EXHIBIT 10
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Reorganization and Merger Agreement Dated April 18, 1995
______________________________________________________
REORGANIZATION AND MERGER AGREEMENT
BY AND AMONG
COMMERCIAL FEDERAL CORPORATION
AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK
AND
RAILROAD FINANCIAL CORPORATION
AND
RAILROAD SAVINGS BANK, FSB
DATED AS OF APRIL 18, 1995
______________________________________________________
TABLE OF CONTENTS
__________________________________________________________
Article I - The Merger and Related Matters.................. 2
1.1 Merger: Surviving Institution........................ 2
1.2 Effective Time of the Merger......................... 3
1.3 Conversion of Shares................................. 3
1.4 Surviving Corporation in the Merger.................. 5
1.5 Authorization for Issuance of Commercial
Common Stock; Exchange of Certificates.............. 6
1.6 No Fractional Shares................................. 8
1.7 Shareholders' Meeting................................ 8
1.8 Company Stock Options................................ 8
1.9 Registration Statement; Prospectus/
Proxy Statement...................................... 9
1.10 Cooperation; Regulatory Approvals.................... 11
1.11 Closing.............................................. 11
1.12 Closing of Transfer Books............................ 12
1.13 Bank Merger.......................................... 12
1.14 Option Agreement..................................... 12
Article II - Representations and Warranties
of Company and Savings....................... 13
2.1 Organization, Good Standing, Authority,
Insurance, Etc...................................... 13
2.2 Capitalization....................................... 13
2.3 Ownership of Subsidiaries............................ 14
2.4 Financial Statements and Reports..................... 14
2.5 Absence of Changes................................... 16
2.6 Prospectus/Proxy Statement........................... 16
2.7 No Broker's or Finder's Fees......................... 16
2.8 Litigation and Other Proceedings..................... 17
2.9 Compliance with Law.................................. 17
2.10 Corporate Actions.................................... 17
2.11 Authority............................................ 18
2.12 Employment Arrangements.............................. 18
2.13 Employee Benefits.................................... 19
2.14 Information Furnished................................ 20
2.15 Property and Assets.................................. 20
2.16 Agreements and Instruments........................... 21
2.17 Material Contract Defaults........................... 21
2.18 Tax Matters.......................................... 22
2.19 Environmental Matters................................ 22
2.20 Loan Portfolio: Portfolio Management................. 23
2.21 Real Estate Loans and Investments.................... 24
2.22 Derivatives Contracts................................ 24
2.23 Insurance............................................ 24
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Article III - Representations and Warranties of
Commercial and the Bank....................... 25
3.1 Organization, Good Standing, Authority,
Insurance, Etc........................................ 25
3.2 Capitalization......................................... 25
3.3 Ownership of Subsidiaries.............................. 25
3.4 Financial Statements and Reports....................... 26
3.5 Absence of Changes..................................... 27
3.6 Prospectus/Proxy Statement............................. 27
3.7 No Broker's or Finder's Fees........................... 27
3.8 Compliance With Law.................................... 28
3.9 Corporate Actions...................................... 28
3.10 Authority.............................................. 28
3.11 Information Furnished.................................. 29
3.12 Litigation and Other Proceedings....................... 29
3.13 Agreements and Instruments............................. 29
Article IV -- Covenants....................................... 29
4.1 Investigations; Access and Copies...................... 29
4.2 Conduct of Business of the Company
and the Company Subsidiaries.......................... 30
4.3 No Solicitation........................................ 32
4.4 Shareholder Approvals.................................. 33
4.5 Filing of Holding Company and Merger
Applications.......................................... 33
4.6 Consents............................................... 33
4.7 Resale Letter Agreements; Pooling
of Interests.......................................... 33
4.8 Publicity.............................................. 34
4.9 Cooperation Generally.................................. 34
4.10 Additional Financial Statements and Reports............ 34
4.11 Due Diligence.......................................... 34
4.12 Stock Listing.......................................... 34
4.13 Allowance for Loan and Real Estate
Owned Losses.......................................... 35
4.14 D&O Indemnification and Insurance...................... 35
Article V - Conditions of the Merger;
Termination of Agreement..................................... 36
5.1 General Conditions..................................... 36
5.2 Conditions to Obligations of Commercial and
Bank.................................................. 37
5.3 Conditions to Obligations of Company
and Savings........................................... 40
5.4 Termination of Agreement and Abandonment
of Merger............................................. 41
Article VI - Termination of Obligations; Payment of
Expenses..................................................... 44
6.1 Termination; Lack of Survival of
Representations and Warranties........................ 44
6.2 Payment of Expenses.................................... 44
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Article VII - Certain Post-Merger Agreements.................. 45
7.1 Registration of Stock Underlying Stock Options......... 45
7.2 Reports to the SEC..................................... 45
7.3 Employees.............................................. 45
Article VIII - General........................................ 45
8.1 Amendments............................................. 45
8.2 Confidentiality........................................ 46
8.3 Governing Law.......................................... 46
8.4 Notices................................................ 46
8.5 No Assignment.......................................... 47
8.6 Headings............................................... 47
8.7 Counterparts........................................... 47
8.8 Construction and Interpretation........................ 47
8.9 Entire Agreement....................................... 47
8.10 Severability........................................... 48
8.11 No Third Party Beneficiaries........................... 48
Schedules:
Schedule I Disclosure Schedule for the Company
and Savings.....................................
Schedule II Disclosure Schedule for Commercial
and the Bank....................................
Exhibits:
Exhibit 1.1(a) Acquisition Agreement of Merger..........
Exhibit 1.1(b) Bank Plan of Merger............................
Exhibit 1.14 Option Agreement..........................
Exhibit 5.2(a) Form of Opinion of Counsel for
the Company................................
Exhibit 5.3(a) Form of Opinion of Counsel for
Commercial...............................
Exhibit 7.3(b) Severance Payment Policy.......................
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REORGANIZATION AND MERGER AGREEMENT
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THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is dated as of April
18, 1995, by and among COMMERCIAL FEDERAL CORPORATION, a Nebraska corporation
("Commercial") and COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK, a Federal-
chartered savings bank and wholly-owned subsidiary of Commercial ("Bank"); and
RAILROAD FINANCIAL CORPORATION, a Delaware corporation ("Company") and RAILROAD
SAVINGS BANK, FSB, a Federal-chartered savings bank and wholly-owned subsidiary
of Company ("Savings").
WHEREAS, Commercial, a non-diversified, unitary savings and loan holding
company, with principal offices in Omaha, Nebraska, owns all of the issued and
outstanding capital stock of Bank, with its principal offices in Omaha,
Nebraska;
WHEREAS, Company, a non-diversified, unitary savings and loan holding
company, with principal offices in Wichita, Kansas, owns all of the issued and
outstanding capital stock of Savings, with principal offices in Wichita,
Kansas;
WHEREAS, Commercial and Company desire to combine their respective holding
companies through a tax-free, stock-for-stock exchange so that the respective
shareholders of both Commercial and Company will have an equity ownership in the
combined holding company;
WHEREAS, following the combination of Commercial and Company it is intended
that Bank and Savings will be merged such that the resulting holding company
will retain the advantage of a unitary savings and loan holding company status
and that the resulting savings institution will achieve certain economies of
scale and efficiencies as a result of such subsequent merger and expand its
market area.
WHEREAS, it is intended that to accomplish this result, the Company will be
acquired by means of a merger (the "Acquisition Merger") of the Company with and
into Commercial, followed by the merger of Savings with and into Bank (the "Bank
Merger"). The Acquisition Merger and the Bank Merger are collectively referred
to as the "Merger".
WHEREAS, it is intended that for federal income tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") and this Agreement shall
constitute a plan of reorganization pursuant to Section 368 of the Code.
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WHEREAS, as an inducement to and condition of Commercial's willingness to
enter into this Agreement, the Company will grant to Commercial an option
pursuant to the Stock Option Agreement, the form of which is attached hereto as
Exhibit 1.14.
WHEREAS, the Boards of Directors of Commercial and the Company (at meetings
duly called and held) have determined that this Agreement and the transactions
contemplated hereby are in the best interests of Commercial and the Company,
respectively, and their respective stockholders and have approved this Agreement
and the Stock Option Agreement. Consummation of the Merger is subject to the
prior approval of the Office of Thrift Supervision ("OTS") and the stockholders
of the Company, among other conditions specified herein.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger: Surviving Institution. Subject to the terms and conditions of
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this Agreement, and pursuant to the provisions of the Nebraska Business
Corporation Act ("NBCA") and the Delaware General Corporation Law (the "DGCL"),
Home Owners Loan Act of 1933, as amended ("HOLA"), and the rules and regulations
promulgated thereunder (the "Thrift Regulations"), (a) at the Acquisition Merger
Effective Time (as hereinafter defined), the Company shall be merged with and
into Commercial pursuant to the terms and conditions set forth herein and in the
Agreement of Merger to be set forth as Exhibit 1.1(a) attached hereto (the
"Acquisition Agreement of Merger"), (b) the separate corporate existence of the
Company shall cease, and (c) thereafter, at the Bank Merger Effective Time (as
hereinafter defined) Savings shall be merged with and into the Bank pursuant to
the terms and conditions set forth herein and in a plan of merger set forth in
Exhibit 1.1(b) (the "Bank Plan of Merger"). The Acquisition Merger shall have
the effects specified in the NBCA and the DGCL, Section 1.4(e) hereof and the
Acquisition Agreement of Merger. Upon the consummation of the Acquisition
Agreement of Merger, the separate existence of the Company shall cease and
Commercial shall continue as the surviving corporation (sometimes referred to
herein in such capacity as the "Surviving Corporation"). Upon consummation of
the Bank Merger, the separate existence of Savings shall cease and the Bank
shall continue as the surviving institution of the Bank Merger. The name of the
Bank, as the surviving institution of the Bank Merger, shall remain "Commercial
Federal Bank, a Federal Savings Bank". From and after the Bank Merger Effective
Time, the Bank, as the surviving institution of the Bank Merger, shall possess
all of the properties
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and rights and be subject to all of the liabilities and obligations of the Bank
and Savings, all as more fully described in the Thrift Regulations, Section 1.13
hereof and the Bank Plan of Merger. Commercial may at any time change the method
of effecting the Merger if and to the extent it deems such change to be
desirable, provided, however, that no such change shall (A) alter or change the
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amount or kind of consideration to be issued to holders of Company common stock
as provided for in this Agreement, (B) adversely affect the tax treatment to
Company shareholders as a result of receiving the consideration described in
Section 1.3 herein or (C) materially impede or delay the consummation of the
transactions contemplated by this Agreement.
1.2 Effective Time of the Merger. As soon as practicable after each of
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the conditions set forth in Article V hereof have been satisfied or waived,
Commercial and the Company will file, or cause to be filed, certificates or
articles of merger with appropriate authorities of Nebraska and Delaware for the
Acquisition Merger and articles of combination with the OTS for the Bank Merger
which certificate or articles of merger and articles of combination shall in
each case be in the form required by and executed in accordance with applicable
provisions of law and the Thrift Regulations, respectively. The Acquisition
Merger shall become effective at the time, and date which is the later of the
time at which (i) the Nebraska articles of merger is filed with the appropriate
authorities of Nebraska and (ii) the Delaware certificate of merger is filed
with the appropriate authorities of Delaware. ("Acquisition Merger Effective
Time") which shall be immediately following the Closing (as defined in Section
1.11 herein) and on the same day as the Closing if practicable. The Bank Merger
shall become effective at the time the articles of combination for such merger
are endorsed by the OTS pursuant to Section 552.13(k) of the Thrift Regulations
(the "Bank Merger Effective Time"). The parties shall cause the Acquisition
Merger to become effective prior to the Bank Merger.
1.3 Conversion of Shares.
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(a) At the Acquisition Merger Effective Time, by virtue of the Merger
and without any action on the part of Commercial or Company or the holders of
shares of Commercial or Company common stock:
(i) Each outstanding share of Company common stock issued and
outstanding at the Acquisition Merger Effective Time, except as provided in
clause (a)(ii) of this Section and Section 1.6 hereof, shall be converted into
and represent solely the right to receive without any action by the holder,
shares of Commercial common stock, in the manner provided in Section 1.5 hereof,
and shall no longer be a share of common stock of Company, according to the
following Exchange Ratios (which shall be subject to adjustment as provided in
clause (a)(v) of this Section):
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(A) If the Average NMS Closing Price (as defined below)
shall be equal to or greater than $24.00 but equal to or less than $27.00, then
the Exchange Ratio shall be such number of shares of Commercial common stock
equal to the quotient (carried to four digits) that results by dividing $17.25
by the Average NMS Closing Price of Commercial common stock (a maximum of .7188
and a minimum of .6389 shares of Commercial common stock);
(B) If the Average NMS Closing Price shall be greater than
$27.00, then the Exchange Ratio shall be .6389 shares of Commercial common
stock;
(C) If the Average NMS Closing Price shall be less than
$24.00, then the Exchange Ratio shall be .7188 shares of Commercial common
stock; provided, however, in the event the Exchange Ratio is adjusted pursuant
to the proviso contained in Section 5.4(f) hereof the Exchange Ratio shall be
the Exchange Ratio as so adjusted.
