceeding asserting that it or any such Subsidiary
has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel Alliance or any such
Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor
dispute involving it or any of its Subsidiaries pending or, to the best
knowledge of Alliance, threatened, nor is Alliance aware of any
activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other
organizational activity. There are no claims, investigations or
proceedings pending or, to the best knowledge of Alliance threatened,
against Alliance or any Alliance Subsidiary relating to discriminatory
employment practices or sexual harassment.
(o) Takeover Laws; Dissenters Rights. This Agreement, the
Stock Option Agreement and the transactions contemplated hereby and
thereby are not subject to the requirements of any "moratorium,"
"control share", "fair price", "affiliate transactions", "business
combination" or other antitakeover laws and regulations of any state,
including the provisions of Section 203 of the DGCL ("Takeover Laws")
applicable to Alliance or any Alliance Subsidiary.
(p) Environmental Matters. (i) Neither the conduct nor
operation of business by Alliance or any of its Subsidiaries nor any
condition of any property currently or previously owned, operated or
controlled by any of them (including, without limitation, in a
fiduciary or agency capacity), or to the best knowledge of Alliance, on
which any of them holds a Lien, results or resulted in a violation of
any Environmental Laws, and to the best knowledge of Alliance, no
condition has existed or event has occurred with respect to any of them
or any such property that, with notice or the passage of time, or both,
is reasonably likely to result in any liability to Alliance or any
Alliance Subsidiary under or by reason of any Environmental Laws or
Materials of Environmental Concern. Except for notices for which there
is no reasonable basis for the assertion of liability or a remediation
obligation on the part of Alliance or any Alliance Subsidiary under any
Environmental Laws or relating to Materials of Environmental Concern,
neither Alliance nor any of its Subsidiaries has received any notice
from any Person that Alliance or its Subsidiaries or the operation or
condition of any property ever owned, operated, controlled, or held as
collateral or in a fiduciary capacity by any of them are or were in
violation of or otherwise are alleged to have liability under any
Environmental Laws or relating to Materials of Environmental Concern,
including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of Materials of
Environmental Concern at, on, beneath, or originating from any such
property.
28
(ii) There are no underground storage tanks located
on, in or under any real property currently owned, operated or
controlled by Alliance or any Alliance Subsidiary. Neither
Alliance nor any Alliance Subsidiary owns or operates any
underground storage tank at any real property leased by it.
(q) Tax Matters. (i) (a) All Tax Returns that are required to
be filed by or with respect to Alliance or its Subsidiaries have been
duly filed, or requests for extensions have been timely filed (or an
extension is automatic) and any such extension has been granted and has
not been rescinded, (b) all Taxes shown to be due on Tax Returns
referred to in clause (a), as filed, and all Taxes required to be shown
on the Tax Returns for which extensions have been granted have been
paid in full or adequate provision has been made for such Taxes on
Alliance's most recent balance sheet provided to COFI, (c) the Tax
Returns referred to in clause (a) that have been filed have been
examined by the IRS or the appropriate state, local or foreign taxing
authority or the period for assessment of the Taxes in respect of which
such Tax Returns were required to be filed has expired, (d) all
deficiencies asserted or assessments made as a result of such
examinations have been paid in full or non-material amounts are being
contested in good faith, (e) no material issues that have been raised
by the relevant taxing authority in connection with the examination of
any of the Tax Returns referred to in clause (a) are currently pending,
and (f) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of Alliance or its Subsidiaries.
Alliance has made available to COFI true and correct copies of the
United States federal income Tax Returns filed by Alliance and its
Subsidiaries for each of the three most recent fiscal years ended on or
before December 31, 1999. Neither Alliance nor any of its Subsidiaries
has any material liability with respect to any Taxes that accrued on or
before the end of the most recent period covered by Alliance's SEC
Documents filed prior to the date hereof in excess of the amounts
accrued with respect thereto that are reflected in the financial
statements included in Alliance's SEC Documents filed on or prior to
the date hereof. As of the date hereof, neither Alliance nor any of its
Subsidiaries has any reason to believe that any condition exists that
might prevent or impede the Company Merger or the Bank Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(ii) No Tax is required to be withheld pursuant to
Section 1445 of the Code as a result of the transfer
contemplated by this Agreement.
(iii) Alliance and its Subsidiaries will not be liable
for any Taxes as a result of either of the Transactions.
(r) Risk Management Instruments. All material interest rate
swaps, caps, floors, option agreements, futures and forward contracts
and other similar risk management arrangements, whether entered into
for Alliance's own account, or for the account of one or more of
Alliance's Subsidiaries or their customers (all of which are Previously
Disclosed), were entered into (iv) in accordance with prudent business
practices and in all material respects in compliance with all
applicable laws, rules, regulations and regulatory policies and
(v) with counterparties believed to be financially responsible at the
time; and each of them constitutes the valid and legally binding
obligation of Alliance or one of its Subsidiaries,
29
enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither Alliance
nor any of its Subsidiaries, nor to the best knowledge of Alliance any
other party thereto, is in breach of any of its obligations under any
such agreement or arrangement in any material respect.
(s) Loans. (i) The Alliance Disclosure Schedule sets forth a
listing, as of the last business day prior to the date of this
Agreement, by account, of: (A) all loans (including loan
participations) of Alliance or any of the Alliance Subsidiaries that
have been accelerated during the past twelve months; (B) all loan
commitments or lines of credit of Alliance or any of the Alliance
Subsidiaries which have been terminated by Alliance or any of the
Alliance Subsidiaries during the past twelve months by reason of a
default or adverse developments in the condition of the borrower or
other events or circumstances affecting the credit of the borrower
(including the termination of the $24 million commitment relating to
the 330 W. Grand Avenue project); (C) all loans, lines of credit and
loan commitments as to which Alliance or any of the Alliance
Subsidiaries has given written notice of its intent to terminate during
the past twelve months; (D) with respect to all commercial loans
(including commercial real estate loans), all notification letters and
other written communications from Alliance or any of the Alliance
Subsidiaries to any of their respective borrowers, customers or other
parties during the past twelve months wherein Alliance or any of the
Alliance Subsidiaries has requested or demanded that actions be taken
to correct existing defaults or facts or circumstances which may become
defaults; (E) each borrower, customer or other party which has notified
Alliance or any of the Alliance Subsidiaries during the past twelve
months of, or has asserted against Alliance or any of the Alliance
Subsidiaries, in each case in writing, any "lender liability" or
similar claim, and, to the best knowledge of Alliance, each borrower,
customer or other party which has given Alliance or any of the Alliance
Subsidiaries any oral notification of, or orally asserted to or against
Alliance or any of the Alliance Subsidiaries, any such claim; (F) all
loans, (1) that are contractually past due 90 days or more in the
payment of principal and/or interest, (2) that are on non-accrual
status, (3) that have been classified "doubtful," "loss" or the
equivalent thereof by any Regulatory Authority, (4) where a reasonable
doubt exists as to the timely future collectibility of principal and/or
interest, whether or not interest is still accruing or the loans are
less than 90 days past due, (5) where the interest rate terms have been
reduced and/or the maturity dates have been extended subsequent to the
agreement under which the loan was originally created due to concerns
regarding the borrower's ability to pay in accordance with such initial
terms, or (6) where a specific reserve allocation exists in connection
therewith, and (G) all assets classified by Alliance or any Alliance
Subsidiary as real estate acquired through foreclosure or in lieu of
foreclosure, including in-substance foreclosures, and all other assets
currently held that were acquired through foreclosure or in lieu of
foreclosure. The $24 million outstanding loan commitment relating the
330 West Grand Avenue project has been terminated by Liberty Federal in
accordance with the terms of such loan commitment and such termination
shall not result in any liability to Alliance or any Subsidiary of
Alliance.
30
(ii) All loans receivable (including discounts) and
accrued interest entered on the books of Alliance and the
Alliance Subsidiaries arose out of bona fide arm's- length
transactions, were made for good and valuable consideration in
the ordinary course of Alliance's or the appropriate Alliance
Subsidiary's respective business, and the notes or other
evidences of indebtedness with respect to such loans
(including discounts) are true and genuine and are what they
purport to be. To the best knowledge of Alliance, the loans,
discounts and the accrued interest reflected on the books of
Alliance and the Alliance Subsidiaries are subject to no
defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in- lending
laws), except as may be provided by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by
general principles of equity. All such loans are owned by
Alliance or the appropriate Alliance Subsidiary free and clear
of any Liens.
