1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [X] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
STANDARD FEDERAL BANCORPORATION, INC.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
31,881,685 shares
- - - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
$59.00 -- cash per share to be paid to shareholders in merger.
- - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$1,881,019,415.00
- - - --------------------------------------------------------------------------------
(5) Total fee paid:
$376,203.88
- - - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - - --------------------------------------------------------------------------------
(3) Filing party:
- - - --------------------------------------------------------------------------------
(4) Date filed:
- - - --------------------------------------------------------------------------------
2
PRELIMINARY COPIES
CONFIDENTIAL -- FOR USE OF COMMISSION ONLY
PROXY STATEMENT
- - - --------------------------------------------------------------------------------
STANDARD FEDERAL BANCORPORATION, INC.
[STANDARD FEDERAL LOGO]
February , 1997
Dear Fellow Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Standard Federal Bancorporation, Inc. (the "Company" or "Standard Federal") to
be held at 10:00 a.m., Detroit time, on , March , 1997, at 2600 West
Big Beaver Road, Troy, Michigan 48084 (the "Special Meeting"). At the Special
Meeting, the shareholders of the Company will be asked to approve and adopt a
merger (the "Merger") between the Company and a newly-organized subsidiary of
ABN AMRO North America, Inc. Under the terms of this Merger, each of the
Company's shareholders will receive $59.00 in cash for each share of the
Company's common stock. Upon consummation of the Merger, the shareholders of the
Company will no longer have an ownership interest in the Company.
The Company's Board of Directors has unanimously determined that the proposal to
be voted upon at the Special Meeting is fair to and in the best interests of the
Company's shareholders and recommends that you vote FOR the approval of the
Merger.
YOUR VOTE, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, IS EXTREMELY IMPORTANT.
UNLESS A SUFFICIENT NUMBER OF SHAREHOLDER VOTES ARE RECEIVED, THE MERGER CANNOT
BE APPROVED. THE BOARD OF DIRECTORS THEREFORE URGES YOU TO VOTE FOR THE MATTERS
INDICATED ON THE ENCLOSED PROXY CARD AND RETURN THE PROXY CARD IMMEDIATELY
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
A Notice of Special Meeting of Shareholders and a Proxy Statement containing a
discussion of the Merger are attached to this letter. We urge you to read this
material carefully before voting. If you attend the meeting or for any other
reason desire to revoke your proxy, you may vote in person at the meeting, even
if you had previously mailed your proxy card.
On behalf of the Board of Directors of the Company, I wish to thank you for your
continued support.
Sincerely,
Thomas R. Ricketts
Thomas R. Ricketts
Chairman of the Board and President
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
WHETHER OR NOT YOU EXPECT TO ATTEND THIS SPECIAL MEETING, PLEASE COMPLETE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
3
PRELIMINARY COPIES
CONFIDENTIAL -- FOR USE OF COMMISSION ONLY
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH , 1997
- - - --------------------------------------------------------------------------------
STANDARD FEDERAL BANCORPORATION, INC.
2600 West Big Beaver Road
Troy, Michigan 48084
810/643-9600
[STANDARD FEDERAL LOGO]
February , 1997
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Standard Federal Bancorporation, Inc., a Michigan corporation (the
"Company" or "Standard Federal"), will be held at 10:00 a.m., Detroit time, on
, March , 1997, at 2600 West Big Beaver Road, Troy, Michigan
48084, for the following purposes:
(1) To approve and adopt an Agreement and Plan of Merger, dated November 21,
1996 (the "Merger Agreement"), by and among ABN AMRO North America, Inc., a
Delaware corporation ("AANA"), Heitritz Corp., a Delaware corporation and
wholly-owned subsidiary of AANA ("MergerSub"), and the Company. Under the
terms of the Merger Agreement, MergerSub will be merged with and into the
Company (the "Merger"), each issued and outstanding share of common stock of
the Company ("Common Stock") (except for shares of Common Stock held by AANA
or MergerSub) will be converted into the right to receive $59.00 in cash
(the "Merger Consideration") and each option issued and outstanding under
the Company's present stock option plans immediately prior to the Merger
will be converted into the right to receive in cash the difference between
the Merger Consideration and the applicable option exercise price. A copy of
the Merger Agreement is attached as Annex A to the Proxy Statement enclosed
herewith.
(2) To transact such other business as properly may come before the Special
Meeting or any adjournment thereof.
The Board of Directors has selected February , 1997, as the record date (the
"Record Date") for the Special Meeting. Only shareholders of record at the close
of business on the Record Date will be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof.
Please complete, date and sign the enclosed proxy card promptly and return it in
the accompanying postage prepaid envelope, whether or not you expect to attend
the Special Meeting, in order to assure that your shares of Common Stock will be
represented. No matter how many or how few shares of Common Stock you own, your
vote is important. Since mail delays occur, IT IS IMPORTANT THAT THE PROXY CARD
BE MAILED WELL IN ADVANCE OF THE DATE OF THE SPECIAL MEETING. Any shareholder
giving a proxy has the right to revoke it at any time before it is voted. If you
receive more than one proxy card because your shares of Common Stock are
registered in different names or addresses, each proxy card should be signed and
returned to ensure that all your shares of Common Stock will be voted properly.
If a shareholder is a participant in the Company's Dividend Reinvestment/Cash
Purchase Plan ("DRP"), the Proxy Card will also serve to direct Registrar and
Transfer Company, the Administrator of the DRP, regarding the voting of any
whole shares of the Company's Common Stock held for the participant under the
DRP at the close of business on the Record Date.
BY ORDER OF THE BOARD OF DIRECTORS,
GARRY G. CARLEY,
GARRY G. CARLEY,
Executive Vice President and Secretary
Troy, Michigan
4
TABLE OF CONTENTS
PAGE
----
Introduction.......................................................................... 1
Record Date; Vote Required.......................................................... 1
Voting and Revocation of Proxies.................................................... 1
Solicitation of Proxies............................................................. 2
Summary............................................................................... 3
Purpose of the Special Meeting; Vote Required....................................... 3
The Parties......................................................................... 3
Time, Place and Date of Special Meeting; Record Date................................ 4
Terms of the Merger................................................................. 4
Effective Time; Conditions to and Termination of the Merger......................... 4
Interests of Certain Persons in the Merger.......................................... 5
Termination Fees.................................................................... 5
The Option Agreement................................................................ 6
Recommendation of the Board of Directors............................................ 6
No Appraisal Rights for Dissenting Shareholders..................................... 6
Certain Federal Income Tax Consequences............................................. 7
Accounting Treatment................................................................ 7
Price Range of the Shares of Common Stock; Dividends................................ 7
Selected Consolidated Financial Data................................................ 8
The Merger............................................................................ 10
Background of the Merger............................................................ 10
Reasons for the Merger.............................................................. 12
Opinion of Financial Advisor........................................................ 13
The Merger Agreement................................................................ 18
Interests of Certain Persons in the Merger.......................................... 25
Effect on Employee Benefit Plans.................................................... 28
Regulatory Approvals................................................................ 28
Option Agreement.................................................................... 30
No Dissenters' Rights............................................................... 31
Information Regarding ABN AMRO North America, Inc................................... 31
AANA's Financial Ability to Consummate the Merger................................... 32
Certain Material Federal Income Tax Consequences.................................... 32
Payment for Shares of Common Stock.................................................. 33
Security Ownership of Certain Beneficial Owners, Directors and Executive Officers..... 34
Principal Shareholders.............................................................. 34
Directors and Executive Officers.................................................... 35
Experts............................................................................... 35
Shareholder Proposals for 1997 Annual Meeting......................................... 35
Incorporation of Certain Documents by Reference....................................... 36
Other Business........................................................................ 36
Annex A -- Merger Agreement
Annex B -- Option Agreement
Annex C -- Fairness Opinion of Merrill Lynch & Co.