(ii) Any shares of Company common stock which are owned or held
by Company or any of its subsidiaries (except shares held in any 401(k) plan of
the Company or any of its subsidiaries or held in a fiduciary capacity) or by
Commercial or any of Commercial's subsidiaries (other than in a fiduciary
capacity) at the Acquisition Merger Effective Time shall cease to exist, and the
certificates for such shares shall as promptly as practicable be cancelled and
no shares of capital stock of Commercial shall be issued or exchanged therefor.
(iii) Each share of common stock of Commercial issued and
outstanding immediately prior to the Acquisition Merger Effective Time shall
remain an outstanding share of common stock of the Surviving Corporation.
(iv) The holders of certificates representing shares of Company
common stock shall cease to have any rights as stockholders of the Company,
except such rights, if any, as they may have pursuant to the DGCL.
(v) If the holders of Commercial common stock shall have
received or shall have become entitled to receive, without payment therefor,
during the period commencing on the date hereof and ending with the Acquisition
Merger Effective Time, additional shares of common stock or other securities for
their stock by way of a stock split, stock dividend, reclassification,
combination of shares or similar corporate rearrangement ("Stock Adjustment"),
then the amount of Commercial common stock to be exchanged on the Acquisition
Merger Effective Time for Company common stock or kind of securities of
Commercial shall be proportionately adjusted to take into account such Stock
Adjustment. In addition, the Average NMS Closing Price amounts set forth above
shall be proportionately adjusted to compensate for any such Stock Adjustment.
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(b) The term "NMS Closing Price" shall mean the price per share
(carried to four decimal places) of the last sale of Commercial common stock
reported on the National Market System (or reported on such other national
securities exchange on which shares of Commercial common stock shall be listed)
at the close of the trading day by the National Association of Securities
Dealers, Inc. (the "National Market System") (or at the close of the trading day
by such other national securities exchange). The term "Average NMS Closing
Price" shall mean the arithmetic mean of the NMS Closing Prices for the twenty-
fifth through the sixth trading day, inclusive, immediately preceding the
Acquisition Merger Effective Time (the "Determination Period").
(c) Each share of common stock of Commercial to be issued to the
Company's shareholders pursuant to this Section 1.3 shall include the
corresponding number of rights associated with the Commercial common stock
pursuant to the Rights Agreement dated as of December 19, 1988 by and between
Commercial and Manufacturers Hanover Trust Company, as Rights Agent ("Commercial
Rights Agreement").
1.4 Surviving Corporation in the Merger.
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(a) The name of the Surviving Corporation in the Acquisition Merger
shall be Commercial Federal Corporation.
(b) The Articles of Incorporation of Commercial as in effect on the
Acquisition Merger Effective Time shall be the Articles of Incorporation of the
Surviving Corporation as the Surviving Corporation.
(c) The bylaws of Commercial, together with all amendments thereto,
if any, as in effect immediately prior to the Acquisition Merger Effective Time,
shall thereafter be the bylaws of the Surviving Corporation, until amended as
provided therein or by law.
(d) The directors and officers of Commercial in office immediately
prior to the Acquisition Merger Effective Time shall be the directors and
officers of the Surviving Corporation following the Acquisition Merger, until
their successors shall be duly elected and qualified.
(e) From and after the Acquisition Merger Effective Time:
(i) The Surviving Corporation shall possess all assets and
property of every description, and every interest in the assets and property,
wherever located, and the rights, privileges, immunities, powers, franchises,
and authority, of a public as well as of a private nature, of each of Commercial
and the Company, and all obligations belonging or due to each of Commercial and
Company,
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all of which are vested in the Surviving Corporation without further act or
deed. Title to any real estate or any interest in the real estate vested in
Commercial or the Company shall not revert or in any way be impaired by reason
of the Acquisition Merger.
(ii) The Surviving Corporation is liable for all the
obligations of each of Commercial and the Company. Any claim existing, or action
or proceeding pending, by or against the Company or Commercial, may be
prosecuted to judgement, with right of appeal, as if the Acquisition Merger had
not taken place, or the Surviving Corporation may be substituted in its place.
(iii) All the rights of creditors of each of the Company and
Commercial are preserved unimpaired, and all liens upon the property of the
Company and Commercial are preserved unimpaired, on only the property affected
by such liens immediately prior to the Acquisition Merger Effective Time.
1.5 Authorization for Issuance of Commercial Common Stock; Exchange of
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Certificates.
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(a) Commercial has reserved for issuance a sufficient number of
shares of its common stock for the purpose of issuing its shares to the
Company's shareholders in accordance with this Article I.
(b) After the Acquisition Merger Effective Time, holders of
certificates theretofore evidencing outstanding shares of Company common stock
(other than as provided in Section 1.3(a)(ii), upon surrender of such
certificates to an exchange agent appointed by Commercial (the "Exchange
Agent"), shall be entitled to receive certificates representing the number of
whole shares of Commercial common stock into which shares of Company common
stock theretofore represented by the certificates so surrendered shall have been
converted, as provided in Section 1.3 hereof, and cash payments in lieu of
fractional shares, as provided in Section 1.6 hereof. As soon as practicable
after the Acquisition Merger Effective Time, the Exchange Agent will send a
notice and transmittal form to each Company shareholder of record at the
Acquisition Merger Effective Time whose Company stock shall have been converted
into Commercial common stock advising such shareholder of the effectiveness of
the Acquisition Merger and the procedure for surrendering to the Exchange Agent
outstanding certificates formerly evidencing Company common stock in exchange
for new certificates for Commercial common stock and cash in lieu of any
fractional interest. Upon surrender, each certificate evidencing Company common
stock shall be cancelled.
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(c) Until surrendered as provided in this Section 1.5 hereof, each
outstanding certificate which, prior to the Acquisition Merger Effective Time,
represented Company common stock (other than shares cancelled at the Acquisition
Merger Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed for
all corporate purposes to evidence ownership of the number of whole shares of
Commercial common stock into which the shares of Company common stock formerly
represented thereby were converted and the right to receive cash in lieu of any
fractional interest. However, until such outstanding certificates formerly
representing Company common stock are so surrendered, no dividend or
distribution payable to holders of record of Commercial common stock shall be
paid to any holder of such outstanding certificates, but upon surrender of such
outstanding certificates by such holder there shall be paid to such holder the
amount of any dividends or distribution, without interest, theretofore paid with
respect to such whole shares of Commercial common stock, but not paid to such
holder, and which dividends or distribution had a record date occurring on or
subsequent to the Acquisition Merger Effective Time and the amount of any cash,
without interest, payable to such holder in lieu of fractional shares pursuant
to Section 1.6 hereof. After the Acquisition Merger Effective Time, there shall
be no further registration of transfers on the records of the Company of
outstanding certificates formerly representing shares of Company common stock
and, if a certificate formerly representing such shares is presented to
Commercial, it shall be forwarded to the Exchange Agent for cancellation and
exchange for certificates representing shares of Commercial common stock as
herein provided.
(d) All shares of Commercial common stock and cash for any fractional
share issued and paid upon the surrender for exchange of Company common stock in
accordance with the above terms and conditions shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
common stock.
(e) If any new certificate for Commercial common stock is to be
issued in the name other than that in which the certificate surrendered in
exchange thereof is registered, it shall be a condition of the issuance therefor
that the certificate surrendered in exchange shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of a new certificate for shares of Commercial common
stock in any name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(f) In the event any certificate for Company common stock shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed
7
certificate, upon the making of an affidavit of that fact by the holder thereof,
such shares of Commercial common stock and cash for fractional shares, if any,
as may be required pursuant hereto; provided, however, that Commercial may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate to deliver a bond in such
sum as it may direct as indemnity against any claim that may be made against
Commercial, the Company, the Exchange Agent or any other party with respect to
the certificate alleged to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof,
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no fractional shares of Commercial common stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in exchange for
any shares of Company common stock; no dividend or distribution with respect to
Commercial common stock shall be payable on or with respect to any fractional
share interests; and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a shareholder of Commercial. In lieu
of such fractional share interest, any holder of Company common stock who would
otherwise be entitled to a fractional share of Commercial common stock will,
upon surrender of his certificate or certificates representing Company common
stock outstanding immediately prior to the Acquisition Merger Effective Time, be
paid the applicable cash value of such fractional share interest, which shall be
equal to the product of the fraction multiplied by the Average NMS Closing
Price. For the purposes of determining any such fractional share interests, all
shares of Company common stock owned by a Company shareholder shall be combined
so as to calculate the maximum number of whole shares of Company common stock
issuable to such Company shareholder.
1.7 Shareholders' Meeting. The Company shall, at the earliest practicable
---------------------
date, hold a meeting of its shareholders (the "Company Shareholders' Meeting")
to submit for shareholder approval this Agreement and the Acquisition Merger.
The affirmative vote of the holders of a majority of the issued and outstanding
shares of Company common stock entitled to vote shall be required for such
approval.
1.8 Company Stock Options.
---------------------
(a) At the Acquisition Merger Effective Time, each outstanding option
under the Company's 1994 Stock Option and Incentive Plan, the 1986 Stock Option
and Incentive Plan and the 1991 Director's Stock Option Plan (the "Company
Option Plans") shall continue outstanding as an option to purchase, in place of
the purchase of each share of Company common stock, the number of shares
(rounded down to the nearest whole share) of Commercial common stock that would
have been received by the optionee in the Merger had the option been exercised
in full (without regard to any
8
limitations contained therein on exercise) for shares of Company common stock
immediately prior to the Acquisition Merger upon the same terms and conditions
under the relevant option as were applicable immediately prior to the
Acquisition Merger Effective Time, except for appropriate pro rata adjustments
as to the relevant option price for shares of Commercial common stock
substituted therefor so that the aggregate option exercise price of shares
subject to an option immediately following the assumption and substitution shall
be the same as the aggregate option exercise price for such shares immediately
prior to such assumption and substitution. 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 stock option
which is an "incentive stock option." Commercial and Company agree to take such
actions as shall be necessary to give effect to the foregoing.
(b) At all times after the Acquisition Merger Effective Time,
Commercial shall reserve for issuance such number of shares of Commercial common
stock as necessary so as to permit the exercise of options granted under the
Company's Option Plans in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. Commercial shall make
all filings required under federal and state securities laws so as to permit the
exercise of such options and the sale of the shares received by the optionee
upon such exercise.
1.9 Registration Statement; Prospectus/Proxy Statement.
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(a) For the purposes (i) of registering the Commercial common stock
to be issued to holders of Company common stock in connection with the Merger
with the Securities and Exchange Commission ("SEC") and with applicable state
securities authorities, and (ii) of holding the Company Shareholders' Meeting,
the parties hereto shall cooperate in the preparation of an appropriate
registration statement (such registration statement, together with all and any
amendments and supplements thereto, being herein referred to as the
"Registration Statement"), including the prospectus/proxy statement satisfying
all applicable requirements of applicable state laws, and of the Securities Act
of 1933 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934
Act") and the rules and regulations thereunder (such prospectus/proxy statement,
together with any and all amendments or supplements thereto, being herein
referred to as the "Prospectus/Proxy Statement").
(b) Commercial shall furnish such information concerning Commercial
and the Commercial Subsidiaries (as defined in Section 3.1 hereof) as is
necessary in order to cause the Prospectus/Proxy Statement, insofar as it
relates to such corporations, to comply with Section 1.9(a) hereof. Commercial
agrees promptly to advise the Company if at any time prior to the Company
Shareholders'
9
Meeting any information provided by Commercial in the Prospectus/Proxy Statement
becomes incorrect or incomplete in any material respect and to provide the
information needed to correct such inaccuracy or omission. Commercial shall
promptly file such supplemental information as may be necessary in order to
cause such Prospectus/Proxy Statement, insofar as it relates to Commercial and
the Commercial Subsidiaries, to comply with Section 1.9(a).
(c) The Company shall furnish Commercial with such information
concerning the Company and the Company Subsidiaries (as defined in Section 2.1
hereof) as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to such corporations, to comply with Section 1.9(a)
hereof. The Company agrees promptly to advise Commercial if at any time prior
to the Company Shareholders' Meeting any information provided by the Company in
the Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide Commercial with the information needed to correct such
inaccuracy or omission. The Company shall furnish Commercial with such
supplemental information as may be necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to the Company and the Company
Subsidiaries, to comply with Section 1.9(a).
(d) Commercial shall promptly file the Registration Statement with
the SEC and applicable state securities agencies. Commercial shall use all
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and applicable state securities laws at the earliest practicable
date. The Company authorizes Commercial to utilize in the Registration Statement
the information concerning the Company and the Company Subsidiaries provided to
Commercial for the purpose of inclusion in the Prospectus/Proxy Statement. The
Company shall have the right to review and comment on the form of proxy
statement included in the Registration Statement. Commercial shall advise the
Company promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Commercial shall furnish Company with
copies of all such documents. Prior to the Acquisition Merger Effective Time or
the termination of this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the 1933
Act.