(iii) The notes and other evidences of indebtedness
evidencing the loans described in clause (ii) above, and all
pledges, mortgages, deeds of trust and other collateral
documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they
purport to be.
(iv) The Alliance Disclosure Schedule sets forth a
schedule prepared by Alliance and delivered to COFI, listing
by account, 31 new major residential construction loan
projects, the original loan amount of each project, the number
of presold units relating to each such project and various
other information. The information set forth on the foregoing
schedule with respect to the 15 accounts identified with a
check mark thereon is accurate and complete and all cash
deposits required pursuant to the sales contracts relating to
the presold units have been received and are being held in
accordance with the terms of the respective sales contracts.
(t) Material Interests of Certain Persons. To the best
knowledge of Alliance, no officer or director of Alliance or any of the
Alliance Subsidiaries, or any "associate" (as such term is defined in
Rule 14a-1 under the Exchange Act) of any such officer or director, has
any interest in any contract or property (real or personal, tangible or
intangible), used in, or pertaining to the business of, Alliance or any
of the Alliance Subsidiaries, which in the case of Alliance and each of
the Alliance Subsidiaries would be required to be disclosed by Item 404
of Regulation S-K promulgated by the SEC.
(u) Registration Obligations. Neither Alliance nor any
Alliance Subsidiary is under any obligation, contingent or otherwise,
which will survive the Effective Time by reason of any agreement to
register any transaction involving any of its securities under the
Securities Act.
(v) Insurance. Alliance has Previously Disclosed all of the
material insurance policies, binders, or bonds maintained by Alliance
or any of its Subsidiaries. Alliance and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts
31
as the management of Alliance reasonably has determined to be prudent
in accordance with industry practices and in accordance with all
contractual obligations. All such insurance policies are in full force
and effect; Alliance and its Subsidiaries are not in material default
thereunder; and all material claims thereunder have been filed in due
and timely fashion.
(w) Governmental Reviews. No investigation or review by any
Governmental Authority with respect to Alliance or any Alliance
Subsidiary is pending or, to the best knowledge of Alliance,
threatened, nor has any Governmental Authority indicated to Alliance or
any Alliance Subsidiary an intention to conduct the same, other than
normal or routine regulatory examinations.
(x) Fairness Opinion. On the date of this Agreement, Keefe,
Bruyette & Woods,Inc. has provided to the Alliance Board a written
fairness opinion to the effect that the Merger Consideration is fair to
the shareholders of Alliance from a financial point of view.
(y) Compliance with Servicing Obligations. Alliance and the
Alliance Subsidiaries are in compliance in all material respects with
all contract, agency and investor requirements and guidelines, and all
applicable laws, rules and regulations of Governmental Authorities,
relating to the servicing and administration of loans by them, or any
of them, including but not limited to, properly and timely making
interest rate adjustments to adjustable rate loans.
5.04 Representations and Warranties of COFI. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed (which exception shall not apply to
Sections 5.04(f)(ii)(A)-(C) and 5.04(g)(ii)) in its Disclosure Schedule
corresponding to the relevant paragraph below, COFI and Charter Michigan hereby,
jointly and severally, represent and warrant to Alliance as follows:
(a) Organization, Standing and Authority. COFI and Charter
Michigan are corporations duly organized, validly existing and in good
standing under the laws of the States of Delaware and Michigan,
respectively. COFI and Charter Michigan are duly qualified to do
business and are in good standing in the states of the United States
and foreign jurisdictions where their respective ownership or leasing
of property or assets or the conduct of their businesses requires them
to be so qualified.
(b) COFI Stock. (i) As of the last business day prior to the
date hereof, the authorized capital stock of COFI consisted solely of
(A) 360,000,000 shares of COFI Common Stock, of which no more than
208,507,882 shares were outstanding, and no more than 4,176,816 shares
were held in treasury, and (B) 20,000,000 shares of preferred stock,
$0.01 par value per share, of which none were issued and outstanding.
As of the date hereof, COFI does not have any Rights issued or
outstanding with respect to COFI Common Stock and COFI does not have
any commitment to authorize, issue or sell any COFI Common Stock or
Rights, other than pursuant to (A) this Agreement, (B) outstanding
stock options (and any mandatory future awards under stock option
plans) that have been Previously Disclosed, (C) its dividend
reinvestment plan on terms Previously Disclosed, and (D) the
32
COFI Rights Agreement. The outstanding shares of COFI Common Stock have
been duly authorized and are validly issued and outstanding, fully paid
and nonassessable, subject to no preemptive rights (and were not issued
in violation of any preemptive rights).
(ii) The shares of COFI Common Stock to be issued as
Stock Consideration in the Company Merger, when issued in
accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and
subject to no preemptive rights.
(c) Subsidiaries. Each of COFI's Subsidiaries has been duly
organized and is validly existing in good standing under the laws of
the jurisdiction of its organization, and is duly qualified to do
business and is in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified and COFI owns, directly or indirectly,
all the issued and outstanding equity securities of each of its
Subsidiaries.
(d) Corporate Power. Each of COFI and its Subsidiaries has the
corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and each of
COFI and Charter Michigan has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and,
in the case of COFI, the Stock Option Agreement, and to consummate the
transactions contemplated hereby and thereby.
(e) Corporate Authority. This Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby have
been authorized, deemed advisable and approved by all necessary
corporate action of COFI and Charter Michigan (as to this Agreement and
the Company Merger only) and the COFI Board and the Charter Michigan
Board (as to this Agreement and the Company Merger only) on or prior to
the date hereof. This Agreement is a valid and legally binding
agreement of COFI and Charter Michigan, enforceable against them in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating
to or affecting creditors' rights or by general equity principles).
(f) Regulatory Filings; No Defaults. (i) No consents or
approvals of, or filings or registrations with, any Governmental
Authority or any third party are required to be made or obtained by
COFI or any of its Subsidiaries in connection with the execution,
delivery or performance by COFI or Charter Michigan of this Agreement
or the consummation of the Transactions except in the case of the
consummation of the Transactions for (A) the filings referred to in
Section 5.03(f)(i); (B) such filings as are required to be made or
approvals as are required to be obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of COFI
Common Stock in the Company Merger; and (C) receipt of the approvals
set forth in Section 7.01(b). As of the date hereof, neither COFI nor
Charter Michigan is aware of any reason why the approvals set forth in
Section 7.01(b) will not be received in a timely manner without
the imposition of a condition, restriction or requirement of the type
described in Section 7.01(b).
33
(ii) Subject to the satisfaction of the requirements
referred to in the preceding paragraph, and expiration of the
related waiting periods, and required filings under federal
and state securities laws relating to the consummation of, and
the issuance of COFI Common Stock in, the Company Merger, the
execution, delivery and performance of this Agreement and the
consummation of the Transactions do not and will not (A)
constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
material agreement, license, indenture or instrument to which
COFI or of any of its Subsidiaries is a party or to which COFI
or any of its Subsidiaries or properties is subject or bound,
(B) constitute a breach or violation of, or a default under,
the certificate of incorporation or by-laws (or similar
governing documents) of COFI or any of its Subsidiaries, or
(C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or
license, agreement, license, indenture or instrument or (D)
result in any penalty payment relating to borrowed funds,
advances or financial instruments of COFI or any COFI
Subsidiary.
(g) Financial Reports, SEC Documents; Material Adverse Effect.
(i) COFI's SEC Documents, as of the date filed, (A) complied and will
comply in all material respects with the applicable requirements under
the Securities Act or the Exchange Act, as the case may be, and (B) did
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and each of the balance
sheets or statements of condition contained in or incorporated by
reference into any such SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
financial position of COFI and its Subsidiaries as of its date, and
each of the statements of income or results of operations and changes
in shareholders' equity and cash flows or equivalent statements in
COFI's SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, in all material
respects, the results of operations, changes in shareholders' equity
and cash flows, as the case may be, of COFI and its Subsidiaries for
the periods to which they relate, in each case in accordance with
generally accepted accounting principles consistently applied during
the periods involved, except in each case as may be noted therein,
subject to non-material, normal year- end audit adjustments and the
absence of footnotes in the case of unaudited financial statements.
(ii) Since December 31, 1999 to the date hereof, (A)
COFI and its Subsidiaries have conducted their respective
businesses and incurred their respective material liabilities
in the ordinary and usual course consistent with past practice
(excluding matters outside the ordinary course that are not in
the aggregate material to the consolidated financial condition
of COFI and matters related to this Agreement
34
and the transactions contemplated hereby) and (B) there has
not occurred any fact, event or circumstance that,
individually or taken together with all other facts, events
and circumstances (described in any paragraph of Section 5.04
or otherwise), would constitute, or is reasonably likely to
result in, a Material Adverse Effect with respect to COFI.