5
PRELIMINARY COPIES
CONFIDENTIAL -- FOR USE OF COMMISSION ONLY
PROXY STATEMENT
- - - --------------------------------------------------------------------------------
STANDARD FEDERAL BANCORPORATION, INC.
SPECIAL MEETING OF SHAREHOLDERS
To be held on March , 1997
[STANDARD FEDERAL LOGO]
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Standard Federal Bancorporation, Inc. (the
"Company" or "Standard Federal") for use at the Special Meeting of Shareholders
of the Company to be held on , March , 1997, and any adjournments
thereof (the "Special Meeting"). This Proxy Statement and an accompanying Proxy
Card are being mailed to shareholders on or about February , 1997.
RECORD DATE; VOTE REQUIRED
The close of business on February , 1997, has been selected as the record date
(the "Record Date") for the determination of shareholders entitled to notice of
and to vote at the Special Meeting. On that date, shares of the Company's
common stock (the "Common Stock") were outstanding. Shareholders will be
entitled to one vote for each share of Common Stock held by them of record at
the close of business on the Record Date on the matters to be presented for
consideration and action by the shareholders.
The holders of a majority of the outstanding shares of Common Stock if present
in person or by proxy will constitute a quorum for the transaction of business
at the Special Meeting. In the event that less than a majority of the
outstanding shares of Common Stock are present at the Special Meeting, either in
person or by proxy, a majority of the shares of Common Stock so represented may
vote to adjourn the Special Meeting from time to time without further notice.
The inspectors of election appointed for the Special Meeting will determine the
existence of a quorum and will tabulate the votes cast at the Special Meeting.
Abstentions will be treated as shares of Common Stock that are present and
entitled to vote for purposes of determining the presence of a quorum but will
have the same effect as votes cast against the proposals for purposes of
determining the approval of the Merger (as hereinafter described). If a broker
indicates on the proxy that he or she does not have discretionary authority to
vote on a particular matter as to certain shares of Common Stock, those shares
of Common Stock will be counted for general quorum purposes but will not be
considered as present and entitled to vote with respect to that matter and will
therefore have the effect of a vote cast against the proposal for purposes of
determining approval of the Merger. In general, brokers will not have
discretionary authority to vote with respect to approval of the Merger.
Accordingly, beneficial owners of shares of Common Stock held in "street name"
by brokers or nominee holders are encouraged to contact such brokers or holders
with respect to the voting of such shares. The affirmative vote of at least a
majority of the issued and outstanding shares of Common Stock entitled to vote
is required to approve the Merger Agreement.
If a stockholder is a participant in the Company's Dividend Reinvestment/Cash
Purchase Plan (the "DRP"), the Proxy Card will also serve to direct Registrar
and Transfer Company regarding the voting of any whole shares of Common Stock
held for the participant under the DRP at the close of business on the Record
Date. Shares beneficially owned by participants in the DRP for which no voting
directions are received will not be voted. The DRP permits participants to
invest quarterly cash dividends in additional shares of Common Stock.
1
6
VOTING AND REVOCATION OF PROXIES
All shares of Common Stock entitled to vote that are represented by a properly
executed and unrevoked proxy received in time for the Special Meeting will be
voted at the Special Meeting in accordance with the instructions given thereon.
IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, SUCH SHARES OF COMMON STOCK WILL
BE VOTED FOR APPROVAL OF THE PROPOSAL TO BE PRESENTED AT THE SPECIAL MEETING.
Persons appointed as proxies will also be entitled to vote in their discretion
on any other matters that may properly come before the Special Meeting and any
adjournments thereof. The Company does not know of any matters other than the
proposal described herein that may be presented for consideration at the Special
Meeting.
Any proxy given by a shareholder may be revoked by the holder at any time before
it is voted at the Special Meeting by (i) attending the Special Meeting and
voting in person (attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy unless the shareholder votes in person using
ballots distributed at the Special Meeting for such purpose), (ii) filing a
written notice of revocation with the Executive Vice President and Secretary of
the Company prior to or at the Special Meeting, or (iii) duly executing and
delivering a proxy bearing a later date to the Executive Vice President and
Secretary of the Company prior to the exercise of the proxy. Written notices of
revocation of a proxy should be addressed to Garry G. Carley, Executive Vice
President and Secretary, Standard Federal Bancorporation, Inc., 2600 West Big
Beaver Road, Troy, Michigan 48084.
SOLICITATION OF PROXIES
All expenses of soliciting proxies will be borne by the Company. [The Company
has retained Georgeson & Company Inc. to assist in the solicitation of proxies.
The Company will pay to Georgeson & Company Inc. a fee for proxy solicitation
services in the amount of $ ,000 plus actual out-of-pocket expenses. In
addition,] officers and employees of the Company may solicit proxies personally,
by mail, by telephone or by facsimile, to the extent necessary to ensure
sufficient representation at the Special Meeting. Such officers and employees
will not receive any additional compensation for such solicitation. The Company
also will request brokers, custodians and other nominees or fiduciaries to send
proxy materials to, and to obtain proxies from, beneficial owners of stock and
will reimburse such parties for their reasonable expenses in doing so.
2
7
SUMMARY
The following is a brief summary of certain information contained in this Proxy
Statement and the documents incorporated herein by reference. This summary does
not contain a complete statement of all material information relating to the
proposed Merger and related transactions, and is subject to and qualified in its
entirety by reference to the more detailed information contained elsewhere in
this Proxy Statement, including the Annexes hereto, and documents incorporated
into this Proxy Statement by reference.
Shareholders are urged to read carefully this Proxy Statement, the Annexes and
such documents incorporated by reference in their entirety.
PURPOSE OF THE SPECIAL MEETING; VOTE REQUIRED
At the Special Meeting, shareholders of Standard Federal will be asked to vote
to approve and adopt an Agreement and Plan of Merger, dated November 21, 1996
(the "Merger Agreement"), by and among ABN AMRO North America, Inc., a Delaware
corporation ("AANA"), Heitritz Corp., a Delaware corporation and wholly-owned
subsidiary of AANA ("MergerSub"), and Standard Federal Bancorporation, Inc., a
Michigan corporation (the "Company" or "Standard Federal"). Under the terms of
the Merger Agreement, MergerSub will be merged with and into the Company (the
"Merger"). A copy of the Merger Agreement is attached as Annex A hereto. See
"The Merger." The affirmative vote of the holders of at least a majority of the
issued and outstanding shares of common stock of the Company ("Common Stock")
that are entitled to vote on the Merger is required to approve and adopt the
Merger Agreement.