(e) The Company shall consult with Commercial in order to determine
whether any directors, officers or shareholders of the Company may be deemed to
be "affiliates" of Company ("affiliated persons") within the meaning of Rule 145
of the SEC promulgated under the 1933 Act. Commercial and the Company each shall
take such action as may be necessary or appropriate to ensure that their
respective affiliated persons are aware of and comply with the guidelines of the
SEC with respect to the sale by affiliates of stock of companies engaging in a
business combination transaction
10
to be accounted for as a pooling of interests as set forth in Topic 2-E of the
SEC staff accounting bulletin series. All shares of Commercial common stock
issued to such Company affiliated persons (i) in connection with the Merger or
(ii) upon exercise of options received pursuant to Section 1.8 hereof subsequent
to the Acquisition Merger Effective Time, shall bear a legend upon the face
thereof stating that transfer of the securities is or may be restricted by the
provisions of the 1933 Act and/or pooling of interests accounting requirements,
and notice shall be given to Commercial's transfer agent of such restriction,
provided that such legend shall be removed by delivery of a substitute
certificate without such legend if such Company affiliated person shall have
delivered to Commercial a copy of a letter from the staff of the SEC or an
opinion of counsel, in form and substance satisfactory to Commercial, to the
effect that such legend is not required for purposes of the 1933 Act, and, in
any event, at any time after the expiration of three years from the Acquisition
Merger Effective Time unless, in the opinion of the counsel for Commercial, such
person was an "affiliate" of Commercial within the meaning of Rule 145 within
three months prior to the expiration of such three year period. So long as
shares of such Commercial common stock bear such legend, no transfer of such
Commercial common stock shall be allowed unless and until the transfer agent is
provided with such information as may reasonably be requested by counsel for
Commercial to assure that such transfer will not violate applicable provisions
of the 1933 Act, or rules, regulations or policies of the SEC.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate and
---------------------------------
use reasonable best efforts to complete the transactions contemplated hereunder
at the earliest practicable date. Each party shall cause each of their
affiliates and subsidiaries to cooperate, in the preparation and submission by
them, as promptly as reasonably practicable, of such applications, petitions,
and other documents and materials as any of them may reasonably deem necessary
or desirable to the OTS, Federal Trade Commission ("FTC"), Department of Justice
("DOJ"), SEC, applicable Secretary of State, other regulatory authorities,
holders of the voting shares of common stock of the Company, and any other
persons for the purpose of obtaining any approvals or consents necessary to
consummate the transactions contemplated by this Agreement. At the date hereof,
none of the parties is aware of any reason that the regulatory approvals
required to be obtained by it would not be obtained.
1.11 Closing. If (i) this Agreement has been duly approved by the
-------
shareholders of the Company, and (ii) all relevant conditions of this Agreement
have been satisfied or waived, a closing (the "Closing") shall take place as
promptly as practicable thereafter at the principal office of Commercial at
which the parties hereto will exchange certificates, opinions, letters and other
documents as required hereby and will make the filings described in Section
11
1.2 hereof. Such Closing will take place as soon as practicable as agreed by the
parties, provided, however, that the Closing shall be no more than thirty
-------- -------
(30) days after the satisfaction or waiver of all conditions and/or obligations
contained in Article V of this Agreement.
1.12 Closing of Transfer Books. At the Acquisition Merger Effective Time,
-------------------------
the transfer books for Company common stock shall be closed, and no transfer of
shares of Company common stock shall thereafter be made on such books.
1.13 Bank Merger.
-----------
(a) At the Bank Merger Effective Time, each share of Savings Common
Stock issued and outstanding immediately prior thereto shall, by virtue of the
Bank Merger, be cancelled. No new shares of the capital stock or other
securities or obligations of the Bank shall be issued or be deemed issued with
respect to or in exchange for such cancelled shares, and such cancelled shares
of Savings Common Stock shall not be converted into any shares or other
securities or obligations of the Bank.
(b) The charter and bylaws of the Bank, as in effect immediately
prior to the Bank Merger Effective Time, shall be the charter and bylaws of the
Bank, as the surviving institution of the Bank Merger, and may thereafter be
amended in accordance with applicable law.
(c) The directors and officers of the Bank immediately prior to the
Bank Merger Effective Time shall be the directors and officers of the Bank, as
the surviving institution of the Bank Merger, and shall continue in office until
their successors are duly elected or otherwise duly selected.
(d) The liquidation account established by Savings pursuant to the
plan of conversion adopted in connection with its conversion from mutual to
stock form shall continue to be maintained by the Bank after the Bank Merger
Effective Time for the benefit of those persons and entities who were savings
account holders of Savings on June 18, 1986 and who continue from time to time
to have rights therein. If required by the rules and regulations of the OTS,
the Bank shall amend its charter to specifically provide for the continuation of
the liquidation account established by Savings.
1.14 Option Agreement. Simultaneously with the execution of this
----------------
Agreement by the parties, Commercial and the Company are executing a Stock
Option Agreement (the "Option Agreement") in the form of Exhibit 1.14.
12
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SAVINGS
Company and Savings represent and warrant to Commercial and the Bank that,
except as disclosed in Schedule I attached hereto:
2.1 Organization, Good Standing, Authority, Insurance, Etc. The Company
------------------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Section 2.1 of Schedule I lists each
"subsidiary" of the Company and Savings within the meaning of Section
10(a)(1)(G) of HOLA, (individually a "Company Subsidiary" and collectively the
"Company Subsidiaries") (unless otherwise noted herein all references to a
"Company Subsidiary" or to the "Company Subsidiaries" shall include Savings).
Each of the Company Subsidiaries is duly organized, validly existing, and in
good standing under the laws of the respective jurisdiction under which it is
organized, as set forth in Section 2.1 of Schedule I. The Company and each
Company Subsidiary has all requisite power and authority and is duly qualified
and licensed to own, lease and operate its properties and conduct its business
as it is now being conducted. The Company has delivered to Commercial a true,
complete and correct copy of the certificate of incorporation, charter, or other
organizing document and of the bylaws, as in effect on the date of this
Agreement, of Company and each Company Subsidiary. The Company and each Company
Subsidiary is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is necessary under
applicable law, except to the extent that any failures to so qualify would not,
in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole. Savings is a member in good standing of the Federal Home Loan
Bank of Topeka and all eligible accounts issued by Savings are insured by the
Savings Association Insurance Fund ("SAIF") to the maximum extent permitted
under applicable law. Savings is a "domestic building and loan association" as
defined in Section 7701(a)(19) of the Code and is a "qualified thrift lender" as
defined in Section 10(m) of the HOLA and the Thrift Regulations. The Company is
duly registered as a savings and loan holding company under the HOLA.
The minute books of the Company and the Company's Subsidiaries contain
complete and accurate records of all meetings and other corporate actions held
or taken of their respective shareholders and Boards of Directors (including the
committees of such Boards).
2.2 Capitalization. The authorized capital stock of the Company consists
--------------
of (i) 4,000,000 shares of common stock, par value $0.10 per share, of which
2,116,074 shares were issued and outstanding as of the date of this Agreement,
and (ii) 1,000,000 shares of preferred stock, par value of $0.10 per share, of
which no shares were outstanding as of the date of this Agreement. All
13
outstanding shares of Company common stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except for outstanding
options to purchase 146,309 shares of Company common stock under the Company
Option Plans and as contemplated by the Option Agreement, as of the date of this
Agreement, there are no options, convertible securities, warrants, or other
rights (preemptive or otherwise) to purchase or acquire any of the Company's
capital stock from the Company and no oral or written agreement, contract,
arrangement, understanding, plan or instrument of any kind (collectively, "Stock
Contract") to which the Company or any of its affiliates is subject with respect
to the issuance, voting or sale of issued or unissued shares of the Company's
capital stock. A true and complete copy of the Company's Option Plans, as in
effect on the date of this Agreement, is attached as Section 2.2 of Schedule I.
Neither the Company nor Savings is aware of any event or circumstance (but not
including actions or events by Commercial) which would disqualify the Merger
from being accounted for as a pooling of interests.
2.3 Ownership of Subsidiaries. All the outstanding shares of the capital
-------------------------
stock of the Company Subsidiaries are validly issued, fully paid, nonassessable
and owned beneficially and of record by the Company or a Company Subsidiary free
and clear of any lien, claim, charge, restriction or encumbrance (collectively,
"Encumbrance"). Except as set forth in Section 2.3 of Schedule I, all of the
outstanding capital stock or other ownership interests in all of the Company
Subsidiaries is owned either by the Company or Savings. There are no options,
convertible securities, warrants, or other rights (preemptive or otherwise) to
purchase or acquire any capital stock of any Company Subsidiary and no contracts
to which the Company or any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of the capital stock of
any of the Company Subsidiaries. Neither the Company nor any Company Subsidiary
owns any of the capital stock or other equity securities (including securities
convertible or exchangeable into such securities) of or profit participations in
any "company" (as defined in Section 10(a)(1)(C) of the HOLA) other than the
Federal Home Loan Bank of Topeka or except as set forth in Section 2.3 of
Schedule I.
2.4 Financial Statements and Reports.
--------------------------------
(a) No registration statement, proxy statement, schedule or report
filed by the Company or any Company Subsidiary with the SEC or the OTS under the
1933 Act or the 1934 Act ("SEC Reports"), on the date of effectiveness in the
case of such registration statements, or on the date of filing in the case of
such reports or schedules, or on the date of mailing in the case of such proxy
statements, contained any untrue statement of a material fact or omitted 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. For the
14
past five years, the Company and the Company Subsidiaries have timely filed all
reports and documents required to be filed by them with the SEC, the OTS, or the
Federal Deposit Insurance Corporation (the "FDIC") under various securities and
financial institution laws and regulations except to the extent that all
failures to so file, in the aggregate, would not have a material adverse effect
on the business, financial condition or results of operations of the Company and
the Company Subsidiaries, taken as a whole; and all such documents, as finally
amended, complied in all material respects with applicable requirements of law
and, as of their respective date or the date as amended, did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
stated therein, all financial statements and schedules included in the documents
referred to in the preceding sentences (or to be included in similar documents
to be filed after the date hereof) (i) are or will be (with respect to financial
statements in respect of periods ending after December 31, 1994) in accordance
with the Company's books and records and those of any of its Subsidiaries, and
(ii) present (and in the case of financial statements in respect of periods
ending after December 31, 1994, will present) fairly the consolidated balance
sheet and the consolidated statements of operations, stockholders' equity and
cash flows of the Company and its Subsidiaries as of the dates and for the
period indicated in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods (except for the omission of
notes to unaudited statements, year end adjustments to interim results and
changes to generally accepted accounting principles). The audited consolidated
financial statements of the Company at December 31, 1994 and for the year then
ended and the consolidated financial statements for all periods thereafter up to
the Closing reflect or will reflect, as the case may be, all liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and regardless of when asserted) of the Company and the Company
Subsidiaries required to be reflected in such financial statements according to
generally accepted accounting principles and contain or will contain adequate
reserves for losses on loans and properties acquired in settlement of loans,
taxes and all other material accrued liabilities and for all reasonably
anticipated material losses, if any as of such date. There exists no set of
circumstances that could reasonably be expected to result in any liability or
obligation material to the Company or the Company Subsidiaries, taken as a
whole, except as disclosed in such consolidated financial statements at December
31, 1994 or for transactions effected or actions occurring or omitted to be
taken after December 31, 1994 (i) in the ordinary course of business, or (ii) as
permitted by this Agreement.
(b) The Company has delivered to Commercial each SEC Report filed,
used or circulated by it with respect to periods
15
since January 1, 1992 through the date of this Agreement and will promptly
deliver each such SEC Report filed, used or circulated after the date hereof,
each in the form (including exhibits and any amendments thereto) filed with the
SEC or the OTS (or, if not so filed, in the form used or circulated), including,
without limitation, its Annual Reports on Form 10-K and its Quarterly Reports on
Form 10-Q.
2.5 Absence of Changes.
------------------
(a) Since December 31, 1994, there has been no material adverse
change in the business, properties, financial condition, results of operations
or assets of the Company and the Company Subsidiaries, taken as a whole. There
is no occurrence, event or development of any nature existing or, to the best
knowledge of the Company, threatened which may reasonably be expected to have a
material adverse effect upon the business, properties, financial condition,
operations or assets of Company or any Company Subsidiary.
(b) Except as set forth in Section 2.5 of Schedule I, since December
31, 1994, each of the Company and the Company Subsidiaries has owned and
operated their respective assets, properties and businesses in the ordinary
course of business and consistent with past practice.