(h) Litigation; Regulatory Action. (i) No litigation, claim or
other proceeding before any Governmental Authority is pending against
COFI or any of its Subsidiaries and, to the best knowledge of COFI and
Charter Michigan, no such litigation, claim or other proceeding has
been threatened, which individually or in the aggregate would be
material to the consolidated financial condition or the consolidated
results of operations of COFI.
(ii) Neither COFI nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from a Regulatory Authority,
nor has COFI or any of its Subsidiaries been advised by a
Regulatory Authority that such agency is contemplating issuing
or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, extraordinary
supervisory letter or similar submission.
(iii) As of the date hereof, each financial
institution Subsidiary of COFI has a Community Reinvestment
Act rating of "satisfactory" or better.
(i) Compliance with Laws. Each of COFI and each COFI
Subsidiary:
(i) is in substantial compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable to
it, its properties, assets and deposits, its business, its
conduct of business, and its employees, including, without
limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act of 1977, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices; and
(ii) has all material permits, licenses,
authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental
Authorities that are required in order to permit it to conduct
its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best knowledge of COFI
and Charter Michigan, no suspension or cancellation of any
such permit, license, certificate, order or approval is
threatened or will result from the consummation of the
Transactions; and
. (iii) has not received, since December 31, 1998, any
notification or communication from any Governmental Authority
(A) asserting that it is not in compliance in any material
respect with any of the statutes, regulations, or ordinances
35
which such Governmental Authority enforces or (B) threatening
to revoke any material license, franchise, permit, or
governmental authorization (nor, to the best knowledge of COFI
and Charter Michigan, do any grounds for any of the foregoing
exist).
(j) Brokers. No action has been taken by COFI or any COFI
Subsidiary that would give rise to any valid claim for a brokerage
commission, finder's fee or other like payment with respect to the
Transactions, except for a fee to be paid by COFI to Lehman Brothers.
(k) Takeover Laws. COFI has taken all action required to be
taken by it in order to exempt this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby from,
and this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby are exempt from, the requirements of
any Takeover Laws applicable to COFI or its Subsidiaries.
(l) Tax Matters. (i) All Tax Returns that are required to be
filed by or with respect to COFI or its Subsidiaries have been duly
filed, or requests for extensions have been timely filed (or an
extension is automatic) and any such extension has been granted and has
not been rescinded, (ii) all Taxes shown to be due on Tax Returns
referred to in clause (i) , as filed, and all Taxes required to be
shown on the Tax Returns for which extensions have been granted have
been paid in full or adequate provision has been made for such Taxes on
COFI's most recent balance sheet, (iii) the Tax Returns referred to in
clause (i) that have been filed have been examined by the IRS or the
appropriate state, local or foreign taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (iv) all deficiencies asserted or
assessments made as a result of such examinations have been paid in
full, or non-material amounts are being contested in good faith, (v) no
material issues that have been raised by the relevant taxing authority
in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, and (vi) no waivers of statutes
of limitation have been given by or requested with respect to any Taxes
of COFI or its Subsidiaries. Neither COFI nor any of its Subsidiaries
has any material liability with respect to any Taxes that accrued on or
before the end of the most recent period covered by COFI's SEC
Documents filed prior to the date hereof in excess of the amounts
accrued with respect thereto that are reflected in the financial
statements included in COFI's SEC Documents filed on or prior to the
date hereof. As of the date hereof, neither COFI nor any of its
Subsidiaries has any reason to believe that any conditions exist that
might prevent or impede the Company Merger or the Bank Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(m) COFI Ownership of Alliance Stock. As of the date of this
Agreement, COFI and its Subsidiaries do not beneficially own more than
1% of the outstanding Alliance Common Stock or, other than as
contemplated by this Agreement and the Stock Option Agreement, do not
have any option, warrant or right of any kind to acquire beneficial
ownership of any shares of Alliance Common Stock.
36
(n) Governmental Reviews. No investigation or review by any
Governmental Authority with respect to COFI or any of its Subsidiary is
pending or, to the best knowledge of COFI and Charter Michigan,
threatened, nor has any Governmental Authority indicated to COFI or any
of its Subsidiary an intention to conduct the same, other than normal
or routine regulatory examinations.
(o) Risk Management Instruments. All material interest rate
swaps, caps, floors, option agreements, futures and forward contracts
and other similar risk management arrangements, whether entered into
for COFI's own account, or for the account of one or more of COFI's
Subsidiaries or their customers, were entered into (i) in accordance
with prudent business practices and in all material respects in
compliance with all applicable laws, rules, regulations and regulatory
policies and (ii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and
legally binding obligation of COFI or one of its Subsidiaries,
enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither COFI nor
its Subsidiaries, nor to the best knowledge of COFI and Charter
Michigan any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement in any material
respect.
(p) Employee Benefit Plans. Each employee benefit plan,
program, policy or arrangement (including, but not limited to each
employee benefit plan (as defined in section 3(3) of ERISA) which COFI
or any of its Subsidiaries maintains or contributes to for the benefit
of its current or former employees complies, and has been administered
in form and in operation, in all material respects with all applicable
requirements of law and no notice has been issued by any Governmental
Authority questioning or challenging such compliance.
(q) Environmental Matters. To the best knowledge of COFI,
neither the conduct nor operation of business by COFI or any of its
Subsidiaries nor any condition of any property currently or previously
owned or operated by any of them (including, without limitation, in a
fiduciary or agency capacity), or on which any of them holds a Lien,
results or resulted in a violation of any Environmental Laws that is
reasonably likely to impose a material liability (including a material
remediation obligation) upon COFI or any of its Subsidiaries. To the
best knowledge of COFI, no condition has existed or event has occurred
with respect to any of them or any such property that, with notice or
the passage of time, or both, is reasonably likely to result in any
material liability to COFI or any COFI Subsidiary by reason of any
Environmental Laws or Materials of Environmental Concern. To the best
knowledge of COFI, except for any notice for which there is no
reasonable basis for the assertion of a material liability or material
remediation obligation on the part of COFI or any COFI Subsidiary under
any Environmental Laws or relating to Materials of Environmental
Concern, neither COFI nor any of its Subsidiaries has received any
notice from any Person that COFI or its Subsidiaries or the operation
or condition of any property ever owned, operated, or held as
collateral or in a fiduciary capacity by any of them are currently in
violation of or otherwise are alleged to have financial exposure under
any Environmental
37
Laws or relating to Materials of Environmental Concern (including, but
not limited to, responsibility (or potential responsibility) for the
cleanup or other remediation of any Materials of Environmental Concern
at, on, beneath, or originating from any such property) for which a
material liability is reasonably likely to be imposed upon COFI or any
of its Subsidiaries.
(r) Labor Matters. Neither COFI nor any of its Subsidiaries is
a party to or is bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor
organization, nor is COFI or any of its Subsidiaries the subject of any
proceeding material to its business, financial condition or results of
operations asserting that it or any such Subsidiary has committed an
unfair labor practice (within the meaning of the National Labor
Relations Act) or any proceeding seeking to compel COFI or any such
Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor
dispute involving it or any of its Subsidiaries pending or, to the best
knowledge of COFI, threatened, nor is COFI aware of any activity
involving its or any of its Subsidiaries' employees seeking to certify
a collective bargaining unit or engaging in other organizational
activity. There are no claims, investigations or proceedings pending
or, to the best knowledge of COFI threatened, against COFI or any COFI
Subsidiary relating to discriminatory employment practices or sexual
harassment material to its business, financial condition or results of
operations.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of Alliance and COFI agrees to use, and shall cause each of
its applicable Subsidiaries to use, its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or desirable, or advisable under applicable laws, so as
to permit consummation of the Transactions as promptly as practicable (but not
earlier than July 1, 2001 without the prior written consent of COFI) and
otherwise to enable consummation of the Transactions and shall cooperate fully
with each other to that end. Such reasonable best efforts shall include, without
limitation, using reasonable best efforts to obtain all necessary consents,
approvals or waivers from Regulatory Authorities necessary for the consummation
of the Transactions and opposing vigorously any litigation or administrative
proceeding or directive relating to this Agreement or the Transactions,
including, promptly appealing any adverse court or agency order.