In order for the Merger and the related transactions to be consummated, the
Merger must be approved by the Board of Governors of the Federal Reserve System,
by the Commissioner of the Michigan Financial Institutions Bureau, by the
Committee on Foreign Investment in the United States and by the Dutch Central
Bank (collectively, the "Regulatory Approvals"). See "The Merger -- Regulatory
Approvals."
As of the Record Date (as hereinafter defined), the executive officers and
directors of the Company may be deemed to be beneficial owners of
shares of Common Stock in the aggregate, or approximately % of the shares
of Common Stock outstanding and stock options currently exercisable at that
date. These shares include shares subject to currently exercisable
stock options. See "Security Ownership of Certain Beneficial Owners, Directors
and Executive Officers."
If the Merger Agreement is not approved by the shareholders of the Company or
the Merger is not consummated for other reasons, the Company intends that its
current management will continue to manage the Company as an ongoing business in
the same general manner as it is now being conducted.
THE PARTIES
The Company is a unitary savings and loan holding company, and its principal
subsidiary is Standard Federal Bank (the "Bank"). The Bank is a federal savings
bank that operates 182 banking centers, over 400 automated teller machines and
11 retail home banking centers throughout Michigan, Indiana, Ohio and Illinois.
Through its InterFirst Division, the Bank also conducts a wholesale mortgage
banking business throughout the United States.
As of December 31, 1996, the Company had consolidated total assets of
$ billion, total deposits of $ billion, $ billion of
loans serviced for others and shareholders' equity of $ million. Based
on deposits, the Bank was the largest thrift institution in the United
States at December 31, 1996. The Company's consolidated net income for the year
ended December 31, 1996 was $ million. The Company's principal offices
are located at 2600 West Big Beaver Road, Troy, Michigan 48084, and its
telephone number is (810) 643-9600.
The Company is subject to the informational filing requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") relating to its
business, financial condition and other matters. Such reports, proxy statements
and other information may be examined at, and copies may be obtained from, the
Commission.
3
8
AANA, is owned by Netherlands-based ABN AMRO Bank N.V. ("ABN AMRO Bank"), the
largest foreign bank in North America and the world's 14th largest bank at June
30, 1996, with over 1,600 locations in 69 countries. AANA is a Delaware
corporation and management company for ABN AMRO Bank's banking and other
financial services operations. AANA's principal subsidiaries include LaSalle
National Corporation and LaSalle Bank, FSB. LaSalle National Corporation is the
holding company for LaSalle National Bank, the fifth largest bank in Chicago,
and for three community banks, LaSalle Bank, LaSalle Bank NI and LaSalle
Northwest National Bank. At December 31, 1996, AANA had consolidated total
assets of $ billion, total deposits of $ billion and
stockholder's equity of $ billion. AANA's principal offices are located
at 135 South LaSalle Street, Chicago, Illinois 60603, and its telephone number
is (312) 443-2000.
TIME, PLACE AND DATE OF SPECIAL MEETING; RECORD DATE
This Proxy Statement is being furnished to shareholders of the Company in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at a special meeting of shareholders (the "Special Meeting"), to
be held at 10:00 a.m., Detroit time, on , March , 1997, at 2600 West
Big Beaver Road, Troy, Michigan 48084, and at any adjournment thereof. Only
holders of record of shares of Common Stock at the close of business on February
, 1997 (the "Record Date"), are entitled to notice of and to vote at the
Special Meeting. At the Record Date, there were shares of Common Stock
outstanding and entitled to vote, held by approximately holders of
record.
TERMS OF THE MERGER
After the adoption and approval of the Merger Agreement by the shareholders of
the Company and the satisfaction or, where permissible, waiver of other
conditions to the Merger and upon the proper and timely filing of Certificates
of Merger with the Michigan Department of Consumer and Industry Services and the
Delaware Secretary of State (the "Effective Time"), MergerSub will be merged
with and into the Company. Although the Company will continue as the surviving
corporation (the "Surviving Corporation"), all current shareholders of the
Company (exclusive of AANA and MergerSub) will have their ownership interest in
the Company extinguished. At the Effective Time, each issued and outstanding
share of Common Stock (except for shares of Common Stock held by AANA or
MergerSub) will be automatically converted into the right to receive $59.00 in
cash (the "Merger Consideration") and each issued and outstanding share of
common stock of MergerSub will be converted into one share of common stock of
the Surviving Corporation, and all such shares will be owned by AANA. In
addition, each option granted under the Company's First Amended Employee Stock
Option and Appreciation Rights Plan and the Company's 1995 Stock Option and
Shareholder Value Plan (the "Company Incentive Plans") issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive cash equal to the difference between the Merger Consideration and the
applicable option exercise price. Thereafter, the Company's existing
shareholders will have no remaining interest in the Company and no interest in
AANA or the Surviving Corporation. See "The Merger."
Promptly after completion of the Merger, a transmittal letter and instructions
for surrendering certificates representing shares of Common Stock will be mailed
to each holder of record of shares of Common Stock at the Effective Time.
LaSalle National Bank will act as the exchange agent for this process. DO NOT
SEND STOCK CERTIFICATES WITH YOUR PROXY. Instructions concerning surrender of
your stock certificates will be delivered to you shortly after the Merger is
consummated. Since no interest will be paid on the Merger Consideration, it is
recommended that certificates be surrendered promptly after consummation of the
Merger and receipt of the transmittal letter and instructions referred to above
to obtain payment as quickly as possible. See "The Merger -- Payment for Shares
of Common Stock."
EFFECTIVE TIME; CONDITIONS TO AND TERMINATION OF THE MERGER
Completion of the Merger is subject to various conditions, including approval of
the Merger by the shareholders of the Company and receipt of all regulatory
approvals. On , 1997, AANA filed its application with the Board of
Governors of the Federal Reserve System and on , 1997, AANA filed its
application for approval with the Michigan Commissioner of Financial
Institutions. On , 1997, AANA requested a determination by the
Committee on Foreign Investments in the United States that no investigation of
the Merger
4
9
is necessary under the Exon-Florio Amendment. On December 6, 1996, the Dutch
Central Bank advised ABN AMRO Bank that it had granted a declaration of no
objection to the Merger. Under applicable law, the U.S. Department of Justice
may challenge the Merger on antitrust grounds within 15 days after its approval
by the Board of Governors of the Federal Reserve System, although no such
challenge is expected. See "The Merger -- Regulatory Approvals."