2.6 Prospectus/Proxy Statement. At the time the Prospectus/ Proxy
--------------------------
Statement is mailed to the shareholders of the Company for the solicitation of
proxies for the approvals referred to in Section 1.7(a) hereof and at all times
subsequent to such mailings up to and including the times of such approval, such
Prospectus/Proxy Statement (including any supplements thereto), with respect to
all information set forth therein relating to the Company (including the Company
Subsidiaries), its shareholders and representatives, Company common stock and
all other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions of the
1933 Act, the 1934 Act and the rules and regulations under such Acts; and
(b) Not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf or under authority of the Company or any of the
Company Subsidiaries is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with
the Merger or any other transaction contemplated hereby, except the
16
Company has engaged Piper Jaffray Inc. to provide financial advisory services
and to deliver a "fairness opinion" to the effect that the consideration to be
received by the Company shareholders in the Merger is fair to the Company
shareholders from a financial point of view, whose fees and reasonable out-of-
pocket expenses will be paid by Company. A copy of the engagement agreement with
Piper Jaffray is attached to Section 2.7 of Schedule I.
2.8 Litigation and Other Proceedings. Except as set forth in Section 2.8
--------------------------------
of Schedule I, neither the Company nor any Company Subsidiary is a defendant in,
nor is any of its property subject to, any pending, or, to the best knowledge of
the management of the Company, threatened, claim, action, suit, investigation,
or proceeding, or subject to any judicial order, judgment or decree.
2.9 Compliance with Law.
-------------------
(a) The Company and the Company Subsidiaries are in compliance in all
material respects with all material laws and regulations applicable to their
respective business or operations or with respect to which compliance is a
condition of engaging in the business thereof, and neither the Company nor any
Company Subsidiary has received notice from any federal, state or local
government or governmental agency of any material violation of, and does not
know of any material violations of, any of the above.
(b) The Company and each of its Subsidiaries have all material
permits, licenses, certificates of authority, orders and approvals of, and have
made all material filings, applications and registrations with, all federal,
state, local and foreign governmental or regulatory bodies that are required in
order to permit them to carry on their respective business as they are presently
conducted.
2.10 Corporate Actions.
-----------------
(a) The Boards of Directors of the Company and Savings have duly
authorized their respective officers to execute and deliver (as applicable) this
Agreement, the Acquisition Merger Agreement, the Bank Plan of Merger and the
Option Agreement and to take all action necessary to consummate the Merger and
the other transactions contemplated hereby. The Board of Directors of the
Company has authorized and directed the submission for shareholders' approval of
this Agreement, together with the Merger and any other action requiring such
approval. All corporate authorization by the Board of Directors of the Company
required for the consummation of the Merger has been obtained.
(b) The Company's Board of Directors has taken or will take all
necessary action to exempt this Agreement, the Acquisition Merger Agreement, the
Bank Plan of Merger and the Option Agreement and the transactions contemplated
hereby and thereby from, (i) any
17
applicable state takeover laws, (ii) any Delaware laws limiting or restricting
the voting rights of shareholders, (iii) any Delaware laws requiring a
shareholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
shareholder" or person or entity of similar type, and (iv) any provision in its
or any of the Company's Subsidiaries articles/certificate of incorporation,
charter or bylaws, (A) restricting or limiting stock ownership or the voting
rights of shareholders, or (B) requiring a shareholder approval vote in excess
of the vote normally required in transactions of similar type not involving a
"related person," interested shareholder" or person or entity of similar type.
2.11 Authority. Except as set forth in Section 2.11 of Schedule I, the
---------
execution, delivery and performance of its obligations under this Agreement and
the Option Agreement by the Company and Savings does not violate any of the
provisions of, or constitute a default under or give any person the right to
terminate or accelerate payment or performance under (i) the certificate of
incorporation or bylaws of the Company, the articles of incorporation, charter
or bylaws of any Company Subsidiary, (ii) any regulatory restraint on the
acquisition of the Company or Savings or control thereof, (iii) any law, rule,
ordinance, or regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its Subsidiaries is
subject or (iv) any other material agreement, material lease, material contract,
note, mortgage, indenture, arrangement or other obligation or instrument
("Contract") to which the Company or any of the Company Subsidiaries is a party
or is subject or by which any of their properties or assets is bound. The
parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals.
The Company and Savings have all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to perform their
respective obligations hereunder and thereunder, except, with respect to this
Agreement and the Acquisition Merger, the approval of the Company's shareholders
required under applicable law. Other than the receipt of Governmental Approvals
(as defined in Section 5.1(c)), the approval of shareholders and the consents
specified in Schedule I with respect to the Contracts, no consents or approvals
are required on behalf of Company in connection with the consummation of the
transactions contemplated by this Agreement and the Option Agreement. This
Agreement and the Option Agreement constitute the valid and binding obligation
of the Company and Savings and each is enforceable in accordance with its terms,
except as enforceability may be limited by applicable laws relating to
bankruptcy, insolvency or creditors rights generally and general principles of
equity.
2.12 Employment Arrangements. Except as disclosed in Section 2.12 of
-----------------------
Schedule I, there are no employment, severance or other
18
agreements, plans or arrangements with any current or former directors, officers
or employees of Company or any Company Subsidiary which may not be terminated
without penalty (including any augmentation or acceleration of benefits) on 30
days or less notice to such person. No payments to directors, officers or
employees of the Company or the Company Subsidiaries resulting from the
transactions contemplated hereby will cause the imposition of excise taxes under
Section 4999 of the Code or the disallowance of a deduction to the Company or
any Company Subsidiary pursuant to Section 280G(a) of the Code.
2.13 Employee Benefits.
-----------------
(a) Neither the Company nor any of the Company Subsidiaries maintains
any funded deferred compensation plans (including profit sharing, pension,
savings or stock bonus plans), unfunded deferred compensation arrangements or
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), other than any plans
("Employee Plans") set forth in Section 2.13 of Schedule I (true and correct
copies of which have been delivered to Commercial). None of Company or any of
the Company Subsidiaries has incurred or reasonably expects to incur any
liability to the Pension Benefit Guaranty Corporation except for required
premium payments which, to the extent due and payable, have been paid. The
Employee Plans intended to be qualified under Section 401(a) of the Code are so
qualified, and Company is not aware of any fact which would adversely affect the
qualified status of such plans. Except as set forth in Section 2.13 of Schedule
I, neither the Company nor any of the Company Subsidiaries (a) provides health,
medical, death or survivor benefits to any former employee or beneficiary
thereof, or (b) maintains any form of current (exclusive of base salary and base
wages) or deferred compensation, bonus, stock option, stock appreciation right,
benefit, severance pay, retirement, incentive, group or individual health
insurance, welfare or similar plan or arrangement for the benefit of any single
or class of directors, officers or employees, whether active or retired
(collectively "Benefit Arrangements").
(b) Except as disclosed in Section 2.13 to Schedule I, all Employee
Plans and Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1994 and there has been no material amendment
thereof (other than amendments required to comply with applicable law) or no
material increase in the cost thereof or benefits payable thereunder on or after
January 1, 1994.
(c) To the best knowledge of the Company, with respect to all
Employee Plans and Benefit Arrangements, the Company and each Company Subsidiary
are in substantial compliance with the requirements prescribed by any and all
statutes, governmental or court orders, or rules or regulations currently in
effect,
19
including but not limited to ERISA and the Code, applicable to such Employee
Plans or Benefit Arrangements. No condition exists that could constitute grounds
for the termination of any Employee Plan under Section 4042 of ERISA; no
"prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of
the Code, has occurred with respect to any Employee Plan, or any other employee
benefit plan maintained by Company or any Company Subsidiary which is covered by
Title I of ERISA, which could subject any person to liability under Title I of
ERISA or to the imposition of any tax under Section 4975 of the Code which could
have an adverse effect on the business, assets, financial condition, results of
operations or prospects of Company or any Company Subsidiary; nor to the best
knowledge of Company has any Employee Plan subject to Part III of Subtitle B of
Title I of ERISA or Section 412 of the Code, or both, incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code, whether or not
waived; nor has Company or any Company Subsidiary failed to make any
contribution or pay any amount due and owing as required by the terms of any
Employee Plan or Benefit Arrangement. To the best of its knowledge, neither
Company nor any Company Subsidiary has incurred or expects to incur, directly or
indirectly, any liability under Title IV of ERISA arising in connection with the
termination of, or a complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA which could constitute a liability of
Commercial, or any of its affiliates at or after the Effective Time of the
Merger.
2.14 Information Furnished. No statement contained in any schedule,
---------------------
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of Company
to Commercial pursuant to this Agreement or pursuant to the due diligence to be
conducted pursuant to Section 4.11 hereof contains or will contain any untrue
statement of a material fact or any material omission. No information material
to the Merger and which is necessary to make (i) the representations and
warranties or (ii) the information provided and to be provided to Commercial for
purposes of its due diligence examination pursuant to Section 4.11 hereof not
misleading, to the best knowledge of the Company, has been withheld from
Commercial.
2.15 Property and Assets. The Company and the Company Subsidiaries have
-------------------
good and marketable title to all of their real property reflected in the
financial statements at December 31, 1994, referred to in Section 2.4 hereof, or
acquired subsequent thereto, free and clear of all Encumbrances, except for (a)
such items shown in such financial statements or in the notes thereto, (b) liens
for current real estate taxes not yet delinquent, (c) customary title exceptions
that have no material adverse effect upon the value of such property, (d)
property sold or transferred in the ordinary course of business since the date
of such financial statements, (e) pledges or liens incurred in the ordinary
course of
20
business and (f) as otherwise specifically indicated in Section 2.15 of Schedule
I. Company and the Company Subsidiaries enjoy peaceful and undisturbed
possession under all material leases for the use of real property under which
they are the lessee; all of such leases are valid and binding and in full force
and effect and neither Company nor any Company Subsidiary is in default in any
material respect under any such lease. No consent of the lessor of any material
real property or material personal property lease is required for consummation
of the Merger except as set forth in Section 2.15 of Schedule I. Except as set
forth in Section 2.15 of Schedule I, there has been no material physical loss,
damage or destruction, whether or not covered by insurance, affecting the real
properties of Company and the Company Subsidiaries since December 31, 1994. All
property and assets material to their business and currently used by Company and
the Company Subsidiaries are, in all material respects, in good operating
condition and repair, normal wear and tear excepted.
2.16 Agreements and Instruments. Except as set forth in Section 2.16 of
--------------------------
Schedule I, neither the Company nor any Company Subsidiary is a party to (a) any
material agreement, arrangement or commitment not made in the ordinary course of
business, (b) any agreement, indenture or other instrument relating to the
borrowing of money by the Company or any Company Subsidiary or the guarantee by
the Company or any Company Subsidiary of any such obligation (other than Federal
Home Loan Bank advances with a maturity of one year or less from the date
hereof, (c) any agreements to make loans or for the provision, purchase or sale
of goods, services or property between Company or any Company Subsidiary and any
director or officer of Company or Savings, or any member of the immediate family
or affiliate of any of the foregoing, (d) any agreements with or concerning any
labor or employee organization to which Company or any Company Subsidiary is a
party, (e) any agreements between Company or any Company Subsidiary and any five
percent or more shareholder of Company, and (f) any agreements, directives,
orders, or similar arrangements between or involving the Company or any Company
Subsidiary and any state or federal savings institution regulatory authority.
2.17 Material Contract Defaults. Neither the Company nor any Company
--------------------------
Subsidiary nor the other party thereto is in default in any respect under any
contract, agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which the Company or a Company Subsidiary is a party or by which
its respective assets, business, or operations may be bound or affected or under
which it or its respective assets, business, or operations receives benefits,
and which default is reasonably expected to have either individually or in the
aggregate a material adverse effect on the Company or any Company Subsidiary,
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.
21
2.18 Tax Matters.
-----------
(a) The Company and each of the Company Subsidiaries have duly and
properly filed all federal, state, local and other tax returns required to be
filed by them and have made timely payments of all taxes due and payable,
whether disputed or not; the current status of audits of such returns by the
Internal Revenue Service ("IRS") and other applicable agencies is as set forth
in Section 2.18 of Schedule I; and, except as set forth in Section 2.18 of
Schedule I, there is no agreement by the Company or any Company Subsidiary for
the extension of time or for the assessment or payment of any taxes payable.
Except as set forth in Section 2.18 of Schedule I, neither the IRS nor any other
taxing authority is now asserting or, to the best knowledge of Company,
threatening to assert any deficiency or claim for additional taxes (or interest
thereon or penalties in connection therewith), nor is Company aware of any basis
for any such assertion or claim. The Company and each of the Company
Subsidiaries have complied in all material respects with applicable IRS backup
withholding requirements and have filed all appropriate information reporting
returns for all tax years for which the statute of limitations has not closed.
The Company and each Company Subsidiary have complied with all applicable state
law sales and use tax collection and reporting requirements.
(b) Adequate provision for any federal, state, local, or foreign
taxes due or to become due for the Company or any of the Company Subsidiaries
for any period or periods through and including December 31, 1994, has been made
and is reflected on the December 31, 1994 audited Company consolidated financial
statements and has been or will be made with respect to periods ending after
December 31, 1994.