6.02 Alliance Shareholder Approval. Alliance agrees to take, in
accordance with applicable law, the Alliance Certificate and the Alliance
By-Laws, all action necessary to convene an appropriate meeting of its
shareholders to consider and vote upon the adoption of this Agreement and any
other matter required to be approved by such shareholders for consummation of
the Company Merger (including any adjournment or postponement thereof, the
"Alliance Meeting") as promptly as practicable after the Registration Statement
is declared effective. The Alliance Board shall unanimously recommend such
adoption by the Alliance shareholders, and Alliance and the Alliance Board
(unanimously) shall take all reasonable, lawful action to solicit such adoption
by the
38
Alliance shareholders; provided if the Alliance Board concludes by at least a
majority vote of its entire membership that the making of such recommendation
would result in a violation of its fiduciary duties to the Alliance shareholders
under Delaware law (as determined in good faith after the receipt of advice from
outside counsel), then the Alliance Board may withdraw, modify or change such
recommendation.
6.03 Registration Statement; and Proxy Statement.
(a) COFI agrees to promptly prepare a registration statement
on Form S-4 (the "Registration Statement") which, subject to compliance
by Alliance with Sections 6.03(b) and (c), will comply in all material
respects with applicable federal securities laws. The Registration
Statement is to be filed by COFI with the SEC in connection with the
issuance of COFI Common Stock in the Company Merger (including the
proxy statement and prospectus and other proxy solicitation materials
of Alliance constituting a part thereof (the "Proxy Statement") and all
related documents). Alliance agrees to cooperate, and to cause its
Subsidiaries, its counsel and its accountants to cooperate, with COFI,
its counsel and its accountants, in preparation of the Registration
Statement and the Proxy Statement; and provided that Alliance and its
Subsidiaries have cooperated as required above, COFI agrees to file the
Registration Statement (or the form of the Proxy Statement) in
preliminary form with the SEC as promptly as reasonably practicable and
shall use reasonable best efforts to cause such filing to occur within
60 days after execution of this Agreement. If COFI files the Proxy
Statement in preliminary form, it agrees to file the Registration
Statement with the SEC as soon as reasonably practicable after any SEC
comments with respect to the preliminary Proxy Statement are resolved.
Each of Alliance and COFI agrees to use all reasonable efforts to cause
the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing
thereof. COFI also agrees to use all reasonable efforts to obtain,
prior to the effective date of the Registration Statement, all
necessary state securities law or "Blue Sky" permits and approvals
required for the issuance of COFI Common Stock in the Company Merger.
Alliance agrees to furnish to COFI all information concerning Alliance,
its Subsidiaries, officers, directors and shareholders as may be
reasonably requested in connection with the foregoing.
(b) Each of Alliance and COFI agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied
by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and
each amendment or supplement thereto, if any, becomes effective under
the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to Alliance shareholders and at the time of the
Alliance Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or any
statement which, in the light of the circumstances under which such
statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any
39
earlier statement in the Proxy Statement or any amendment or supplement
thereto. Each of Alliance and COFI further agrees that if it shall
become aware prior to the Effective Date of any information furnished
by it that would cause any of the statements in the Proxy Statement to
be false or misleading with respect to any material fact, or to omit to
state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof and to
take the necessary steps to correct the Proxy Statement.
(c) COFI agrees to advise Alliance, promptly after COFI
receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification
of COFI Common Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration
Statement or for additional information.
(d) At the request of COFI, Alliance shall employ a
professional proxy solicitor to assist it in contacting shareholders in
connection with soliciting votes for the adoption of this Agreement at
the Alliance Meeting.
6.04 Press Releases. Each of Alliance and COFI agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the Transactions, except
as otherwise required by applicable law or regulation or NASDAQ or NYSE rules,
whichever is applicable, and then only after making reasonable efforts to first
consult with the other party. Charter Michigan shall not issue any press release
or written statement for general circulation relating to the Transactions.
6.05 Access; Information.
(a) Each of Alliance and COFI agrees that upon reasonable
notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's
Representatives, such access during normal business hours throughout
the period prior to the Effective Time to its and its Subsidiaries
books, records (including, without limitation, Tax Returns and work
papers of independent auditors), properties, personnel and to such
other information as the other party may reasonably request and, during
such period, it shall furnish promptly to such other party (i) a copy
of each material report, schedule and other document filed by it or any
of its Subsidiaries pursuant to the requirements of federal or state
securities, thrift, or banking laws, and (ii) all other information
concerning the business, properties and personnel of it and its
Subsidiaries as the other party may reasonably request. Alliance shall
also permit COFI or its environmental consultant, at the sole expense
of COFI, to conduct environmental audits, studies and tests on real
property currently owned, controlled, leased or used by Alliance or any
of its Subsidiaries or upon which any of them have a Lien; provided
however COFI shall not conduct any subsurface or phase II environmental
assessments on any such property unless the phase I environmental
assessment (or in the absence thereof based upon the advise of COFI's
environmental consultant) indicates a reasonable basis for conducting
further assessments, studies or testing. In the event any subsurface or
phase II site assessments are
40
conducted (which assessments shall be at COFI's sole expense), COFI
shall indemnify Alliance for all costs and expenses associated with
returning the property to its previous condition. Alliance shall
provide copies to COFI of any phase I site assessments or other
environmental reports in its or its Subsidiaries' possession or control
with respect to any real property previously or currently owned,
controlled, leased or used by Alliance or any of its Subsidiaries or
upon which any of them has a Lien.
(b) Each of Alliance and COFI agrees that it will not, and
will cause its Representatives not to, use any information obtained
pursuant to this Section 6.05 (as well as any other information
obtained prior to the date hereof in connection with the entering into
of this Agreement) for any purpose unrelated to the consummation of the
Transactions. Subject to the requirements of law, each party will keep
confidential, and will cause its Representatives to keep confidential,
all information and documents obtained pursuant to this Section 6.05
(as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes available
to such party from other sources not known by such party to be bound by
a confidentiality obligation, (iii) is disclosed with the prior written
approval of the party to which such information pertains or (iv) is or
becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents,
extracts thereof or notes, analyses, compilations, studies or other
documents containing information and data as to another party hereto to
be returned to the party which furnished the same. No investigation by
any party of the business and affairs of the other shall affect or be
deemed to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to any party's
obligation to consummate the transactions contemplated by this
Agreement.
(c) During the period from the date of this Agreement to the
Effective Time, each of Alliance and COFI shall promptly furnish each
other with copies of all monthly and other interim financial statements
produced by it or any of its Subsidiaries in the ordinary course of
business as the same shall become available.
6.06 Acquisition Proposal. Alliance agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, or cooperate with,
any Person relating to, any Acquisition Proposal. Alliance shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any Person other than COFI
with respect to an Acquisition Proposal and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal in existence on the date hereof. Alliance shall promptly
advise COFI of any Acquisition Proposal and the substance thereof (including the
identity of the Person making such Acquisition Proposal) within 24 hours after
Alliance becomes aware of such Acquisition Proposal, and advise COFI of any
material developments with respect to such Acquisition Proposal immediately upon
the occurrence thereof. Notwithstanding the foregoing, after receipt of an
Acquisition Proposal and during the period prior
41
to the Alliance Meeting, Alliance may provide information at the request of or
enter into negotiations or cooperate with a third party with respect thereto, if
the Alliance Board determines in good faith, by at least a majority of its
entire membership, after considering the advice of its outside counsel, that the
failure to do so would result in violation of its fiduciary duties to the
Alliance shareholders under Delaware law.
6.07 Affiliate Agreements.
(a) Not later than the 15th day prior to the mailing of the
Proxy Statement, Alliance shall deliver to COFI a schedule of each
Person that, to the best of its knowledge, is or is reasonably likely
to be, as of the date of the Alliance Meeting, deemed to be an
"affiliate" of Alliance (each, a "Alliance Affiliate") as that term is
used in Rule 145 under the Securities Act or SEC, which schedule shall
be updated at least monthly thereafter until the Effective Time.
(b) Alliance shall use its best efforts to cause each Person
who may be deemed to be a Alliance Affiliate to execute and deliver to
COFI on or before the date of mailing of the Proxy Statement (or in the
case of a Person who is not deemed to be an Alliance Affiliate until a
later date, then as soon as practicable after the date such Person is
deemed to be an Alliance Affiliate) an agreement in the form attached
hereto as Exhibit D.
6.08 Takeover Laws. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement or the Stock Option
Agreement to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement and the
Stock Option Agreement from, or if necessary challenge the validity or
applicability of, any applicable Takeover Law, as now or hereafter in effect.
6.09 Conforming Entries
(a) Alliance recognizes that COFI and its Subsidiaries may
have adopted different loan, accrual and reserve policies (including
loan classifications and levels of reserves for possible loan losses).