The Merger Agreement may be terminated and the Merger abandoned, notwithstanding
approval by the shareholders of the Company, as follows: (i) by the mutual
consent of AANA and the Company; (ii) by either AANA or the Company (a) if any
conditions to the other party's obligation to consummate the Merger become
impossible to satisfy and such party has used its best efforts and acted in good
faith and is not in breach of or default under the Merger Agreement, (b) if the
Effective Time has not occurred on or before December 31, 1997, or (c) if the
other party is in material breach of or default under the Merger Agreement which
has not been cured within 30 days of written notice; and (iii) by AANA (a) in
the event any disclosure schedule or amendment or supplement to the Merger
Agreement discloses certain specified matters, or (b) if a public announcement
with respect to a proposal, plan or intention to effect an Acquisition
Transaction has been made by a person other than AANA or its affiliates and the
Board of Directors of the Company fails to publicly reject or oppose such
proposed Acquisition Transaction within 10 days of its public announcement or if
the Board of Directors of the Company modifies, amends or withdraws its
recommendation of the Merger Agreement and the Merger (for a definition of
Acquisition Transaction, see "The Merger -- The Merger Agreement-Acquisition
Transaction").
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Merger Agreement, AANA has agreed to elect Thomas R. Ricketts,
Chairman and President of the Company and the Bank, to the Board of Directors of
LaSalle Bank, FSB, and to continue him as a Director of the Bank, and to employ
Garry G. Carley, Ronald J. Palmer and Joseph Krul, executive officers of the
Company and the Bank. In addition, AANA has agreed to appoint Mr. Carley,
William E. Hoglund, John M. O'Hara, E.G. Wilkinson, Jr., and David P. Williams,
all of whom are currently directors of the Company and the Bank, as directors of
the Bank after the Merger. Consummation of the Merger will result in substantial
payments being made and/or benefits provided to directors and executive officers
of both the Company and the Bank under various existing employment and severance
agreements, tax-qualified plans, nonqualified plans, and stock- and cash-based
compensation plans and arrangements. See "The Merger -- Interests of Certain
Persons in the Merger" and "The Merger -- Effect on Employee Benefit Plans."
TERMINATION FEES
Pursuant to the Merger Agreement, and provided that AANA has not breached in any
material respect its obligations under the Merger Agreement, the Company is
obligated to pay AANA a cash fee of $10,000,000 (the "Termination Fee") for all
costs, fees and expenses incurred by AANA if the Merger Agreement is terminated
due to certain events. Included among such events is the failure of the
shareholders of the Company to approve the Merger. In addition, the Termination
Fee is due and payable in the event the Merger Agreement is terminated by Board
of Directors of AANA due to (i) a material breach of, or material default under,
the Merger Agreement by the Company or (ii) the public announcement of an
Acquisition Transaction and such Acquisition Transaction is consummated within
two years of the date of the termination of the Agreement. The Termination Fee,
when aggregated with any net consideration received by AANA in respect of the
Option Agreement, which is described below, may not exceed $90,000,000. See "The
Merger -- The Merger Agreement" and "The Merger -- The Option Agreement."
The Merger Agreement also provides that AANA is obligated to pay the Company a
cash fee of $5,000,000 for all costs, fees and expenses incurred by the Company
if the Merger Agreement is terminated by the Board of Directors of the Company
due to a material breach of, or material default under, the Merger Agreement by
AANA. See "The Merger -- The Merger Agreement."
5
10
THE OPTION AGREEMENT
On November 21, 1996, the date the Merger Agreement was executed, the Company,
as grantor, and AANA, as grantee, also executed an Option Agreement (the "Option
Agreement") under which the Company has granted to AANA an option to purchase an
aggregate amount of up to 6,209,984 newly issued shares of Company Common Stock,
subject to adjustment in certain circumstances (19.9% of the authorized and
outstanding shares of Common Stock), at a purchase price of $52.50 per share
(the "Option"). The execution and delivery of the Option Agreement was a
condition to AANA entering into the Merger Agreement. The Option may be
exercised by AANA upon the occurrence of certain "Triggering Events" and for a
period of up to twenty-four (24) months after such occurrence. A Triggering
Event occurs if (a) the Board of Directors of the Company withdraws its support
of the Merger or if the Board of Directors of the Company fails to recommend the
Merger; (b) any person or group, other than AANA or any of its affiliates,
acquires 10% or more of the outstanding Common Stock of the Company or
securities representing the right or option to acquire 10% or more of the
outstanding Common Stock of the Company and, if upon the occurrence of such
acquisition, the Board of Directors of the Company (1) recommends such
acquisition to the Company's shareholders; (2) fails to oppose such acquisition;
or (3) fails to recommend or withdraws its approval of the Merger Agreement; (c)
any person or group, other than AANA or any of its affiliates, enters into an
agreement with the Company pursuant to which such person would merge or
consolidate or acquire all of the assets of the Company; or (d) any person or
group, other than AANA or any of its affiliates, makes a bona fide offer to
merge, consolidate or acquire all of the assets of the Company and there is a
willful and material breach of the Merger Agreement by the Company.
A Triggering Event has not occurred as of the date hereof. See "The Merger --
The Option Agreement." The Option Agreement and the Termination Fee have the
effect of discouraging persons who might now or in the future be interested in
acquiring all or a significant interest in the Company from considering or
proposing such an acquisition, even if such persons were prepared to pay a
higher price per share for the Company Common Stock than the Merger
Consideration. If AANA elects to exercise the Option, such exercise would
inhibit any acquiror of the Company (other than AANA) from accounting for any
acquisition of the Company using the "pooling of interests" accounting method.
Such method is often preferred by an acquiror proposing an acquisition. The
Termination Fee and the Option Agreement are intended to increase the likelihood
that the Merger will be consummated. See "The Merger -- The Option Agreement." A
copy of the Option Agreement is attached hereto as Annex B.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS APPROVED THE MERGER AGREEMENT ON NOVEMBER 21, 1996, BY
UNANIMOUS VOTE OF ALL DIRECTORS, AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT. The Board of Directors, after consideration of
the terms and conditions of the Merger Agreement and other factors deemed
relevant by them, including the opinion of Merrill Lynch & Co. ("Merrill Lynch")
referred to below, has determined that the terms of the Merger are fair to the
shareholders of the Company from a financial point of view, and that the Merger
is in the best interests of the Company and its shareholders. See "The Merger --
Background of the Merger" and "The Merger -- Reasons for the Merger -- Opinion
of Financial Advisor."
Merrill Lynch, the Company's financial advisor, has rendered its opinion to the
Board of Directors that the Merger Consideration to be received by shareholders
of the Company is fair to such shareholders (other than AANA and its
affiliates), from a financial point of view. THIS OPINION, WHICH IS ATTACHED
HERETO AS ANNEX C, SHOULD BE READ IN ITS ENTIRETY WITH RESPECT TO THE MATTERS
CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY MERRILL LYNCH IN RENDERING
SUCH OPINION. See "The Merger -- Opinion of Financial Advisor."
NO APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS
Under applicable provisions of the Michigan Business Corporation Act (the
"MBCA"), shareholders of the Company who vote against the Merger do not have any
rights to dissent from the Merger and exercise any sort of "appraisal" rights.
See "The Merger -- No Dissenters' Rights."
6
11
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In general, the receipt of cash for shares of Common Stock pursuant to the terms
of the Merger Agreement will be a taxable transaction for federal income tax
purposes and may be a taxable transaction for state, local and other tax
purposes as well. Shareholders are urged to consult their own tax advisors to
consider the particular tax consequences of the Merger to them. See "The Merger
- - - -- Certain Material Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" transaction.