2.19 Environmental Matters. Except as set forth in Section 2.19 of
---------------------
Schedule I, to the best knowledge of the Company, neither the Company nor any
Company Subsidiary owns or leases any properties affected by toxic waste, radon
gas or other hazardous conditions or constructed in part with the use of
asbestos. Except as set forth in Section 2.19 of Schedule I, neither the
Company nor any Company Subsidiary has knowledge of, nor has the Company or any
Company Subsidiary received written notice from any governmental or regulatory
body of, any conditions, activities, practices or incidents which is reasonably
likely to interfere with or prevent compliance or continued compliance with
hazardous substance laws or any regulation, order, decree, judgment or
injunction, issued, entered, promulgated or approved thereunder, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, suit, proceeding, hearing or investigation based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant or
chemical, or
22
industrial, toxic or hazardous substance or waste. There is no civil, criminal
or administrative claim, action, suit, proceeding, hearing or investigation
pending or, to Company's knowledge, threatened against Company or any Company
Subsidiary relating in any way to such hazardous substance laws or any
regulation, order, decree, judgment or injunction issued, entered, promulgated
or approved thereunder.
2.20 Loan Portfolio: Portfolio Management.
-------------------------------------
(a) All evidences of indebtedness reflected as assets in the
consolidated balance sheet of Company as of December 31, 1994, or acquired since
such date, are (except with respect to those assets which are no longer assets
of the Company or any Company Subsidiary) binding obligations of the respective
obligers named therein except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding may be brought, and the payment of no material amount thereof (either
individually or in the aggregate with other evidences of indebtedness) is
subject to any defenses which have been threatened or asserted against the
Company or any Company Subsidiary. All such indebtedness which is secured by an
interest in real property is secured by a valid and perfected mortgage lien
having the priority specified in the loan documents. All loans originated or
purchased by Savings were at the time entered into and at all times since have
been in compliance in all material respects with all applicable laws (including,
without limitation, all consumer protection laws) and regulations. Savings
administers its loan and investment portfolios (including, but not limited to,
adjustments to adjustable mortgage loans) in accordance with all applicable laws
and regulations and the terms of applicable instruments. The records of Savings
regarding all loans outstanding on its books are accurate in all material
respects and the risk classification system has been established in accordance
with the requirements of the OTS.
(b) Section 2.20 of Schedule I sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of loans, extensions
of credit and other assets of Savings and its subsidiaries that have been
adversely designated, criticized or classified by it as of March 31, 1995,
separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated, classified or criticized as of the date
hereof by any representative of any government entity as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
23
extensions of credit or other assets that were charged off by it or any of its
Subsidiaries before the date hereof.
2.21 Real Estate Loans and Investments. Except for properties acquired in
---------------------------------
settlement of loans, there are no facts, circumstances or contingencies known to
the Company or any Company Subsidiary which exist which would require a material
reduction under generally accepted accounting principles in the present carrying
value of any of the real estate investments, joint ventures, construction loans,
other investments or other loans of the Company or any Company Subsidiary
(either individually or in the aggregate with other loans and investments).
2.22 Derivatives Contracts. Neither the Company nor any of its
---------------------
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on its Balance Sheet which is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 2.22 of Schedule I, including a list, as applicable, of any
of its or any of its Subsidiaries' assets pledged as security for a Derivatives
Contract.
2.23 Insurance. Except as set forth in Section 2.23 of Schedule I, the
---------
Company and the Company Subsidiaries have in effect insurance coverage with
reputable insurers which, in respect to amounts, types and risks insured, is
reasonably adequate for the business in which the Company and the Company
Subsidiaries are engaged. A schedule of all insurance policies in effect as to
the Company and the Company Subsidiaries (the "Insurance Policies") is as set
forth on Section 2.23 of Schedule I (other than policies pertaining to mortgage
loans made in the ordinary course of business). Except as set forth on Section
2.23 of Schedule I, all Insurance Policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of this Agreement have been paid, such premiums covering all periods from the
date hereof up to and including the Acquisition Merger Effective Date shall have
been paid on or before the Acquisition Merger Effective Date, to the extent then
due and payable (other than retrospective premiums which may be payable with
respect to worker's compensation insurance policies, adequate reserves for which
are reflected in the Company's financial statements). The Insurance Policies
are valid, outstanding and enforceable in accordance with their respective terms
and will not in any way be affected by, or terminated or lapsed solely by reason
of, the transactions contemplated by this Agreement. Except as set forth on
Section 2.23 of Schedule I, neither the Company nor any Company Subsidiary has
been refused any insurance with respect to any material properties, assets or
operations, nor has any coverage
24
been limited or terminated by any insurance carrier to which it has applied for
any such insurance or with which it has carried insurance during the last three
years.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Commercial and the Bank represent and warrant to Company and Savings that,
except as disclosed in Schedule II attached hereto:
3.1 Organization, Good Standing, Authority, Insurance, Etc. Commercial is
------------------------------------------------------
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Nebraska. Each of the subsidiaries of Commercial within
the meaning of Section 10(a)(1)(G) of HOLA (individually a "Commercial
Subsidiary" and collectively the "Commercial Subsidiaries") is duly organized,
validly existing, and in good standing under the laws of the respective
jurisdiction under which it is organized. Commercial and each Commercial
Subsidiary has all requisite power and authority and is duly qualified and
licensed to own, lease and operate its properties and conduct its business as it
is now being conducted. Commercial and each Commercial Subsidiary is qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which qualification is necessary under applicable law, except to
the extent that any failures to so qualify would not, in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of Commercial and the Commercial Subsidiaries, taken as a whole. The
Bank is a member in good standing of the Federal Home Loan Bank of Topeka, and
all eligible accounts issued by the Bank are insured by the SAIF to the maximum
extent permitted under applicable law. The Bank is a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Code, and is a "qualified
thrift lender" as defined in Section 10(m) of the HOLA and the Thrift
Regulations. Commercial is duly registered as a savings and loan holding company
under the HOLA.
3.2 Capitalization. The authorized capital stock of Commercial consists
--------------
of 25,000,000 shares of Commercial common stock, par value $.01 per share, of
which 12,877,339 shares were issued and outstanding as of the date of this
Agreement and 10,000,000 shares of serial preferred stock, par value of $.01 per
share, of which no shares were outstanding as of the date of this Agreement.
All outstanding shares of Commercial common stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
3.3 Ownership of Subsidiaries. All the outstanding shares of the capital
-------------------------
stock of the Commercial Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by Commercial or a Commercial
Subsidiary free and clear of
25
any Encumbrance. Except as disclosed in Section 3.3 of Schedule II, all of the
outstanding capital stock or other ownership interests in all of the Commercial
Subsidiaries is owned either by Commercial or the Bank. There are no options,
convertible securities, warrants, or other rights (preemptive or otherwise) to
purchase or acquire any capital stock of any Commercial Subsidiary and no
contracts to which Commercial or any of its affiliates is subject with respect
to the issuance, voting or sale of issued or unissued shares of the capital
stock of any of the Commercial Subsidiaries.
3.4 Financial Statements and Reports. No registration statement, proxy
--------------------------------
statement, schedule or report filed by Commercial or any Commercial Subsidiary
with the SEC or the OTS under the 1933 Act, or the 1934 Act, on the date of
effectiveness in the case of such registration statements, or on the date of
filing in the case of such reports or schedules, or on the date of mailing in
the case of such proxy statements, contained any untrue statement of a material
fact or omitted 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. For the past five years, Commercial and
the Commercial Subsidiaries have timely filed all documents required to be filed
by them with the SEC, the OTS, or the FDIC under various securities and
financial institution laws and regulations, except to the extent that all
failures to so file, in the aggregate, would not have a material adverse effect
on the business, financial condition or results of operations of Commercial and
the Commercial Subsidiaries, taken as a whole; and all such documents, as
finally amended, complied in all material respects with applicable requirements
of law and, as of their respective date or the date as amended, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
to the extent stated therein, all financial statements and schedules included in
the documents referred to in the preceding sentences (or to be included in
similar documents to be filed after the date hereof) (i) are or will be (with
respect to financial statements in respect of periods ending after December 31,
1994) in accordance with Commercial's books and records and those of any of its
Subsidiaries, and (ii) present (and in the case of financial statements in
respect of periods ending after December 31, 1994, will present) fairly the
consolidated statement of financial condition and the consolidated statements of
operations, stockholders' equity and cash flows of Commercial and its
Subsidiaries as of the dates and for the periods indicated in accordance with
generally accepted accounting principles (except for the omission of notes to
unaudited statements, year end adjustments to interim results and changes in
generally accepted accounting principles). The consolidated financial
statements of Commercial as of December 31, 1994 and for the six months then
26
ended and the consolidated financial statements for all periods thereafter up to
the Closing disclose or will disclose, as the case may be, all liabilities
(including contingent liabilities) as of such date of Commercial and the
Commercial Subsidiaries, other than liabilities which are not, in the aggregate,
material to Commercial and the Commercial Subsidiaries, taken as a whole, and
contain or will contain in the opinion of management adequate reserves for
losses on loans and properties acquired in settlement of loans, taxes and all
other material accrued liabilities and for all reasonably anticipated material
losses, if any as of such date. There exists no set of circumstances that could
reasonably be expected to result in any liability or obligation material to
Commercial or the Commercial Subsidiaries, taken as a whole, except as disclosed
in such consolidated financial statements at December 31, 1994, or for
transactions effected or actions occurring or omitted to be taken after December
31, 1994, (i) in the ordinary course of business, or (ii) as permitted by this
Agreement.
3.5 Absence of Changes. Since December 31, 1994, there has been no
------------------
material adverse change in the business, properties, financial condition,
results of operations or assets of Commercial and the Commercial Subsidiaries,
taken as a whole. There is no occurrence, event or development of any nature
existing or, to the best knowledge of Commercial, threatened which may
reasonably be expected to have a material adverse effect upon the business,
properties, financial condition, operations or assets of Commercial or any
Commercial Subsidiary.
3.6 Prospectus/Proxy Statement. At the time the Registration Statement
--------------------------
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of the Company for the solicitation of proxies for the approval
referred to in Section 1.7(b) hereof and at all times subsequent to such
mailings up to and including the times of such approval, such Registration
Statement and Prospectus/Proxy Statement (including any amendments or
supplements thereto), with respect to all information set forth therein relating
to Commercial (including the Commercial Subsidiaries) and its shareholders,
Commercial common stock, this Agreement, the Merger and all other transactions
contemplated hereby, will:
(a) comply in all material respects with applicable provisions of the
1933 Act, the 1934 Act and the rules and regulations under such Acts; and
(b) not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
3.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf or under
27
authority of Commercial or any of the Commercial Subsidiaries is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly in connection with the Merger or any other transaction
contemplated hereby, except Commercial has engaged Merrill Lynch & Co., an
investment banking firm, to provide financial advisory services and to deliver a
"fairness opinion" as to whether or not the Exchange Ratio is fair to
Commercial's shareholders from a financial point of view, whose fees and
reasonable out-of-pocket expenses will be paid by Commercial.
3.8 Compliance With Law.
-------------------
(a) Commercial and the Commercial Subsidiaries are in compliance in
all material respects with all material laws and regulations applicable to their
respective business or operations or with respect to which compliance is a
condition of engaging in the business thereof, and neither Commercial nor any
Commercial Subsidiary has received notice from any federal, state or local
government or governmental agency of any material violation of, and does not
know of any material violations of, any of the above.
(b) Commercial and each of it Subsidiaries have all material permits,
licenses, certificates of authority, orders and approvals of, and have made all
material filings, applications and registrations with, all federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its respective business as it is presently conducted.
3.9 Corporate Actions. The Boards of Directors of Commercial and the Bank
-----------------
have duly authorized their respective officers to execute and deliver (as
applicable) this Agreement, the Acquisition Merger Agreement, the Bank Plan of
Merger and the Option Agreement and to take all action necessary to consummate
the Merger and the other transactions contemplated hereby. All corporate
authorizations by the Board of Directors of Commercial required for the
consummation of the Merger have been obtained.
3.10 Authority. The execution, delivery and performance of this Agreement
---------
by Commercial and the Bank does not violate any of the provisions of, or
constitute a default under or give any person the right to accelerate payment or
performance under (i) the articles of incorporation or bylaws of Commercial, the
charter or bylaws of the Bank, or the articles of incorporation or bylaws or of
any other Commercial Subsidiary, (ii) any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which it or any of its Subsidiaries is subject or (iii) any other
Contract to which Commercial or any of the Commercial Subsidiaries is a party or
is subject to or by which any of their properties or assets is bound which
default, termination or acceleration would have a material
28
adverse effect on the financial condition, business or results of operations of
Commercial and its Subsidiaries, taken as a whole. The parties acknowledge that
the consummation of the Merger and the other transactions contemplated hereby is
subject to various regulatory approvals. Commercial and the Bank have all
requisite corporate power and authority to enter into this Agreement and the
Option Agreement and to perform their obligations hereunder and thereunder.
Other than the receipt of Government Approvals, no consents or approvals are
required on behalf of Commercial or any Commercial Subsidiary in connection with
the consummation of the transactions contemplated by this Agreement and the
Option Agreement. This Agreement and the Option Agreement constitute the valid
and binding obligation of Commercial and the Bank, and are enforceable in
accordance with their terms, except as enforceability may be limited by
applicable laws relating to bankruptcy, insolvency or creditors' rights
generally and general principles of equity.