Subject to applicable law, from and after the date hereof Alliance
shall consult and cooperate with COFI with respect to conforming the
loan, accrual and reserve policies of Alliance and its Subsidiaries to
those policies of COFI and its Subsidiaries, as specified in each case
in writing from COFI to Alliance, based upon such consultation and
subject to the conditions in Section 6.09(c).
(b) Subject to applicable law, Alliance shall consult and
cooperate with COFI with respect to determining, as specified in a
written notice from COFI to Alliance, based upon such consultation and
subject to the conditions in Section 6.09(c), the amount and the timing
for recognizing for financial accounting purposes of Alliance's
expenses of the Transactions and the restructuring charges relating to
or to be incurred in connection with the Transactions.
42
(c) Subject to applicable law, Alliance and its Subsidiaries
shall (i) establish and take such reserves and accruals to conform the
loan, accrual and reserve policies of Alliance and its Subsidiaries to
the policies of COFI and its Subsidiaries and (ii) establish and take
such accruals, reserves and charges in order to implement such policies
and to recognize for financial accounting purposes such expenses of the
Transactions and restructuring charges related to or to be incurred in
connection with the Transactions, in each case at such times as are
reasonably requested by COFI, but in no event prior to five days before
the Effective Date; provided, however, that on the date such reserves,
accruals and charges are to be taken, COFI shall certify to Alliance
that all conditions to COFI's and Charter Michigan's obligation to
consummate the Company Merger set forth in Sections 7.01 and 7.03
hereof (subject to the receipt of Alliance's officer certificate
pursuant to Section 7.03(e)) have been satisfied or waived; and
provided, further, that Alliance and its Subsidiaries shall not be
required to take any such action that is not permitted under generally
accepted accounting principles.
(d) No reserves, accruals or charges taken at the written
request of COFI in accordance with this Section 6.09 may be a basis to
assert a violation or a breach of a representation, warranty or
covenant of Alliance herein.
6.10 Systems Integration. From and after the date hereof , Alliance
shall cause its and Liberty Federal's directors, officers and employees to, and
shall make all reasonable efforts to cause Liberty Federal's data processing
service providers to, cooperate and assist Charter One Bank in connection with
an electronic and systematic conversion of all applicable data regarding Liberty
Federal to Charter One Bank's system of electronic data processing. In
furtherance of, and not in limitation of, the foregoing, Alliance shall cause
Liberty Federal to make reasonable arrangements during normal business hours to
permit Representatives of Charter One Bank to train Liberty Federal employees in
Charter One Bank's system of electronic data processing.
6.11 Listing. COFI agrees to use its best efforts to list, prior to the
Effective Time, on the NYSE, subject to official notice of issuance, the shares
of COFI Common Stock to be issued to the holders of Alliance Common Stock in the
Company Merger.
6.12 Regulatory Applications.
(a) COFI and Alliance shall, and shall cause their respective
Subsidiaries to, cooperate and use reasonable best efforts to promptly
prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary to consummate the Transactions
and shall use reasonable best efforts to file within 45 days of the
date hereof, the applications necessary to obtain the permits,
consents, approvals and authorizations of all Regulatory Authorities
necessary to consummate the Transactions. Each of COFI and Alliance
shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case subject to
applicable laws relating to the exchange of information, with respect
to, all material written information submitted to any third party or
any Governmental Authority in connection with the Transactions. In
exercising the foregoing right, each of the parties hereto agrees to
act reasonably and as promptly as practicable. Each party hereto agrees
that it will
43
consult with the other party hereto with respect to the obtaining of
all material permits, consents, approvals and authorizations of all
third parties and Governmental Authorities necessary or advisable to
consummate the Transactions and each party will keep the other party
apprised of the status of material matters relating to completion of
the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other
party with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with any filing, notice
or application made by or on behalf of such other party or any of its
Subsidiaries to any third party or Governmental Authority.
6.13 Officers' and Directors' Insurance; Indemnification.
(a) For six years from and after the Effective Time, COFI
shall maintain officers' and directors' liability insurance covering
the Persons who are presently covered by Alliance's current officers'
and directors' liability insurance policy with respect to actions,
omissions, events, matters or circumstances occurring prior to the
Effective Time, on terms which are at least as favorable as the terms
of said current policy, provided that it shall not be required to
expend in the aggregate during the coverage period more than an amount
equal to 200% of the annual premium most recently paid by Alliance (the
"Insurance Amount") to maintain or procure insurance coverage pursuant
hereto, and further provided that if COFI is unable to maintain or
obtain the insurance called for by this Section 6.13(a), COFI shall use
its reasonable best efforts to obtain as much comparable insurance as
is available for the Insurance Amount which may be in the form of tail
coverage, or may request Alliance to obtain such tail coverage at
Alliance's expense prior to the Effective Time; provided, further, that
officers and directors of Alliance or its Subsidiaries may be required
to make application and provide customary representations and
warranties to COFI's insurance carrier for the purpose of obtaining
such insurance.
(b) For a period of six years from after the Effective Time,
COFI shall, and shall cause its Subsidiaries to, maintain and preserve
the rights to indemnification of officers and directors provided for in
the certificate of incorporation or other charter document (a
"Charter") and By-Laws of Alliance and each of its Subsidiaries as in
effect on the date hereof with respect to indemnification for
liabilities and claims arising out of acts, omissions, events, matters
or circumstances occurring or existing prior to the Effective Time,
including, without limitation, the Transactions, to the extent such
rights to indemnification are not in excess of that permitted by
applicable state or federal laws or Regulatory Authorities.
(c) In addition to and without limitation of the rights set
forth in Section 6.13(b), for a period of six years from after the
Effective Time, COFI shall to the fullest extent permitted under
applicable law indemnify and hold harmless each present and former
director and officer of Alliance (collectively, the "Indemnified
Parties") against any and all costs, expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any pending, threatened
or
44
completed claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or
pertaining to any act, omission, event, matter or circumstance
occurring or existing prior to the Effective Time (including, without
limitation, any claim, action, suit, proceeding or investigation
arising out of or pertaining to the Transactions), and in the event of
any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time) (i) COFI shall advance
expenses to each such Indemnified Party to the fullest extent permitted
by law, including the payment of the fees and expenses of one counsel
with respect to a matter, and one local counsel in each applicable
jurisdiction, if necessary or appropriate, selected by such Indemnified
Party or multiple Indemnified Parties, it being understood that they
collectively shall only be entitled to one counsel and one local
counsel in each applicable jurisdiction where necessary or appropriate
(unless a conflict shall exist between Indemnified Parties in which
case they may retain separate counsel), all such counsel shall be
reasonably satisfactory to COFI, promptly after statements therefor are
received and (ii) COFI will cooperate in the defense of any such
matter.
(d) Any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards for
or prerequisites to indemnification set forth under the DGCL, or the
Charter and By-Law provisions referred to in Section 6.13(b), shall be
made by independent counsel selected by COFI (which shall not be
counsel that provides any services to COFI or any of its Subsidiaries)
and reasonably acceptable to the Indemnified Party, and COFI shall pay
such counsel's fees and expenses.
(e) This Section 6.13 shall survive the Effective Time, is
intended to benefit each of the Indemnified Parties (each of whom shall
be entitled to enforce this Section against COFI), and shall be binding
on all successors and assigns of COFI.
(f) In the event COFI or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties
and assets to one or more other Persons, then, and in each such case,
proper provision shall be made so that the successors and assigns of
COFI assume the obligations set forth in this Section 6.13.
(g) COFI shall pay all expenses (including attorneys' fees)
that may be reasonably incurred by any Indemnified Party in enforcing
the indemnity and other obligations provided for in this Section 6.13
if the Indemnified Party is successful in whole or any material part or
if any dispute relating thereto is settled or compromised.
6.14 Benefit Plans.
(a) Except as otherwise provided in this Agreement, at the
Effective Time, COFI or one of its Subsidiaries shall be substituted
for Alliance or an Alliance Subsidiary as the sponsoring employer under
those employee benefit and welfare plans with respect to which Alliance
or any of its Subsidiaries is a sponsoring employer, and any other
employee benefit
45
programs, policies, and arrangements (other than the Alliance Stock
Plans) in each case as Previously Disclosed and in effect immediately
prior to the Effective Time (collectively, the "Alliance
Arrangements"), and COFI or one of its Subsidiaries shall assume and be
vested with all of the powers, rights, duties, obligations and
liabilities previously vested in Alliance or the applicable Alliance
Subsidiary with respect to each such Alliance Arrangement. Each such
Alliance Arrangement shall be continued in effect by COFI or any
applicable COFI Subsidiary after the Effective Time without a
termination or discontinuance thereof as a result of the Transactions,
subject to the power reserved to COFI or any applicable COFI Subsidiary
under each such Alliance Arrangement to subsequently amend or terminate
the Alliance Arrangement, which amendments or terminations shall comply
with applicable law. COFI will use reasonable efforts (i) to effect
said substitutions and assumption and (ii) to amend such Alliance
Arrangements as to the extent necessary to provide for said
substitutions and assumptions.