PRICE RANGE OF THE SHARES OF COMMON STOCK; DIVIDENDS
The Company's shares of Common Stock of the Company are listed and traded on the
New York Stock Exchange under the symbol "SFB." The table below sets forth the
high and low per share closing sales prices for the shares of Common Stock
reported and cash dividends paid during the periods indicated.
YEAR ENDED DECEMBER 31, HIGH LOW DIVIDENDS PER SHARE
- - - -------------------------------------------------------- ------ ------ -------------------
1992.................................................... $24.88 $16.50 $0.46
1993.................................................... 32.25 18.50 0.54
1994.................................................... 29.75 22.25 0.62
1995.................................................... 40.88 23.75 0.70
1996.................................................... 58.00 36.63 0.78
On November 21, 1996, the last full trading day prior to the announcement of the
execution of the Merger Agreement, the per share closing price as reported on
the New York Stock Exchange was $58.00. On February , 1997, the per share
closing price as reported on the New York Stock Exchange was $ .
Shareholders may wish to obtain a current quotation for the shares of Common
Stock.
7
12
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected consolidated financial data for the
Company for each of the four years ended December 31, 1992 through 1995, and
selected unaudited consolidated financial data for the nine month periods ended
September 30, 1996, and 1995. The data for the four years ended December 31,
1995, has been derived from, and should be read in conjunction with, the audited
consolidated financial statements of the Company and its subsidiaries for such
years, including the notes thereto and the reports thereon of
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME:
Interest income......................................................... $ 765,484 $ 682,458
Interest expense........................................................ 480,676 443,560
Net interest income..................................................... 284,808 238,898
Provisions for losses................................................... 2,184 564
Net interest income after provisions for losses......................... 282,624 238,334
Net gains............................................................... 14,296 7,902
Other income............................................................ 44,275 38,876
Operating and administrative expenses(1)................................ 247,036 146,456
Income before federal income tax provision and the cumulative effect of
an accounting change.................................................. 94,159 138,656
Provision for federal income taxes...................................... 34,300 50,350
Income before the cumulative effect of an accounting change............. 59,859 88,306
Cumulative effect of a change in accounting for goodwill................ (43,032) --
Net income.............................................................. $16,827 $88,306
Earnings per share
Income before the cumulative effect of a change in accounting for
goodwill............................................................. $1.86 $2.73
Net income............................................................ $0.52 $2.73
Dividends per common share.............................................. $0.58 $0.52
Dividend payout ratio(2)................................................ 18.0% 19.0%
SUMMARY OF CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
Total assets............................................................ $15,353,682 $13,271,994
Investments............................................................. 534,270 267,841
Mortgage-backed securities.............................................. 3,001,637 2,591,710
Loans receivable........................................................ 11,029,395 9,776,946
Cost in excess of fair value of net assets acquired..................... 166,739 139,827
Deposits................................................................ 10,786,092 9,137,305
Borrowings.............................................................. 3,116,029 2,840,484
Shareholders' equity.................................................... 895,703 878,468
OTHER FINANCIAL AND STATISTICAL DATA:
Core capital ratio...................................................... 5.05% 5.56%
Tangible capital ratio.................................................. 4.95% 5.41%
Risk-based capital ratio................................................ 10.67% 11.75%
Interest rate spread during the period.................................. 2.54% 2.38%
Net interest margin on average earning assets........................... 2.81% 2.66%
Operating expense ratio(3).............................................. 51.09% 48.28%
Ratio of non-performing assets to total assets.......................... 0.59% 0.38%
Return on average assets(4)............................................. 0.16% 0.93%
Equity-to-assets ratio (at end of period)............................... 5.83% 6.62%
Equity-to-assets ratio (average for period)............................. 6.37% 6.67%
Return on average shareholders' equity(5)............................... 2.49% 13.91%
Number of full-service Banking Centers.................................. 181 164
Number of Home Lending Centers (retail)................................. 11 11
Number of Loan Production Offices (wholesale)........................... 28 24
- - - -------------------------
(1) Included in the 1996 operating and administrative expenses is a one-time
industry wide assessment, mandated by federal law, the Company's portion of
which totaled $67,311,000, before tax, for the recapitalization of the
Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation.
(2) The dividend payout ratio calculated for the nine months ended September 30,
1996 excludes the effect of the SAIF recapitalization expense and the
cumulative effect of a change in accounting for goodwill.
(3) Total operating and administrative expenses (excluding goodwill
amortization) divided by the sum of net interest income and other recurring
income (primarily fees and charges). For 1996, this ratio excludes the SAIF
recapitalization expense. This ratio is often referred to as an "efficiency
ratio".
8
13
Deloitte & Touche LLP, independent auditors for the Company, as well as the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, which is incorporated herein by reference. The data for
the nine month periods ended September 30, 1996, and 1995, is unaudited but has
been derived from the Company's unaudited consolidated financial statements
included in its Quarterly Report on Form 10-Q for the period ended September 30,
1996, which is incorporated herein by reference.
AT OR FOR THE YEAR ENDED DECEMBER 31,
- - - ----------------------------------------------------------
1995 1994 1993 1992
- - - ----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA AND OTHER FINANCIAL AND
STATISTICAL DATA)
$ 925,703 $ 774,996 $ 715,059 $ 758,181
603,219 444,349 426,428 498,586
322,484 330,647 288,631 259,595
1,304 184 11,311 11,728
321,180 330,463 277,320 247,867
20,694 6,957 23,477 28,235
44,339 47,710 30,488 16,279
198,012 198,527 151,323 143,468
188,201 186,603 179,962 148,913
68,700 67,600 64,400 53,300
119,501 119,003 115,562 95,613
-- -- -- --
$119,501 $119,003 $115,562 $95,613
$3.70 $3.70 $3.60 $3.00
$3.70 $3.70 $3.60 $3.00
$0.70 $0.62 $0.54 $0.46
18.9% 16.8% 15.0% 15.3%
$13,275,608 $12,076,933 $10,905,397 $9,544,731
227,774 369,049 316,379 543,149
3,189,433 2,527,476 2,438,169 3,175,781
9,197,725 8,488,385 7,435,063 5,247,577
35,874 151,381 149,914 120,568
9,151,929 8,150,121 7,790,555 6,527,603
2,818,217 2,772,715 1,989,350 2,081,312
916,263 812,824 710,500 609,071
5.82% 6.10% 6.01% 6.14%
5.67% 5.53% 5.08% 5.14%
2.53% 12.83% 12.74% 13.53%
2.36% 2.90% 2.86% 2.62%
2.64% 3.11% 3.10% 2.89%
48.63% 48.60% 44.08% 47.44%
0.39% 0.43% 0.71% 0.75%
0.93% 1.05% 1.17% 1.00%
6.90% 6.73% 6.52% 6.38%
6.67% 6.69% 6.64% 5.90%
13.93% 15.68% 17.61% 16.93%
166 168 169 123
11 10 9 7
24 27 13 --
(4) The return on average assets for 1996 has been annualized and includes the
effect of the SAIF recapitalization and the cumulative effect of a change in
accounting for goodwill. Excluding these one-time only items, the Company's
return on average assets would have been % for the nine months ended
September 30, 1996.