3.11 Information Furnished. No statement contained in any schedule,
---------------------
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of
Commercial to Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or any material omission. No information
material to the Merger and which is necessary to make the representations and
warranties not misleading, to the best knowledge of Commercial, has been
withheld from the Company.
3.12 Litigation and Other Proceedings. Except for matters which would not
--------------------------------
have a material adverse effect on the business, financial condition or results
of operations of Commercial and Commercial's Subsidiaries taken as a whole,
neither Commercial nor any Commercial Subsidiary is a defendant in, nor is any
of its property subject to, any pending, or, to the best knowledge of the
management of Commercial, threatened, claim, action, suit, investigation, or
proceeding, or subject to any judicial order, judgment or decree.
3.13 Agreements and Instruments. As of the date of this Agreement, there
--------------------------
are no agreements, directives, orders or similar arrangements between or
involving Commercial or any Commercial Subsidiary and any state or federal
savings institution regulatory authority.
ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies. Between the date of this Agreement
---------------------------------
and the Acquisition Merger Effective Time, each party agrees to give to the
other party and its respective representatives and agents full access (to the
extent lawful) to
29
all of the premises, books, records and employees of it and its subsidiaries at
all reasonable times, and to furnish and cause its subsidiaries to furnish to
the other party and its respective agents or representatives access to and true
and complete copies of such financial and operating data, all documents with
respect to matters to which reference is made in Articles II or III of this
Agreement or on any list, schedule or certificate delivered or to be delivered
in connection herewith, and such other documents, records, or information with
respect to the business and properties of it and its subsidiaries as the other
party or its respective agents or representative shall from time to time
reasonably request; provided, however, that any such inspection (a) shall be
-------- -------
conducted in such manner as not to interfere unreasonably with the operation of
the business of the entity inspected and (b) shall not affect any of the
representations and warranties hereunder. Each party will also give prompt
written notice to the other party of any event or development (x) which, had it
existed or been known on the date of this Agreement, would have been required to
be disclosed under this Agreement, (y) which would cause any of its
representations and warranties contained herein to be inaccurate or otherwise
materially misleading, or (z) which materially relate to the satisfaction of the
conditions set forth in Article V of this Agreement.
4.2 Conduct of Business of the Company and the Company Subsidiaries.
---------------------------------------------------------------
Between the date of this Agreement and the Acquisition Merger Effective Time,
the Company and Savings agree:
(a) That the Company and the Company Subsidiaries shall conduct
their business only in the ordinary course, and maintain their books and records
in accordance with past practices and not to take any action that would (i)
adversely affect the ability to obtain the Governmental Approvals or (ii)
adversely affect the Company's ability to perform its obligations under this
Agreement or the Stock Option Agreement or (iii) adversely affect the ability of
Savings to acquire and operate the seven branch offices it agreed to acquire by
contract dated January 31, 1995 from Metropolitan Federal Bank, fsb;
(b) That the Company shall not, without the prior written consent of
Commercial: (i) declare, set aside or pay any dividend or make any other
distribution with respect to Company's capital stock; (ii) reacquire any of
Company's outstanding shares; (iii) issue or sell or buy any shares of capital
stock of the Company or any Company Subsidiary, except shares of Company common
stock issued pursuant to the Company Option Plans; (iv) effect any stock split,
stock dividend or other reclassification of Company's common stock; or (v) grant
any options or issue any warrants exercisable for or securities convertible or
exchangeable into capital stock of Company or any Company Subsidiary or grant
any stock appreciation or other rights with respect to shares of capital stock
of Company or of any Company Subsidiary;
30
(c) That Company and the Company Subsidiaries shall not, without the
prior written consent of Commercial: (i) sell or dispose of any significant
assets of the Company or of any Company Subsidiary other than in the ordinary
course of business consistent with past practices; (ii) merge or consolidate the
Company or any Company Subsidiary with or otherwise acquire any other entity, or
file any applications or make any contract with respect to branching by Savings
(whether de novo, purchase, sale or relocation, it being the understanding of
the parties, however, that Savings may acquire and operate the seven branches it
agreed to acquire by contract dated January 31, 1995) or acquire or construct,
or enter into any agreement to acquire or construct, any interest in real
property (other than with respect to security interests in properties securing
loans and properties acquired in settlement of loans in the ordinary course) or
improvements to real property; (iii) change the certificate of incorporation,
charter documents or other governing instruments of the Company or any Company
Subsidiary, except as provided in this Agreement; (iv) grant to any executive
officer, director or employee of the Company or any Company Subsidiary (A) any
increase in annual compensation, except for increases in salaries paid to non-
executive employees in the ordinary course of business, which inreases shall not
exceed $25,000 in the aggregate, or (B) any bonus type payment, except that
bonuses may be paid from the Company's formula bonus arrangement disclosed in
Section 4.2 of Schedule I pro rated to the Closing if the earnings targets the
Company previously advised Commercial are met, provided, that any actions taken
--------
pursuant to Section 4.13 of this Agreement shall not adversely impact the
ability of Savings to make any bonus payments in accordance herewith; (v) adopt
any new or amend or terminate any existing Employee Plans or Benefit
Arrangements of any type; (vi) authorize severance pay or other benefits for any
officer, director or employee of Company or any Company Subsidiary except, other
than as permitted hereby, in accordance with similar policies of Commercial;
(vii) incur any material indebtedness or obligation or enter into or extend any
material agreement or lease, except in the ordinary course of business
consistent with past practices; (viii) engage in any lending activities other
than in the ordinary course of business consistent with past practices; (ix)
form any new subsidiary or cause or permit a material change in the activities
presently conducted by any Company Subsidiary or make additional investments in
subsidiaries; (x) purchase any debt securities or derivative securities,
including CMO or REMIC products, that are defined as "high risk mortgage
securities" under OTS Thrift Bulletin No. 52 dated January 10, 1992 as revised
or purchase any Derivatives Contracts or Structured Notes; (xi) purchase any
equity securities other than Federal Home Loan Bank stock; (xii) make any
investment which would cause Savings to not be a qualified thrift lender under
Section 10(m) of the HOLA, or not to be a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Code; (xiii) make (A) any
acquisition and development or land acquisition loans, (B) any commercial or
commercial real estate
31
loan or multifamily real estate loan, (C) any construction loans, or (D) any
loans for the construction or development of condominium projects, except in
each case in accordance with existing policies as of the date hereof or as may
otherwise be agreed to by Commercial and the Company after the date hereof;
(xiv) authorize capital expenditures other than in the ordinary course of
business; (xv) adopt or implement any change in its accounting principles,
practices or methods other than as may be required by generally accepted
accounting principles or adopt or implement any change in its methods of
accounting for Federal income tax purposes; or (xvi) make any loan in which
participation interests therein are to be sold to other persons or entities or
acquire a participation interest in a loan originated by another person or
entity. The limitations contained in this Section 4.2(c) shall also be deemed to
constitute limitations as to the making of any commitment with respect to any of
the matters set forth in this Section 4.2(c). Notwithstanding the foregoing,
Savings may engage in any of the foregoing activities exclusively with the Bank.
4.3 No Solicitation. The Company will not authorize any officer,
---------------
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of Company or any Company Subsidiary,
directly or indirectly, to initiate contact with any person or entity in an
effort to solicit, initiate or encourage any "Takeover Proposal" (as such term
is defined below). Except as the fiduciary duties of the Company Board of
Directors may otherwise require (as determined in consultation with legal
counsel), the Company will not authorize any officer, director, employee,
investment banker, financial consultant, attorney, accountant or other
representative of the Company or any Company Subsidiary, directly or indirectly,
(A) to cooperate with, or furnish or cause to be furnished any non-public
information concerning its business, properties or assets to, any person or
entity in connection with any Takeover Proposal; (B) to negotiate any Takeover
Proposal with any person or entity; or (C) to enter into any agreement, letter
of intent or agreement in principle as to any Takeover Proposal. The Company
will promptly give written notice to Commercial upon becoming aware of any
Takeover Proposal, such notice to contain, at a minimum, the identity of the
persons submitting the Takeover Proposal, a copy of any written inquiry or other
communication, the terms of any Takeover Proposal, any information requested or
discussions sought to be initiated and the status of any requests, negotiations
or expressions of interest. As used in this Agreement with respect to the
Company, "Takeover Proposal" shall mean any proposal, other than as contemplated
by this Agreement, for a merger or other business combination involving the
Company or Savings or for the acquisition of a ten percent (10%) or greater
equity interest in Company or Savings, or for the acquisition of a substantial
portion of the assets of Company or Savings (other than loans or securities sold
in the ordinary course).
32
4.4 Shareholder Approvals. The Company shall call the meeting of its
---------------------
shareholders to be held for the purpose of voting upon the Acquisition Merger
and related matters, as referred to in Section 1.7 hereof, as soon as
practicable. In connection with such meeting, the Company Board of Directors
shall recommend approval of the Merger, subject to the fiduciary duties of the
Board of Directors and receipt of an updated fairness opinion immediately prior
to the date of mailing of the Prospectus/Proxy Statement. The Company shall use
its best efforts to solicit from its shareholders proxies in favor of approval
and to take all other action necessary or helpful to secure a vote of the
holders of the shares of Company common stock in favor of the Merger, except as
the fiduciary duties of the Boards of Directors may otherwise require.
4.5 Filing of Holding Company and Merger Applications. Commercial shall
-------------------------------------------------
use its best efforts promptly to prepare, submit and file, a holding company
application to the OTS pursuant to 12 C.F.R. (S)574.3 for acquisition of control
of Company and Savings and a merger application to the OTS pursuant to the Bank
Merger Act and 12 C.F.R. 563.22(a) for the Bank Merger and any other
applications required to be filed in connection with the transactions
contemplated hereby. Commercial and the Company each agree to use their best
efforts to secure the OTS confirmation described in Section 5.2(h)(ii) herein.
4.6 Consents. Company and Savings will use their best efforts to obtain
--------
the consent or approval of each person whose consent or approval shall be
required in order to permit Company or Savings, as the case may be, to
consummate the Acquisition Merger and the Bank Merger.
4.7 Resale Letter Agreements; Pooling of Interests. After execution of
----------------------------------------------
this Agreement, (i) Company shall use its best efforts to cause to be delivered
to Commercial from each person who may be deemed to be an "affiliate" of Company
within the meaning of Rule 145, a written letter agreement regarding
restrictions on resale of the shares of Commercial common stock received by such
persons in the Merger and upon exercise of options received under Section 1.8
herein subsequent to the Acquisition Merger Effective Time to ensure compliance
with applicable resale restrictions imposed under the federal securities laws
and to ensure pooling of interest accounting treatment and (ii) neither
Commercial nor the Company (including the Company Subsidiaries) shall take any
action which would materially impede or delay consummation of the Merger, or
prevent the transactions contemplated hereby from (A) qualifying for accounting
treatment as a "pooling of interests" (unless this requirement is waived (in
writing, if the action is to be taken by the Company) by Commercial in which
event the condition set forth in Section 5.2(f) hereof shall also be deemed
waived by Commercial) or (B) qualifying as a reorganization within the meaning
of Section 368 of the Code; provided that nothing hereunder shall limit the
33
ability of Commercial to exercise its rights under the Option Agreement.
4.8 Publicity. Between the date of this Agreement and the Acquisition
---------
Merger Effective Time, neither Commercial, Company or any of their subsidiaries
shall, without the prior approval of the other, issue or make, or permit any of
its directors, employees, officers or agents to issue or make, any press
release, disclosure or statement to the press or any third party with respect to
the Merger or the transactions contemplated hereto, except as required by law.
The parties shall cooperate when issuing or making any press release, disclosure
or statement with respect to Merger or the transactions contemplated hereby,
except as required by law.
4.9 Cooperation Generally. Between the date of this Agreement and the
---------------------
Acquisition Merger Effective Time, Commercial, Company and their subsidiaries
shall use their best efforts, and take all actions necessary or appropriate, to
consummate the Merger and the other transactions contemplated by this Agreement
at the earliest practicable date.
4.10 Additional Financial Statements and Reports. As soon as reasonably
-------------------------------------------
practicable after they become publicly available, the Company shall furnish to
Commercial and Commercial shall furnish to the Company, respectively, its
balance sheet and related statements of operations, cash flows and stockholders'
equity for all periods prior to the Closing. Such financial statements will be
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and fairly present the financial condition, results of
operations and cash flows of the Company or Commercial, as the case may be
(subject, in the case of unaudited financial statements, to (a) normal year-end
audit adjustments, (b) any other adjustments described therein and (c) the
absence of notes which, if presented, would not differ materially from those
included in its most recent audited consolidated balance sheet, and all of such
financial statements will be prepared in conformity with the requirements of
Form 10-Q or Form 10-K, as the case may be, under the Exchange Act.
4.11 Due Diligence. For a period commencing on the date hereof and ending
-------------
on May 24, 1995, the Company shall permit Commercial and its counsel and other
representatives to conduct a due diligence investigation of the Company and its
Subsidiaries. The Company shall provide full access during normal business hours
for such review of its properties, books and records. The Company shall furnish
Commercial with such information concerning its affairs and the affairs of the
Company Subsidiaries as may reasonably be requested.