(b) Notwithstanding anything contained in Section 6.14(a) to
the contrary, at the written request of COFI, and to the extent
permitted by applicable law, Alliance shall cause its 401(k) Pension
Plan to be terminated or merged into a Pension Plan of COFI, as of the
Effective Time.
(c) At or as promptly as practicable after the Effective Time
as COFI shall reasonably determine, COFI shall provide, or cause an
COFI Subsidiary to provide, to each continuing full time employee of
Alliance and its wholly-owned Subsidiaries (the "Continuing Employees")
the opportunity to participate in each employee benefit and welfare
plan maintained by COFI or an COFI Subsidiary, whichever is applicable,
which is generally available to its full time employees on a uniform
and non-discriminatory basis, provided that with respect to such plans
maintained by COFI or an COFI Subsidiary, whichever is applicable,
Continuing Employees shall be given credit for their past service with
Alliance or an Alliance Subsidiary in determining eligibility for
participation and vesting in benefits thereunder, and only with respect
to vacation plans, accrual of benefits. Continuing Employees shall not
be subject to any waiting periods under the group health plan of COFI
or any applicable COFI Subsidiary to the extent that such periods are
longer than the periods imposed under the applicable Alliance group
health plan and COFI shall use its reasonable efforts to cause its
health insurance carrier to cover pre-existing conditions that were
previously covered for a Continuing Employee under the Alliance health
plan. To the extent that the initial period of coverage for Continuing
Employees under any plan of COFI or an COFI Subsidiary, whichever is
applicable, that is an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA is not a full 12-month period of coverage,
Continuing Employees shall be given credit under the applicable welfare
plan for any deductibles and co-insurance payments made by such
Continuing Employees under the corresponding Alliance welfare plan
during the balance of such 12-month period of coverage. Nothing
contained herein shall obligate COFI or any COFI Subsidiary to provide
or cause to be provided any benefits duplicative to those provided
under any benefit or welfare plan continued pursuant to Section
6.14(a), including, but not limited to, extending participation in any
plan which is a Pension Plan relative to any period of time with
respect to which allocations are made to Continuing Employees under any
Pension Plan maintained or
46
sponsored by Alliance or an Alliance Subsidiary. Nothing herein shall
alter the power of COFI or any COFI Subsidiary to amend or terminate
any benefit or welfare plans of COFI, Alliance or their respective
Subsidiaries. Moreover, this subsection 6.14(c) shall not confer upon
any Continuing Employee any rights or remedies hereunder and shall not
constitute a contract of employment or create any rights, to be
retained or otherwise, in employment at COFI or any COFI Subsidiary.
6.15 Senior Officer Employment and Senior Officer Executive
Agreements; Change in Control Agreements; SERP; Deferred Compensation Plans;
Grantor Trust.
(a) Alliance Senior Officer Employment Agreements, Alliance
Senior Officer Executive Agreements and New COFI Employment Agreements.
Alliance shall cause the Alliance Senior Officer Employment Agreements
to be canceled and terminated immediately prior to the Effective Time
in exchange for a cash payment by Alliance, immediately prior to the
Effective Time, of $1,005,893 to Kenne P. Bristol and $621,706 to
Fredric G. Novy, subject in each case to the reduction of such payment
to the extent that such payment, together with any other payments (or
deemed payments), would constitute a "parachute payment". At the time
payment is made to the employee pursuant to the preceding sentence,
Alliance shall obtain a written release from the employee in form and
substance reasonably satisfactory to COFI. COFI shall, or shall cause
Charter One Bank to, assume and honor the Alliance Senior Officer
Executive Agreements. COFI shall, at the Effective Time, enter into an
employment agreement with each of Fredric G. Novy and Kenne P. Bristol
in the form of Exhibits E and F, respectively.
(b) Liberty Federal Change in Control Agreements, Etc. COFI
shall, or shall cause Charter One Bank to, assume and honor the Liberty
Federal Change in Control Agreements, and any other employment and
consulting agreement (but excluding the Alliance Senior Officer
Employment Agreements) that are in effect on the date hereof and are
Previously Disclosed, including, without limitation, the Burns
Employment Agreement and the Webber Consultant Agreement. If COFI makes
a determination prior to the Effective Time not to continue the
employment of an Liberty Federal employee who is a party to an Liberty
Federal Change in Control Agreement and provides a written request to
Alliance prior to the Effective Time for Liberty Federal to terminate
the employment of such employee as of the Effective Time, then Alliance
shall cause Liberty Federal to (a) effect such employment termination
as of the Effective Time, (b) pay such employee his or her change in
control payment under such employee's Liberty Federal Change in Control
Agreement immediately prior to the Effective Time, subject to the
written approval of COFI to the payment amount (which approval shall
not be unreasonably withheld or delayed), and (c) obtain a written
release from such employee relating to all employment and compensation
matters, in form and substance reasonably satisfactory to COFI, against
the tender of payment pursuant to clause (b) above.
(c) Alliance SERP. Alliance shall cause the Alliance SERP to
be terminated by the mutual consent of Alliance, Liberty Federal and
the participants in the Alliance SERP immediately prior to the
Effective Time. The aggregate accrued benefit of the participants
47
in the Alliance SERP shall be calculated under Section 3.3 of the
Alliance SERP (as if employment termination occurred on the date of the
termination of the Alliance SERP). It is agreed and acknowledged that
the accrued benefit of such participants in the Alliance SERP, if it is
terminated on June 30, 2001, will be $1,879,947 (or such lesser amount
using a 7% annual discount rate if termination of the Alliance SERP
occurs prior thereto). The amount of the $1,879,947 accrued benefit
allocable to each participant in the Alliance SERP as of June 30, 2001
is set forth in Section 6.15(c) of Alliance's Disclosure Schedule. At
the time of the termination of the Alliance SERP, Alliance shall
expense and accrue as a liability for financial reporting purposes the
full amount of the accrued benefit of the participants in the Alliance
SERP less amounts previously expensed and accrued as a liability for
financial reporting purposes. Upon termination of the Alliance SERP, an
amount shall be invested by Alliance in a tax deferred annuity for the
benefit of such participant and his designated beneficiaries, which tax
deferred annuity will provide for equal monthly payments of the amount
set forth in Section 6.15(c) of Alliance's Disclosure Schedule over a
period of 180 months commencing on the first day of the calendar month
after the participant has attained the age of 65 years. In connection
with the termination of the Alliance SERP, Alliance shall obtain a
written release from each participant in the Alliance SERP (in form and
substance reasonably satisfactory to COFI) releasing Alliance, Liberty
Federal, their respective successors in interest, their respective
officers and directors, and all fiduciaries under the Alliance SERP
from any and all liabilities and obligations relating to the Alliance
SERP or the termination thereof, and the agreement of such participant
to look solely to the tax- deferred annuity product in satisfaction of
any and all obligations with respect to his Alliance SERP benefit,
recognizing that until such tax-deferred annuity is fully paid out to
him and/or his beneficiaries such tax deferred annuity constitutes an
asset of Alliance (and any of its successors in interest) subject to
the rights of the creditors of Alliance (or its successors in
interest).