(5) The return on average equity for 1996 has been annualized and includes the
effect of the SAIF recapitalization and the cumulative effect of a change in
accounting for goodwill. Excluding these one-time only items, the Company's
return on average equity would have been % for the nine months ended
September 30, 1996.
9
14
THE MERGER
BACKGROUND OF THE MERGER
Since the mid-1980s, the Company and its principal subsidiary, the Bank, have
carried out an expansion strategy as the result of which the Bank has become the
th largest SAIF-insured thrift institution in the nation, measured by total
assets as of December 31, 1996, and, according to industry publications, one of
the nation's largest thrift institution originators of single-family mortgage
loans during 1996. From time to time during this period, inquiries were received
from other financial institutions regarding the Company's interest in
affiliating with a larger financial institution.
During the first half of 1994, the Bank was approached by the Chief Executive
Officer of a larger mid-Western bank holding company, concerning a possible
merger. Mr. Ricketts reported this contact to the Bank's Board of Directors,
which authorized him to continue preliminary discussions with this institution
and to engage the investment banking firm of Merrill Lynch to advise the Bank
regarding available strategic alternatives. Subsequently, a process was
conducted with a view to identifying other parties that might have an interest
in discussing an acquisition or merger with the Bank pursuant to parameters
under consideration by the Board of Directors. Each identified party was
provided with information regarding the Bank. After a review of this
information, two parties expressed continued interest in a possible transaction.
Both parties were provided with additional information and given the opportunity
to review materials with management of the Bank. Preliminary negotiations were
then commenced with both parties.
During the course of preliminary negotiations, it became apparent that the
parameters outlined by the Bank's Board of Directors for a possible sale of the
Bank would not be met. At this point, senior management of the Bank terminated
the sale process and recommended to the Bank's Board of Directors in November
1994 that a sale of the Bank to the parties under consideration not be pursued
at that time. The Board of Directors concurred with these conclusions, and
instructed management to terminate negotiations with both parties. Thereafter,
the Bank took a series of actions designed to enhance shareholder value,
including reorganizing into a holding company structure in the spring of 1995,
implementing a stock repurchase program and expanding into the Chicago, Illinois
market area in mid-1996.
Throughout 1995 and 1996 significant consolidation in the financial services
industry continued. During 1995, Mr. Ricketts was approached by several other
mid-Western financial institutions, and each indicated varying degrees of
interest in exploring the possibility of a business combination with the
Company. Preliminary discussions were held by senior executive officers of the
Company with each institution, but these discussions were typically general in
nature and were subsequently terminated with each interested party at an early
stage.
In July 1996, the Company requested Merrill Lynch to again advise it regarding
available strategic alternatives. Merrill Lynch was instructed to identify those
financial institutions that had in the past expressed serious interest in
effecting a business combination with the Company or which Merrill Lynch
believed would have such an interest. During August 1996, Merrill Lynch
contacted 21 financial institutions to determine their level of interest in a
possible transaction. Of these, 10 institutions executed confidentiality and
standstill agreements with Merrill Lynch, as the Company's agent, and were
provided with a confidential memorandum prepared by Merrill Lynch regarding the
Company. Each was asked to submit by September 26, 1996, a preliminary,
non-binding indication of interest to acquire the Company.
During September 1996, another mid-Western thrift holding company (the "MTHC")
that had previously informally expressed an interest in acquiring the Company
was contacted. Following this contact, the MTHC executed a confidentiality and
standstill agreement that was identical in substance to those agreed to by the
other prospective interested parties. The MTHC was then furnished with certain
confidential information concerning the Company and invited to submit its
preliminary non-binding indication of interest to acquire the Company. In
September 1996, the Company received preliminary indications of interest in
acquiring the Company from AANA and the MTHC, subject, in each case, to
completion of an on-site due diligence review of the Company.
Based on the indications of interest received from AANA and the MTHC, senior
executive officers of the Company invited both to conduct an investigation of
the Company and its business and to submit a list of
10
15
materials that each desired to examine as a part of their investigation. The
Company's Board of Directors was advised of these developments, among others, at
a meeting held on October 11, 1996. During October 1996, AANA and the MTHC
conducted their investigations of the Company at a location removed from the
Company's offices. Numerous conversations occurred during the last half of
October with both AANA and the MTHC regarding the results of their due diligence
investigations.
At the Company's Board of Directors meeting held on October 24, 1996, the
Company's outside counsel discussed the fiduciary duties of the Board and the
process that should be observed in connection with any possible business
combination. At this meeting, Merrill Lynch was authorized to solicit from AANA
and the MTHC definitive proposals for a business combination with the Company in
order to evaluate the significance of such proposals against the Company's
alternative of remaining independent.
Following completion of their due diligence investigations, on November 6, 1996,
the Company received final definitive proposals from AANA and the MTHC. The
proposal from AANA was for a merger involving an all cash consideration of
$58.00 per share for the Company's Common Stock, while the MTHC's proposal was
for a merger involving a stock-for-stock exchange of MTHC common stock for
shares of the Company's Common Stock, at a fixed exchange ratio without any
guarantee of value between the time of signing and the closing of the proposed
merger. Based on the reported closing sales price of MTHC common stock on
November 6, 1996, the value for each share of the Company's Common Stock
proposed by the MTHC was for a lower nominal value than the AANA offer. On
November 6 and 7, 1996, senior executive officers of the Company met with
outside counsel and Merrill Lynch to review the two proposals, and Merrill Lynch
was instructed by management and outside counsel to continue discussions with
both AANA and the MTHC to clarify certain aspects of their proposals.
On November 11, 1996, the Company's Board met to discuss the proposals from both
interested parties, having been provided with copies of the proposals and other
relevant materials prepared by Merrill Lynch and by outside counsel prior to the
meeting. At the meeting, the Company's outside counsel again reviewed with the
Directors their duties in connection with consideration of any proposed
transaction, the primary tax and legal considerations involved in both all cash
and all stock merger transactions and the legal requirements involved in the
completion of a merger transaction of either type. Merrill Lynch then presented
a full report on its efforts over the past three months to identify potential
purchasers and a detailed analysis of the two final proposals. At the conclusion
of these presentations, the Board preliminarily concluded that the proposal from
AANA presented a potentially superior offer, but confirmed that it had not yet
concluded that entering into a business combination at this time was preferable
to remaining independent. Thereafter, both Mr. Ricketts and Merrill Lynch
contacted AANA on November 11, 1996, regarding its proposal, and on November 12,
1996, AANA informed Merrill Lynch that it would increase its all-cash offer by
$1.00, to $59.00 per share. Merrill Lynch also sought further clarification with
respect to certain aspects of the MTHC's proposal, including confirmation of the
fact that its offer was structured as a fixed exchange ratio offer and did not
contemplate any pricing collar mechanism to insulate the offer from movement in
the MTHC stock price.