4.12 Stock Listing. Commercial agrees to use all reasonable efforts to
-------------
cause to be listed on the NASDAQ National Market System (or such other national
securities exchange on which the shares of
34
Commercial common stock outstanding as of the date hereof shall be listed as of
the date of consummation of the Merger), subject to official notice of issuance,
the shares of Commercial common stock to be issued in the Merger.
4.13 Allowance for Loan and Real Estate Owned Losses. At the request of
-----------------------------------------------
Commercial and in an amount specified by Commercial, prior to the Acquisition
Merger Effective Time, the Company and Savings shall establish such additional
provisions for loan and real estate owned losses as may be necessary in the sole
determination of Commercial to conform the Company's and Savings' loan and real
estate owned allowance practices and methods to those of Commercial and the Bank
(as such practices and methods are to be applied to Company and Savings from and
after the Acquisition Merger Effective Time); provided, however, that Company
and Savings shall not be required to take such action until: (i) Company and
Savings provide to Commercial a written statement dated the date of Closing
certified by the Chairman of the Board, the President and the Chief Financial
Officer of the Company and Savings, that the conditions in Sections 5.1 and 5.2
to be satisfied by the Company or Savings or both of them have been satisfied by
either or both of them or, alternatively, setting forth in detail the
circumstances that have prevented such conditions from being satisfied (the
"Reliance Certificate"); and (ii) Commercial and the Bank, after reviewing the
Reliance Certificate, provide the Company and Savings a written waiver of any
right either entity may have to terminate the Agreement which waiver shall
contain an express condition precedent that Company and Savings have established
such additional provisions for loan and real estate losses as requested by
Commercial pursuant to this Section 4.13. No additional provision for loan and
real estate owned losses taken by Savings pursuant to this Section 4.13 shall be
deemed in and of itself to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement.
4.14 D&O Indemnification and Insurance. For a period of six (6) years
---------------------------------
following the Acquisition Merger Effective Time, Commercial agrees that the
Merger shall not affect or diminish any of the Company's duties and obligations
of indemnification existing as of the Acquisition Merger Effective Time in favor
of employees, agents, directors or officers of the Company or the Company
Subsidiaries arising by virtue of its Certificate of Incorporation or Bylaws in
the form in effect at the date of this Agreement or arising by operation of law.
Commercial shall cause the persons serving as officers and directors of the
Company immediately prior to the Acquisition Merger Effective Time to be covered
for a period of three years from the Acquisition Merger Effective Time by the
directors' and officers' liability insurance policy maintained by the Company
(provided that Commercial may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not materially
less advantageous than such policy) with respect to acts or omissions occurring
prior to the
35
Acquisition Merger Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event shall
Commercial be required to expend more than 150% of the amount currently expended
by the Company to maintain or procure insurance coverage for such three year
period pursuant hereto.
ARTICLE V
CONDITIONS OF THE MERGER;
TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of Commercial, the Bank, the
------------------
Company and Savings to effect the Acquisition Merger and the Bank Merger shall
be subject to the following conditions:
(a) Stockholder Approval. The holders of the outstanding shares of
--------------------
Company common stock shall have approved this Agreement and the Acquisition
Merger as specified in Section 1.7 hereof or as otherwise required by applicable
law.
(b) No Proceedings. No order shall have been entered and remain in
--------------
force restraining or prohibiting the Merger in any legal, administrative,
arbitration, investigatory or other proceedings (collectively, "Proceedings") by
any governmental or judicial or other authority.
(c) Government Approvals. To the extent required by applicable
--------------------
law or regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including without limitation those of
the OTS, the FDIC, the Federal Trade Commission, DOJ, the SEC, and any state
securities or blue sky authorities, shall have been obtained or made and any
waiting periods shall have expired in connection with the consummation of the
Merger. All other statutory or regulatory requirements for the valid
consummation of the Merger and related transactions shall have been satisfied.
(d) Registration Statement. The Registration Statement shall have
----------------------
been declared effective and shall not be subject to a stop order of the SEC and,
if the offer and sale of Commercial's common stock in the Merger pursuant to
this Agreement is subject to the Blue Sky laws of any state, shall not be
subject to a stop order of any state securities commissioner.
(e) Federal Tax Opinion. Receipt of either an opinion of Deloitte &
-------------------
Touche LLP, or other tax advisor reasonably acceptable to Commercial and the
Company, or a private letter ruling from the IRS, in form and content
reasonably satisfactory to Commercial and the Company, and upon which Company
shareholders may rely, to the effect that for federal income tax purposes:
36
(i) The Acquisition Merger and the Bank Merger will each
qualify as a "reorganization" under Section 368(a) of the Code.
(ii) No gain or loss will be recognized by Commercial, the
Bank, the Company or Savings by reason of the Acquisition Merger or the Bank
Merger.
(iii) No gain or loss will be recognized by any Company
shareholder (except in connection with the receipt of cash in lieu of a
fractional share of Commercial common stock) upon the exchange of Company common
stock for Commercial common stock in the Merger.
(iv) The basis of the Commercial common stock received by a
Company shareholder who exchanges Company common stock for Commercial common
stock will be the same as the basis of the Company common stock surrendered in
exchange therefor (subject to any adjustments required as the result of receipt
of cash in lieu of a fractional share of Commercial common stock).
(v) The holding period of the Commercial common stock received
by a Company shareholder receiving Commercial common stock will include the
period during which the Company common stock surrendered in exchange therefore
was held (provided that such common stock of such Company shareholder was held
as a capital asset at the Acquisition Merger Effective Time).
(vi) Cash received by a Company shareholder in lieu of a
fractional share interest of Commercial common stock will be treated as having
been received as a distribution in full payment in exchange for the fractional
share interest of Commercial common stock which he would otherwise be entitled
to receive and will qualify as capital gain or loss (assuming the Company stock
was a capital asset in his hands at the Acquisition Merger Effective Time).
5.2 Conditions to Obligations of Commercial and Bank. The obligations of
------------------------------------------------
Commercial and Bank to effect the Merger and the transactions contemplated
herein shall be subject to the following additional conditions:
(a) Opinion of Counsel for Company. Commercial shall have received
------------------------------
from Thompson & Mitchell, counsel to Company, an opinion dated as of the Closing
covering the matters to be set forth in Exhibit 5.2(a).
(b) Required Consents. In addition to Governmental Approvals,
-----------------
Company and Savings shall have obtained all necessary third party consents or
approvals in connection with the Merger, the absence of which would materially
and adversely affect Company and the Company Subsidiaries, taken as a whole; in
this connection,
37
the Company and Savings shall obtain consents from all lessors to their
respective real estate leases that may be required for consummation of the
Merger.
(c) Company Accountants' Letter. Commercial shall deliver an
---------------------------
appropriate representation letter pursuant to SAS 72 and shall have received
from KPMG Peat Marwick LLP, letters dated the date of mailing the
Prospectus/Proxy Statement and the date of the Closing to the effect that: (i)
with respect to the Company they are independent accountants within the meaning
of the 1933 Act and 1934 Act and the applicable rules and regulations
thereunder, (ii) it is their opinion that the audited financial statements of
the Company included in the Prospectus/Proxy Statement comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and 1934 Act and the applicable published accounting rules and regulations
thereunder, (iii) on the basis of such procedures as are set forth therein but
without performing an examination in accordance with generally accepted auditing
standards nothing has come to their attention which would cause them to believe
that (A) any unaudited interim financial statements appearing in the
Prospectus/Proxy Statement do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and 1934 Act and the
published rules and regulations thereunder; (B) said financial statements are
not stated on a basis substantially consistent with that of the audited
financial statements; (C) (1) at the date of the latest available consolidated
financial statements of the Company and at a specific date not more than five
business days prior to the date of each such letter there has been, except as
specified in such letter, any increase in the outstanding capital stock, or
indebtedness for borrowed money of the Company (other than deposits and Federal
Home Loan Bank advances with a maturity of one year or less) or any decrease in
the stockholders' equity thereof as compared with amounts shown in the latest
statement of financial condition included in the Prospectus/Proxy Statement, or
(2) for the period from the date of the latest audited financial statements of
the Company included in the Prospectus/Proxy Statement to a specific date not
more than five business days prior to the date of each such letter, there were,
except as specified in such letter, any decreases, as compared with the
corresponding period in the preceding year, in consolidated net income for
Company or any increase, as compared with the corresponding period in the
preceding year, in the provision for loan losses for Company, (iv) they have
performed certain specific procedures as a result of which they determined that
certain information of an accounting, financial or statistical nature included
in the Prospectus/Proxy Statement and requested by Commercial and agreed upon by
such accountants, which is expressed in dollars (or percentages obtained from
such dollar amounts) and obtained from accounting records which are subject to
the internal controls of the Company's accounting system or which has been
derived directly from such accounting records by analysis or computation is in
38
agreement with such records or computations made therefrom (excluding any
questions of legal interpretation), and (v) on the basis of such procedures as
are set forth in such letter, nothing came to their attention with respect to
the Company which would cause them to believe that the pro forma financial
statements had not been properly compiled on the pro forma basis described
therein.
(d) No Material Adverse Change. Between the date of this Agreement
--------------------------
and the date of Closing, there shall not have occurred any material adverse
change in the financial condition, business or results of operations of Company
and the Company Subsidiaries, taken as a whole, other than any such change
attributable to or resulting from any change in law, regulation or generally
accepted accounting principles which impair both the Company and Commercial in a
substantially similar manner.
(e) Representations and Warranties to be True; Fulfillment of
---------------------------------------------------------
Covenants and Conditions. The representations and warranties of the Company and
- - ------------------------
Savings shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Company and Savings
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Company shall have delivered to Commercial a certificate, dated the
Acquisition Merger Effective Time and signed by its chief executive officer and
chief financial officer, to such effect.
(f) Commercial Accountants' Letter. Commercial shall have received
------------------------------
from Deloitte & Touche LLP a letter dated the Acquisition Merger Effective Time,
in substance reasonably acceptable to Commercial, stating its opinion that,
based upon the information furnished to it, the Merger should be accounted for
by Commercial as a "pooling of interests" for financial statement purposes and
that such accounting treatment is in accordance with generally accepted
accounting principles.
(g) No Litigation. Neither the Company nor any Company Subsidiary
-------------
shall be a party to any pending litigation, reasonably probable of being
determined adversely to the Company or any Company Subsidiary, which would have
a material adverse effect on the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole.
(h) Regulatory Approval. (i) All Governmental Approvals required
-------------------
hereunder to consummate the transactions contemplated hereby shall have been
obtained without the imposition of any conditions which Commercial and the Bank
reasonably and in good
39
faith determine to be unduly burdensome upon the conduct of the business of
Commercial or the Bank; and (ii) in connection with such Governmental Approvals,
the OTS and any other applicable governmental agency shall confirm in writing
that the Bank, as the surviving institution of the Bank Merger, shall be
lawfully authorized to operate, maintain and replace Savings agency offices to
the same extent as Savings currently operates, maintains and replaces such
agency offices and such authorization shall be subject to no time or other
restriction not in effect as of the date hereof.
(i) Acceptance of Legal Matters. The form and substance of all
---------------------------
legal matters contemplated hereby and all papers delivered hereunder shall be
reasonably acceptable to Housley Goldberg Kantarian & Bronstein, P.C., special
counsel to Commercial and the Bank.
(j) Affiliates Letters. Commercial shall have received the letter
------------------
agreements from all affiliates of the Company as contemplated in Section 4.7(i)
herein.
(k) Fairness Opinion. Prior to mailing the Prospectus/Proxy
----------------
Statement, Commercial shall have received an updated written opinion from
Merrill Lynch & Co. to the effect that the Exchange Ratio is fair to Commercial
from a financial point of view.
(l) Environmental Reports. Commercial, at its expense, shall have
---------------------
received a Phase I Environmental Risk Report (as contemplated in OTS Thrift
Bulletin #16) on (i) all commercial real estate owned of, (ii) all offices and
premises used as facilities by, and (iii) all properties which serve as security
for any commercial real estate loan having an original principal balance of
$1,000,000 or more of, the Company and Savings, such Reports or other reports
derived therefrom or supplemental thereto to be satisfactory to Commercial.
5.3 Conditions to Obligations of Company and Savings. The obligations of
------------------------------------------------
Company and Savings to effect the Acquisition Merger and the transactions
contemplated herein shall be subject to the following additional conditions:
(a) Opinion of Counsel for Commercial. Company shall have received
---------------------------------
from Housley Goldberg Kantarian & Bronstein, P.C., special counsel to
Commercial, and Fitzgerald, Schorr, Barmettler & Brennan, an opinion dated as of
the Closing covering the matters to be set forth in Exhibit 5.3(a).