(d) Liberty Federal Deferred Compensation Plans. Alliance
shall cause the Liberty Federal Deferred Compensation Plans to be
terminated by the mutual consent of Alliance, Liberty Federal and the
participants in the Liberty Federal Deferred Compensation Plans
immediately prior to the Effective Time. Upon termination of the
Liberty Federal Deferred Compensation Plans, the "Elective Contribution
Account" (as such term is defined in the Liberty Federal Deferred
Compensation Plans) of each participant, as of the date of termination
of the Liberty Federal Deferred Compensation Plans, shall be annuitized
(using the then current prime interest rate as published in the Wall
Street Journal) over a five year period certain and shall be payable
quarterly commencing on October 1, 2001. Upon such termination, an
amount shall be invested by Liberty Federal in a tax deferred annuity
for the benefit of such participant and his designated beneficiaries,
which tax deferred annuity will provide for substantially equal
quarterly payments of the amount determined above, over a period of 5
years commencing on October 1, 2001. In connection with the termination
of the Liberty Federal Deferred Compensation Plans, Alliance shall
obtain a written release from each participant in the Liberty Federal
Deferred Compensation Plans (in form and substance reasonably
satisfactory to COFI) releasing Alliance, Liberty Federal, their
respective successors in interest, their respective officers and
directors, and all fiduciaries under the Liberty Federal Deferred
Compensation Plans from any and all liabilities and obligations
48
relating to the Liberty Federal Deferred Compensation Plans or the
termination thereof, and the agreement of such participant to look
solely to the tax-deferred annuity product purchased with his Elective
Contribution Account in satisfaction of any and all obligations with
respect to his benefit under the Liberty Federal Deferred Compensation
Plans, recognizing that until such tax-deferred annuity is fully paid
out to him and/or his beneficiaries such tax deferred annuity
constitutes an asset of Liberty Federal (and any of its successors in
interest) subject to the rights of the creditors of Liberty Federal (or
its successors in interest).
(e) Grantor Trust. Alliance shall cause the Alliance Grantor
Trust to be terminated by the mutual consent of Liberty Federal and the
participants in each "Benefit Plan" (as such term is defined in the
Grantor Trust) immediately prior to the Effective Time. Alliance
acknowledges that the only assets, if any, that will be in the Grantor
Trust at the time of termination thereof will be cash equal to the
Elective Contribution Accounts of participants in the Liberty Federal
Deferred Compensation Plans, which amounts are to be remitted to
Liberty Federal by the Trustee of the Alliance Grantor Trust and
invested by Liberty Federal in the tax-deferred annuities referred to
in Section 6.15(d) above.
6.16 Alliance General Severance Plan. The parties agree that
notwithstanding anything contained to the contrary in this Agreement, Alliance
and Liberty Federal shall be permitted to adopt prior to the Effective Time a
general severance plan for the full time employees of Alliance and Liberty
Federal who are not covered by any employment, severance, change in control or
similar agreement or arrangement, in the form of Exhibit G, and at the Effective
Time, COFI shall assume and honor the obligations of Alliance thereunder and
COFI shall cause Charter One Bank to assume and honor the obligations of Liberty
Federal thereunder.
6.17 Advisory Board Membership. At the Effective Time, each member of
the Alliance Board shall be offered the opportunity to become a member of the
Alliance Bancorp Advisory Board to be established by COFI for a three year term,
which advisory board shall advise COFI with respect to the geographic areas in
which Liberty Federal operates as of the date hereof. Each advisory board member
shall receive a quarterly fee, in arrears, in the amount of $6,250.00 during his
service as an advisory director. Notwithstanding the foregoing, any Person
serving on such advisory board who subsequently becomes a director of COFI or
any COFI Subsidiary shall cease to be a member of such advisory board on the
date that he or she commences serving as a director of COFI or any COFI
Subsidiary.
6.18 COFI Liquidated Damages.
(a) If (i) the Alliance Board shall have failed to unanimously
recommend adoption of this Agreement to the Alliance shareholders,
withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of
COFI, (ii) Alliance shall be in material and willful breach of any of
its covenants contained in this Agreement such that COFI shall be
entitled to terminate this Agreement pursuant to Section 8.01(b) after
the occurrence of any Acquisition Proposal, or (iii) the shareholders
of Alliance do not adopt this Agreement at the Alliance Meeting after
the occurrence of any Acquisition Proposal, then in any such event
(except as provided in
49
Section 6.18(b)), upon termination of this Agreement Alliance shall pay
COFI $9 million as agreed upon liquidated damages. In addition, the $9
million liquidated damages shall be payable by Alliance to COFI upon a
termination of this Agreement by Alliance pursuant to Section 8.01(f).
No liquidated damages shall be payable pursuant to this Section 6.18(a)
if either (x) COFI has acquired any shares pursuant to the exercise of
its Option (as defined in the Stock Option Agreement), Alliance has
repurchased the Option pursuant to the Stock Option Agreement or
Alliance has paid COFI the Surrender Price (as defined in the Stock
Option Agreement) pursuant to the Stock Option Agreement or (y) COFI
refuses to execute and deliver a written release of all of COFI's
rights under the Stock Option Agreement against delivery and payment of
the $9 million set forth above. Any payment made pursuant to this
Section 6.18(a) shall be made in immediately available funds upon
demand.
(b) The liquidated damages provided for in Section 6.18(a)
shall not be payable if Alliance properly terminates this Agreement
pursuant to Section 8.01(b) or 8.01(d)(i).
6.19 Notification of Certain Matters. Each of Alliance and COFI shall
give prompt written notice to the other of any fact, event or circumstance known
to it that (a) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it, (b) would cause or constitute a breach of any
of its representations, warranties, covenants or agreements contained herein as
of the date of this Agreement or (c) would cause or constitute a material breach
of any of its representations, warranties, covenants or agreements contained
herein arising from facts, events or circumstances after the date of this
Agreement. Provided however, any notice by Alliance to COFI pursuant to Section
6.19(c) relating to Section 5.03(p) shall be accompanied by a report from an
environmental consultant stating either (i) there is no potential liability
under the Environmental Laws or relating to Materials of Environmental Concern
and no remediation action is necessary or (ii) the estimated maximum potential
liability (inclusive of remediation obligations) under the Environmental Laws or
relating to Materials of Environmental Concern.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE COMPANY MERGER
7.01 Conditions to Each Party's Obligation to Effect the Company
Merger. The respective obligation of each of COFI, Charter Michigan and Alliance
to consummate the Company Merger is subject to the fulfillment or written waiver
by COFI (on behalf of itself and Charter Michigan) and Alliance prior to the
Effective Time of each of the following conditions:
(a) Alliance Shareholder Approval. This Agreement shall
have been duly adopted by the requisite vote of the shareholders of
Alliance under the DGCL and the Alliance Certificate.
(b) Regulatory Approvals. All regulatory approvals
required to consummate the Company Merger shall have been obtained and
shall remain in full force and effect and all
50
statutory waiting periods in respect thereof shall have expired and no
such approvals shall contain (i) any conditions, restrictions or
requirements which the COFI Board reasonably determines would either
before or after the Effective Time have a Material Adverse Effect on
COFI or (ii) any conditions, restrictions or requirements that are not
customary and usual for approvals of such type and which the COFI Board
reasonably determines would either before or after the Effective Time
be unduly burdensome.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in
effect and prohibits consummation of the Company Merger.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) Blue Sky Approvals. All permits and other authorizations
under state securities laws necessary to consummate the Company Merger
and to issue the shares of COFI Common Stock in the Company Merger
shall have been received and shall be in full force and effect.
(f) Listing. The shares of COFI Common Stock to be issued in
the Company Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) Permits, Authorizations. Each of COFI, Charter Michigan
and Alliance shall have obtained all permits, authorizations, waivers,
approvals and consents required for the lawful consummation of the
Company Merger, unless the failure to obtain the foregoing is not
reasonably likely to result, individually or in the aggregate, in a
Material Adverse Effect on Alliance or COFI.
7.02 Conditions to Obligation of Alliance. The obligation of Alliance
to consummate the Company Merger is also subject to the fulfillment or written
waiver by Alliance prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of COFI and Charter Michigan set forth in this Agreement
shall be true and correct in all material respects, subject in the case
of Specified Representations to the standard set forth in Section 5.02,
as of the date of this Agreement and as of the Effective Time as though
made anew on and as of the Effective Time (except that (i)
representations and warranties that by their terms speak as of the date
of this Agreement or some other date shall be true and correct as of
such date and (ii) and no information provided by COFI pursuant to
Section 6.19(c) shall cause any of the representations and warranties
in Section 5.04 to be untrue or incorrect as of the
51
Effective Time unless such information individually, or taken together
with other facts, events and circumstances, is material, or is
reasonably likely to become material, to the consolidated financial
condition or the consolidated results of operations of COFI).
(b) Performance of Obligations of COFI. COFI and its
Subsidiaries shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or
prior to the Effective Time.
(c) No Material Adverse Effect. No fact, event or circumstance
(inclusive of material litigation which has a reasonable likelihood of
being adversely determined) has occurred individually, or taken
together with other facts, events and circumstances, that has resulted
in, or is reasonably likely to result in, a Material Adverse Effect on
COFI.