On November 15, 1996, the Board of Directors met to consider the final proposals
of both AANA and the MTHC. All directors of the Company were present in person,
except Mr. Williams, who participated by telephone. At the meeting, Mr. Ricketts
and Merrill Lynch reported on the discussions that had taken place over the past
four days and the increase in the AANA proposal. The Company's senior executive
officers, Merrill Lynch and the Company's outside counsel again reviewed the
terms of each proposal. Ronald J. Palmer, Senior Vice President and General
Counsel of the Company, summarized the financial payments and other benefits
that would be payable to Directors Ricketts and Carley, as well as to the other
senior executives of the Company, under their employment or severance agreements
in the event of a change in control of the Company. Certain senior executive
officers then presented their views as to the long-term prospects for the
Company if it remained independent, including estimates of future earnings
potential for the next two years. After these presentations and further
discussions, the Board of Directors authorized management to proceed with
discussions with AANA and to work with outside counsel to negotiate the terms of
a definitive agreement. Following the meeting, Merrill Lynch informed AANA and
the MTHC of the Board's decision.
11
16
From November 16 through November 21, 1996, outside counsel to the Company,
together with senior management of the Company, negotiated the final terms and
conditions of the Merger Agreement, the Option Agreement and related agreements
with AANA and its counsel. During these negotiations, counsel for AANA informed
outside counsel for the Company that AANA's willingness to proceed with the
Merger was conditioned on the Company granting the Option pursuant to the Option
Agreement and on the provisions in the Merger Agreement providing for certain
fees to be paid in the event of termination of the Merger Agreement prior to
closing.
At a meeting of the Company's Board of Directors held on November 21, 1996,
outside counsel reviewed the Merger Agreement and the Option Agreement in
detail, and in particular explained (a) the effect of the Option Agreement and
the termination fee provisions of the Merger Agreement, (b) the restrictions
placed on the Company's ability to consider any subsequent unsolicited
acquisition proposal by a third party, (c) the termination rights provided to
AANA in the event of an unsolicited acquisition proposal by a third party and
(d) certain employee benefits offered by AANA. Merrill Lynch discussed its views
of the terms and conditions of the Merger Agreement and the Option Agreement and
rendered its written opinion that, as of such date, the cash consideration to be
received by the Company's shareholders was fair to such shareholders from a
financial point of view. After these presentations by outside counsel and
Merrill Lynch, Directors Ricketts and Carley were excused from the meeting and
the remaining independent Directors discussed the desirability of accepting the
AANA final proposal and approving the Merger. The independent Directors then
reviewed the financial benefits that would flow to senior management of the
Company and other issues relating to the AANA offer. Upon the return of
Directors Ricketts and Carley to the meeting, the Board then unanimously
approved the Merger Agreement and the Option Agreement and authorized their
execution and the execution of all related documents and agreements. At the
conclusion of the meeting, the Merger Agreement, the Option Agreement and the
related agreements were executed by the Company, AANA and MergerSub. Prior to
the opening of trading on November 22, 1996, AANA and the Company issued press
releases announcing the execution of the Merger Agreement and related matters.
Shortly after these announcements, the Company received a letter from the MTHC
indicating that it was preparing to submit another merger proposal providing for
a stock-for-stock exchange of Company Common Stock for MTHC common stock having
a value of $60.29 per share of Company Common Stock, based on the closing price
of MTHC common stock on the preceding day, without any mention of value
protection. At approximately 4:00 p.m. on November 22, 1996, this revised
proposal was received.
Following discussions with Merrill Lynch, its counsel and counsel for the
Company on November 23, 1996, management decided to convene a special meeting of
the Company's Board of Directors at 10:00 a.m. on Tuesday, November 26, 1996.
The Company's Directors were notified of the revised proposal of the MTHC on
Saturday, November 23, 1996, and copies were distributed to Directors on Monday,
November 25, 1996. Senior management continued to meet with its advisors on
Sunday and Monday, November 24 and 25, 1996, in preparation for the Tuesday
meeting. On Tuesday morning, November 26, 1996, shortly before the special
meeting of the Company's Board was scheduled to begin, the MTHC notified Mr.
Ricketts by letter that it was withdrawing its revised proposal, having learned
that the Company had signed definitive agreements with AANA. The Company and the
MTHC then promptly issued separate press releases announcing such withdrawal.
REASONS FOR THE MERGER
As indicated under "Background of the Merger," the Company's Board of Directors
unanimously determined on November 21, 1996, that the terms of the Merger
Agreement were in the best interests of the Company and its shareholders.
In the course of reaching its decision to approve the Merger Agreement and the
Merger and not to remain as an independent company, the Board consulted with its
legal and financial advisors, as well as senior management of the Company, and
considered numerous factors. The following are the material factors considered
by the Board:
(i) The opinion of Merrill Lynch that the Merger Consideration consisting of
cash in the amount of $59.00 per share of Common Stock is fair to the
Company's shareholders (other than AANA and its affiliates) from a
financial point of view, as more fully discussed below under the caption
"Opinion of Financial Advisor."
12
17
(ii) The calculation by Merrill Lynch, using a 14% discount rate and a price
to earnings ratio of 8.0x to 10.0x, based upon publicly available
information, that if the Company were to remain independent a compound
annual growth rate in the Company's earnings of approximately 17% to 23%
would be needed through 2001 to provide the Company's shareholders with
the same value on a present value basis as the Merger Consideration. The
Board of Directors concluded that it was uncertain that profit increases
of this magnitude could be readily achieved in a manner consistent with
safe and sound banking practices.
(iii) The relationship of the Merger Consideration and the historical and then
current market prices for the shares of Common Stock, as described in
detail under "Summary -- Price Range of the Shares of Common Stock;
Dividends," including the fact that the Merger Consideration represented
premiums of approximately 20.72%, 36.18% and 41.32% over the closing
market prices of the Common Stock at 30 days, 60 days and 90 days,
respectively, prior to the execution and delivery by the Company and AANA
of the Merger Agreement.
(iv) The prices and premiums paid in comparable acquisition transactions
involving other financial institutions of which the Board was aware,
based, among other things, on information supplied by Merrill Lynch. With
respect to this factor, the Board noted that the price offered by AANA
compared favorably with similar transactions involving other financial
institutions.
(v) A review of the terms of the proposal by AANA, including the form of
consideration to be paid, cash, which the Board believed would be desired
by most shareholders and would not be subject to reduction.
(vi) The results of the process that had been undertaken over a period of
several months to identify and solicit proposals from third parties to
enter into a strategic transaction with the Company.
(vii) The Board's familiarity with and review of the Company's business,
results of operations, financial condition and prospects, as well as
thrift industry conditions generally and the changing environment for
banking and financial services, as presented at its meeting on November
21, 1996.
(viii) The Board's view, based on advice received from both outside counsel and
Merrill Lynch, that the terms of the Merger Agreement, including the
termination fee provisions, and the Option Agreement contained provisions
customary for this type of transaction, as well as the Board's
understanding that the Merger Agreement permits the Company, in the
exercise of the fiduciary duties of its Board of Directors, to furnish
nonpublic information and access in response to unsolicited requests made
by third parties after the signing of the Merger Agreement, pursuant to
appropriate confidentiality agreements, and to participate in discussions
with such third parties concerning an acquisition proposal.