(b) Representations and Warranties to be True; Fulfillment of
---------------------------------------------------------
Covenants and Conditions. The representations and warranties of Commercial and
- - ------------------------
the Bank shall be true in all material respects at the Acquisition Merger
Effective Time with the same
40
effect as though made at the Acquisition Merger Effective Time (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); Commercial and the Bank shall have performed all
obligations and complied with each covenant, in all material respects, and all
conditions under this Agreement on their parts to be performed or complied with
at or prior to the Acquisition Merger Effective Time; and Commercial shall have
delivered to Company a certificate, dated the Acquisition Merger Effective Time
and signed by its chief executive officer and chief financial officer, to such
effect.
(c) Acceptance of Legal Matters. The form and substance of all
---------------------------
legal matters contemplated hereby and all papers delivered hereunder shall be
reasonably acceptable to Thompson & Mitchell, counsel to the Company.
(d) Fairness Opinion. Prior to mailing the Prospectus/Proxy
----------------
Statement, the Company shall have received an updated written opinion from Piper
Jaffray Inc. to the effect that the consideration to be received by the Company
shareholders in the Acquisition Merger is fair from a financial point of view to
the stockholders of the Company.
(e) Commercial Common Stock. A certificate for the required number
-----------------------
of whole shares of Commercial common stock, as determined pursuant to Section
1.3 hereof, and cash for the fractional share interests, as so determined, shall
have been delivered to the Exchange Agent.
(f) Required Consents. In addition to Governmental Approvals,
-----------------
Commercial and the Bank shall have obtained all necessary third party consents
or approvals in connection with the Merger, the absence of which would
materially and adversely affect Commercial and the Commercial Subsidiaries,
taken as a whole.
5.4 Termination of Agreement and Abandonment of Merger. This Agreement
--------------------------------------------------
and the Acquisition Plan of Merger may be terminated at any time before the
Acquisition Merger Effective Time, whether before or after approval thereof by
shareholders of Company, as provided below:
(a) Mutual Consent. By mutual consent of the parties, evidenced by
--------------
their written agreement.
(b) Closing Delay. At the election of either party, evidenced by
-------------
written notice, if the Closing shall not have occurred on or before March 31,
1996, or such later date as shall have been agreed to in writing by the parties;
provided, however, that the right to terminate under this Section 5.4(b) shall
- - -------- -------
not be available to any party whose failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the Closing to occur
on or before such date.
41
(c) Conditions to Commercial Performance Not Met. By Commercial
--------------------------------------------
upon delivery of written notice of termination to Company if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Commercial and the Bank to effect the
Merger set forth in Sections 5.1 and 5.2 and noncompliance is not waived by
Commercial, provided, however, that (i) Commercial's right to terminate this
-------- -------
Agreement due to failure of the condition set forth in Section 5.2(l) shall
expire unless exercised by Commercial on or prior to August 16, 1995; and (ii)
the right to terminate under this Section 5.4(c) shall not be available to
Commercial where Commercial's or Bank's failure to perform an obligation
hereunder has been the cause of, or has resulted in, the failure of the Closing
to occur on or before such date.
(d) Conditions to Company Performance Not Met. By the Company upon
-----------------------------------------
delivery of written notice of termination to Commercial if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Company and Savings to effect the Merger
set forth in Sections 5.1 and 5.3 and noncompliance is not waived by Company,
provided, however, that the right to terminate under this Section 5.4(d) shall
- - -------- -------
not be available to the Company where the Company's or Savings' failure to
perform an obligation hereunder has been the cause of, or has resulted in, the
failure of the Closing to occur on or before such date.
(e) Commercial Due Diligence Not Satisfactory. By Commercial at any
-----------------------------------------
time prior to the close of business on May 24, 1995, if Commercial shall not
be satisfied with the results of its due diligence investigation (including
review of the Company Disclosure Schedule (Schedule I) and any documents or
information set forth or disclosed therein) to be conducted pursuant to Section
4.11 herein.
(f) Average NMS Closing Price. By the Company at any time during
-------------------------
the two business day period commencing on the business day immediately after the
end of the Determination Period, if both of the following conditions are met:
(i) the Average NMS Closing Price shall be less than $20.00
(adjusted as indicated below in this Section 5.4(f)); and
(ii) (A) the number obtained by dividing the Average NMS
Closing Price by the Starting Price shall be less than (B) the number obtained
by dividing the Index Price on the last day of the Determination Period by the
Index Price on the Starting Date and subtracting 0.15 from the quotient in this
clause (ii)(B);
subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section
42
5.4(f), it shall give written notice to Commercial no later than the end of the
aforementioned two day period. During the two business day period commencing
with the business day after its receipt of such notice, Commercial shall have
the option to increase the consideration to be received by the holders of
Company common stock hereunder, by adjusting the Exchange Ratio to equal the
number (calculated to four digits) obtained by dividing (A) $14.38 by (B) the
Average NMS Closing Price. If Commercial so elects within such two day period,
it shall give written notice to the Company no later than the end of the
aforementioned two day period of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section 5.4(f) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified).
For purposes of this Section 5.4, the following terms shall have the
meanings indicated:
"Average NMS Closing Price" shall have the meaning specified in
Section 1.3(b).
"Determination Period" shall have the meaning specified in Section
1.3(b).
"Index Group" means the financial institutions listed on the SNL
Midwest Thrift Index, as published by SNL Securities LP, and as to which there
shall not have been a publicly announced proposal since the Starting Date and
before the Determination Date for any such company on such list. In the event
that the common stock of any such company ceases to be publicly traded or a
proposal to acquire any such company is announced after the Starting Date and
before the Determination Date, such company will be removed from the Index
Group, and the weights attributed to the remaining companies will be adjusted
proportionately for purposes of determining the Index Price.
"Index Price," on a given date, means the weighted average of the
closing prices on such dates of the common stocks of the companies comprising
the Index Group.
"Starting Date" means the last trading day immediately preceding the
date of the first public announcement of entry into this Agreement or, if no
trades of Commercial common stock occur on such day then the date most
immediately preceding such day in which a trade of Commercial common stock
occurred.
"Starting Price" means the closing price per share of Commercial
common stock, as reported on the National Market System (as reported by The Wall
Street Journal or, if not reported thereby, another authoritative source) for
the Starting Date or, if no trades of Commercial common stock occur on such day
then the
43
date most immediately preceding such day in which a trade of Commercial common
stock occurred.
If Commercial or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company
shall be appropriately adjusted for the purposes of applying this Section
5.4(f).
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
6.1 Termination; Lack of Survival of Representations and Warranties. In
---------------------------------------------------------------
the event of the termination and abandonment of this Agreement pursuant to
Section 5.4 of this Agreement, this Agreement shall become void and have no
effect, except that (i) the provisions of Sections 2.7 and 3.7 (Brokers and
Finders), 4.8 (Publicity), 6.2 (Expenses) and 8.2 (Confidentiality) of this
Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 5.4(c) or 5.4(d) of this Agreement shall not
relieve the breaching party from liability for an uncured intentional and
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
The representations, warranties and agreements of the parties set forth in
this Agreement shall not survive the Acquisition Merger Effective Time, and
shall be terminated and extinguished at the Acquisition Merger Effective Time,
and from and after the Acquisition Merger Effective Time none of the parties
hereto shall have any liability to the other on account of any breach or failure
of any of those representations, warranties and agreement; provided, however,
-------- -------
that the foregoing clause shall not (i) apply to agreements of the parties which
by their terms are intended to be performed after the Acquisition Merger
Effective Time, and (ii) shall not relieve any person for liability for fraud,
deception or intentional misrepresentation.
6.2 Payment of Expenses. Each of the parties hereto shall bear and pay
-------------------
all costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder. The Company shall select the printer and
pay the expenses of printing the Prospectus/Proxy Statement.
44
ARTICLE VII
CERTAIN POST-MERGER AGREEMENTS
7.1 Registration of Stock Underlying Stock Options. In order to permit
----------------------------------------------
the exercise of options to purchase Commercial common stock which were
originally granted under the Company Option Plans and are to be substituted and
assumed by Commercial under the provisions of Section 1.8 hereof, at and after
the Acquisition Merger Effective Time, Commercial shall take all such actions as
may be necessary or appropriate in order to carry out fully the provisions of
Section 1.8 hereof.
7.2 Reports to the SEC. Commercial shall continue to file all reports and
------------------
data with the SEC necessary to permit the shareholders of Company who may be
deemed "underwriters" (within the meaning of Rule 145 under the 1933 Act) of
Company common stock to sell the Company common stock received by them in
connection with the Merger pursuant to Rules 144 and 145(d) under such Act if
they would otherwise be so entitled.
7.3 Employees.
---------
(a) Employees of the Company or Savings who become employees of
Commercial or the Bank after the Acquisition Merger Effective Time shall be
eligible to participate in all benefit plans sponsored by Commercial or the Bank
to the same extent as other similarly situated Commercial or Bank employees.
Commercial shall honor all accrued vacation leave for the employees of Company
and the Company Subsidiaries following the Acquisition Merger Effective Time.
(b) Commercial agrees that any employees of the Company or Savings
whose employment is terminated at any time after the Acquisition Merger
Effective Time shall be entitled to receive a severance payment in accordance
with Exhibit 7.3(b) attached hereto.
ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this Agreement may be amended,
----------
whether before or after any relevant approval of shareholders, by an agreement
in writing executed in the same manner as this Agreement and authorized or
ratified by the Boards of Directors of the parties hereto, provided that, after
-------------
the adoption of the Agreement by the shareholders of the Company, no such
amendment without further shareholder approval may change the amount or form of
the consideration to be received by the Company shareholders in the Merger.
45
8.2 Confidentiality. All information disclosed hereafter by any party to
---------------
this Agreement to any other party to this Agreement, including, without
limitation, any information obtained pursuant to Sections 4.1 or 4.11 hereof,
shall be kept confidential by such other party and shall not be used by such
other party otherwise than as herein contemplated except to the extent that (i)
it was known by such other party when received, (ii) it is or hereafter becomes
lawfully obtainable for other sources, (iii) it is necessary or appropriate to
disclose to the OTS, the FDIC or any other regulatory authority having
jurisdiction over the parties or their subsidiaries or as may otherwise be
required by law, or (iv) to the extent such duty as to confidentiality is waived
by the other party. In the event of the termination of this Agreement, each
party shall use all reasonable efforts to return upon request to the other
parties all documents (and reproductions thereof) received from such other
parties (and, in the case of reproductions, all such reproductions made by the
receiving party) that include information not within the exceptions contained in
the first sentence of this Section 8.2.
8.3 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
State of Nebraska without taking into account a provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
8.4 Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to Commercial or Company, to
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
Attention: William A. Fitzgerald, Chairman of
the Board and Chief Executive
Officer
with a copy to:
Housley Goldberg Kantarian & Bronstein, P.C.
Suite 700
1220 19th Street, N.W.
Washington, DC 20036
Attention: Leonard S. Volin, Esq.
and
46
Railroad Financial Corporation
110 South Main Street
Wichita, Kansas 67202
Attention: Robert D. Taylor, Chairman of the
Board and President
with a copy to:
Thompson & Mitchell
One Mercantile Center
Suite 3300
St. Louis, Missouri 63101
Attention: Paul F. Pautler, Esq.
or such other address as shall be furnished in writing by any such party, and
any such notice or communication shall be deemed to have been given two business
days after the date of such mailing (except that the notice of change of address
shall not be deemed to have been given until received by the addressee). Notices
may also be sent by telegram, telex, facsimile transmission or hand delivery and
in such event shall be deemed to have been given as of the date received.
8.5 No Assignment. This Agreement may not be assigned by any of the
-------------
parties hereto, by operation of law or otherwise, except as contemplated hereby.
8.6 Headings. The description heading of the several Articles and
--------
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be extended in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the context otherwise
-------------------------------
requires, (a) all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and (b)
all references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
8.9 Entire Agreement. This Agreement, together with the schedules, lists,
----------------
exhibits and certificates required to be delivered hereunder, and any amendment
hereafter executed and delivered in accordance with Section 8.1, constitutes the
entire agreement of the parties, and supersedes any prior written or oral
agreement or understanding among any of the parties hereto pertaining to the
Merger. This Agreement is not intended to confer
47
upon any other persons any rights or remedies hereunder except as expressly set
forth herein.
8.10 Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of the Agreement.
8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
----------------------------
entitle any person (other than the Company, Savings, Commercial or the Bank and
their respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise expressly provided
herein.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, all as of the
date set forth above.
COMMERCIAL FEDERAL CORPORATION RAILROAD FINANCIAL CORPORATION
By: /s/ William A. Fitzgerald By: /s/ Robert D. Taylor
------------------------------ ---------------------
Name: William A. Fitzgerald Name: Robert D. Taylor
Title: Chairman of the Board and Title: Chairman of the Board and
Chief Executive Officer Chief Executive Officer
COMMERCIAL FEDERAL BANK, A RAILROAD SAVINGS BANK, FSB
FEDERAL SAVINGS BANK
By: /s/ William A. Fitzgerald By: /s/ Robert D. Taylor
------------------------------ ---------------------
Name: William A. Fitzgerald Name: Robert D. Taylor
Title: Chairman of the Board and Title: Chairman of the Board and
Chief Executive Officer Chief Executive Officer
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