(d) Officer's Certificate. Alliance shall have received a
certificate, dated the Effective Date, signed on behalf of COFI by its
Chief Executive Officer or Chief Financial Officer to the effect that
the conditions set forth in Sections 7.02(a) - (c) have been satisfied.
(e) Opinion of Alliance's Counsel. Alliance shall have
received an opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.,
special counsel to Alliance, dated the date of or shortly prior to the
first mailing of the Proxy Statement and the Effective Date, to the
effect that, on the basis of facts, representations and customary
assumptions set forth in such opinion, the Company Merger constitutes a
"reorganization" within the meaning of Section 368 of the Code. In
rendering its opinion, Luse Lehman Gorman Pomerenk & Schick, P.C. may
require and rely upon representations contained in letters from
Alliance, COFI and others.
7.03 Conditions to Obligation of COFI and Charter Michigan. The
obligation of COFI and Charter Michigan to consummate the Company Merger is also
subject to the fulfillment or written waiver by COFI (on behalf of itself and
Charter Michigan) prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Alliance set forth in this Agreement shall be true and
correct in all material respects, subject in the case of Specified
Representations to the standard set forth in Section 5.02, as of the
date of this Agreement and as of the Effective Time as though made anew
on and as of the Effective Time (except that (i) representations and
warranties that by their terms speak as of the date of this Agreement
or some other date shall be true and correct as of such date, and (ii)
no information with respect to Section 5.03(h), (p), (q), (r) and (y)
provided by Alliance pursuant to Section 6.19(c), or discovered by COFI
pursuant to any environmental investigation undertaken by it pursuant
to Section 6.05(a), shall cause any such representations and warranties
of Alliance to be untrue or incorrect as of the Effective Time, unless
such information individually, or taken together with other facts,
events and circumstances, is material, or is reasonably likely to
become material, to the consolidated financial condition or the
consolidated results of operations of Alliance.
52
(b) Performance of Obligations of Alliance. Alliance and its
Subsidiaries shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or
prior to the Effective Time
(c) No Material Adverse Effect. No fact, event or circumstance
(inclusive of material litigation which has a reasonable likelihood of
being adversely determined) has occurred individually, or taken
together with other facts, events and circumstances, that has resulted
in, or is reasonably likely to result in, a Material Adverse Effect on
Alliance.
(d) Dissenters Rights. The holders of not more than 7% of the
outstanding Alliance Common Stock have dissented from the Company
Merger and preserved, as of the Effective Time, the right to pursue
their right of appraisal for the fair value of their shares under the
DGCL.
(e) Officer's Certificate. COFI shall have received a
certificate, dated the Effective Date, signed on behalf of Alliance by
its Chief Executive Officer or Chief Financial Officer to the effect
that the conditions set forth in Sections 7.03(a) - (d) have been
satisfied.
(f) Opinion of COFI's Counsel. COFI shall have received an
opinion of Silver, Freedman & Taff, L.L.P., special counsel to COFI,
dated the date of or shortly prior to the first mailing of the Proxy
Statement and the Effective Date, to the effect that, on the basis of
facts, representations and customary assumptions set forth in such
opinion, the Company Merger constitutes a "reorganization" under
Section 368 of the Code. In rendering its opinion, Silver, Freedman &
Taff, L.L.P. may require and rely upon representations contained in
letters from COFI, Alliance and others.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
Transactions may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time,
by the mutual consent of COFI and Alliance, if the Board of Directors
of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time, by COFI
or Alliance, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event of either:
(i) a breach by the other party of any representation or warranty
contained herein, which breach would cause the condition in Section
7.02(a) or 7.03(a), as applicable, to not be satisfied and which breach
cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach; or (ii) a breach
by the other party in any material respect of any of the covenants
53
or agreements contained herein, which breach cannot be or has not been
cured within 30 days after the giving of written notice to the
breaching party of such breach.
(c) Delay. At any time prior to the Effective Time, by COFI or
Alliance, if its Board of Directors so determines by vote of a majority
of the members of its entire Board, in the event that the Company
Merger is not consummated by October 31, 2001, except to the extent
that the failure of the Company Merger to be consummated arises out of
or results from the knowing action or inaction of the party seeking to
terminate pursuant to this Section 8.01(c).
(d) No Approval. By Alliance or COFI, if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board, in the event (i) the approval of any Governmental
Authority required for consummation of the Company Merger shall have
been denied by final nonappealable action of such Governmental
Authority or (ii) the Alliance shareholder approval required by Section
7.01(a) is not obtained at the Alliance Meeting.
(e) Failure to Recommend, Etc. By COFI, if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board, at any time prior to the adoption of this Agreement by
the Alliance shareholders, if the Alliance Board shall have failed to
unanimously recommend adoption of this Agreement to the Alliance
shareholders, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of
COFI.
(f) Acquisition Proposal. By Alliance, if its Board of
Directors so determines by vote of a majority of the members of its
entire Board, for the sole purpose of permitting Alliance to enter into
an agreement in respect of an Acquisition Proposal which provides more
favorable consideration to Alliance's shareholders from a financial
point of view than the consideration to be received by such
shareholders in the Company Merger; provided however, Alliance's right
of termination hereon shall only apply if it and the Alliance Board
have complied with the obligations set forth in Sections 6.02 and 6.06.
8.02 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Company Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) under Section 6.18 or as
otherwise set forth in Section 9.01 and (ii) that termination will not relieve a
breaching party from liability for any willful breach of this Agreement giving
rise to such termination. Provided, however, if COFI pursues its rights under
Section 6.18, and is paid liquidated damages by Alliance as provided in Section
6.18, then neither COFI nor Charter Michigan shall be entitled to any other
relief. Nothing contained herein shall diminish the rights of COFI under the
Stock Option Agreement which may be separately exercised and enforced pursuant
to the terms and provisions thereof.
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ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than the
agreements and covenants contained in Article III, and Sections 6.13, 6.14,
6.15, 6.16, 6.17 and this Article IX which shall survive the Effective Time) or
the termination of this Agreement if this Agreement is terminated prior to the
Effective Time (other than Sections 6.05(b), 6.18 and 8.02 and this Article IX
which shall survive such termination).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the Board of Directors of the party
benefitted by the provision, or (ii) amended or modified at any time, by action
of the Boards of Directors of the parties pursuant to an agreement in writing
between the parties executed in the same manner as this Agreement, except that
after the Alliance Meeting no such action shall be taken to change or alter the
form and the amount of the Merger Consideration.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law or of the MBCA are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby.
Printing and mailing expenses of the Proxy Statement shall be paid by Alliance
and fees payable to the SEC in connection with the Registration Statement shall
be paid by COFI.
9.06 Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
55
If to Alliance, to:
Alliance Bancorp
One Grant Square
Hinsdale, Illinois 60521
Attention: Fredric G. Novy, Chairman of the Board
and
Kenne P. Bristol, Chief Executive Officer
With a copy to:
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Attention: John Gorman
If to COFI or Charter Michigan, to:
Charter One Financial, Inc.
1215 Superior Avenue
Cleveland, Ohio 44114
Attention: Charles J. Koch, Chief Executive Officer
and
Robert J. Vana, Chief Corporate Counsel
With a copy to:
Silver, Freedman & Taff LLP
1100 New York Avenue, N.W.
7th Floor East
Washington, D.C. 20005
Attention: Barry Taff
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement
, the Stock Option Agreement, and the Confidentiality Agreement between COFI and
Alliance dated November 20, 2000 represent the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
thereby and this Agreement supersedes any and all other oral or written
agreements heretofore made (other than the Stock Option Agreement and the
aforesaid Confidentiality Agreement). However, in the event of any conflict
between any of the terms of the aforesaid Confidentiality Agreement and the
terms of this Agreement, the terms of this Agreement
56
shall be controlling. Except with respect to Sections 6.13, 6.14, 6.15, 6.16 and
6.17, nothing in this Agreement is intended to confer upon any Person, other
than the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
57
* * *
The parties hereto have caused this Agreement to be executed in
counterparts by their duly authorized officers, all as of the day and year first
above written.
CHARTER ONE FINANCIAL, INC.
By \s\Robert J. Vana
------------------------------------
Name: Robert J. Vana
Title: Senior Vice President,
Chief Corporate Counsel and
Corporate Secretary
CHARTER MICHIGAN BANCORP, INC.
By \s\Robert J. Vana
------------------------------------
Name: Robert J. Vana
Title: Senior Vice President,
Chief Corporate Counsel and
Corporate Secretary
ALLIANCE BANCORP
By \s\Kenne P. Bristol
-----------------------------------
Name: Kenne P. Bristol
Title: Chief Executive Officer and
President
58