(ix) The effect of the proposed Merger on the employees and customers of
Standard Federal and the communities in which Standard Federal operates.
In view of the wide variety of factors considered in connection with this
evaluation, and the fact that none of these factors were viewed as suggesting a
contrary conclusion, the Board did not favor one factor over another in
determining that the Company should enter into the Merger Agreement on November
21, 1996. Based upon all of these factors, the Board of Directors unanimously
approved the Merger Agreement and unanimously recommended that the shareholders
of the Company vote for the Merger.
OPINION OF FINANCIAL ADVISOR
Standard Federal retained Merrill Lynch to act as its exclusive financial
advisor in connection with a possible business combination with one or more
parties. Pursuant to the terms of its engagement, Merrill Lynch agreed to assist
the Company in analyzing, structuring, negotiating and effecting a transaction
with AANA. The Company selected Merrill Lynch because Merrill Lynch is a
nationally recognized investment banking firm with substantial experience in
transactions similar to the Merger and is familiar with the Company and its
business. As part of its investment banking business, Merrill Lynch is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions.
As part of its engagement, representatives of Merrill Lynch attended the meeting
of the Company's Board of Directors held on November 21, 1996, at which the
Board of Directors considered and approved the Merger
13
18
Agreement. At that meeting, Merrill Lynch rendered its written opinion that, as
of such date, the cash consideration to be received by the Company's
shareholders is fair from a financial point of view. Such opinion was
reconfirmed in writing as of the date of this Proxy Statement.
The full text of Merrill Lynch's written opinion is attached hereto as Annex C
and is incorporated herein by reference. The description of the opinion set
forth herein is qualified in its entirety by reference to Annex C. The Company's
shareholders are urged to read the opinion in its entirety for a description of
the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the view undertaken, by Merrill Lynch in
connection therewith.
MERRILL LYNCH'S OPINION IS DIRECTED TO THE STANDARD FEDERAL BOARD AND ADDRESSES
ONLY THE CASH CONSIDERATION TO BE RECEIVED BY STANDARD FEDERAL SHAREHOLDERS. IT
DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO PROCEED WITH THE MERGER AND
DOES NOT CONSTITUTE, NOR SHOULD IT BE CONSTRUED AS, A RECOMMENDATION TO ANY
STANDARD FEDERAL SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
STANDARD FEDERAL SPECIAL MEETING OR ANY OTHER MATTER IN CONNECTION THEREWITH.
Merrill Lynch has informed the Company that in arriving at its written opinion,
Merrill Lynch, among other things: (1) reviewed the Company's Annual Reports,
the Company's Annual Reports on Form 10-K and related audited financial
information for the three fiscal years ended December 31, 1995, and the
Company's Quarterly Reports on Form 10-Q and related unaudited financial
information for each of the quarterly periods ended March 31, 1996, June 30,
1996 and September 30, 1996; (2) reviewed the Annual Report of ABN AMRO Holding
N.V. and related financial information for the three fiscal years ended December
31, 1995, and ABN AMRO Holding N.V.'s Interim Report and related financial
information for the six months ended June 30, 1996; (3) reviewed certain
information, including financial forecasts, relating to the business, earnings,
assets and prospects of the Company furnished to Merrill Lynch by the Company;
(4) conducted limited discussions with members of senior management of the
Company concerning the business, earnings, assets and prospects and senior
management's views as to future financial performance of the Company; (5)
reviewed the historical market prices and trading activity for the Company's
common stock and compared them with those of certain publicly traded companies
which Merrill Lynch deemed to be relevant; (6) compared the results of
operations of the Company with those of certain companies which Merrill Lynch
deemed to be relevant; (7) compared the proposed financial terms of the Merger
contemplated by the Agreement with the financial terms of certain other mergers
and acquisitions which Merrill Lynch deemed to be relevant; (8) reviewed the
Merger Agreement and the Option Agreement; (9) reviewed such other financial
studies and analyses and performed such other investigations and took into
account such other matters as Merrill Lynch deemed necessary.
For the purpose of its opinion, with the Company's consent, Merrill Lynch
excluded from its analysis the value of the supervisory goodwill litigation
claim held by the Company against the United States government, given what
Merrill Lynch understood to be the inability of the Company to value this
litigation claim as of the date of its opinion. In preparing its opinion,
Merrill Lynch assumed and relied upon the accuracy and completeness of all
financial and other information supplied or otherwise made available to it for
purposes of its opinion, and Merrill Lynch did not assume any responsibility for
independently verifying such information or undertaking an independent
evaluation or appraisal of the assets or liabilities of the Company or any of
its subsidiaries (including, as noted above, the supervisory goodwill litigation
claim), nor was it furnished any such evaluation or appraisal. Merrill Lynch
also assumed and relied upon the senior management of the Company referred to
above as to the reasonableness and achievability of the financial and operating
forecasts (and the assumptions and bases therefore) provided to Merrill Lynch.
In that regard, Merrill Lynch assumed, with the Company's consent, that such
forecasts, including, without limitation, financial forecasts and projections
regarding underperforming and nonperforming assets, net charge-offs and adequacy
of reserves, reflect the best currently available estimates and judgments of
management as to the future financial performance of the Company. Merrill Lynch
is not an expert in the evaluation of allowances for loan losses, and it did not
make an independent evaluation of the adequacy of the allowance for loan losses
of the Company nor did it review any individual credit files, and it assumed
that the aggregate allowance for loan losses of the Company is adequate to cover
such losses. Merrill Lynch's opinion was necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, the date of its opinion.
14
19
Merrill Lynch's opinion was rendered without regard to the necessity for, or
level of, any restrictions, obligations, undertakings or divestitures which may
be imposed or required in the course of obtaining regulatory approvals for the
Merger.
In connection with rendering its opinion on November 21, 1996, Merrill Lynch
performed a variety of financial analyses, including those summarized below. The
summary set forth below, which has been provided by Merrill Lynch, does not
purport to be a complete description of the analyses performed by Merrill Lynch
in this regard, although it describes the material terms of the analyses
performed. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to a partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized below,
Merrill Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors considered by it, without
considering all analyses and factors, or attempting to ascribe relative weights
to some or all such analyses and factors, could create an incomplete view of the
evaluation process underlying Merrill Lynch's opinion. In addition, while
Merrill Lynch gave the various analyses approximately similar weight, it may
have used them for different purposes and may have deemed various assumptions
more or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described below should not be taken to be
Merrill Lynch's view of the actual value of the Company. The fact that any
specific analysis is referred to in the summary below is not meant to indicate
that such analysis was given more weight than any other analysis.
In performing its analyses, Merrill Lynch made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. The analyses performed
by Merrill Lynch are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Merrill Lynch's
analysis of the fairness to the Company shareholders of the cash consideration
to be paid pursuant to the Merger and were provided to the Company's Board of
Directors in connection with the delivery of Merrill Lynch's opinion. With
respect to the comparison of selected companies analysis and the analysis of
selected thrift merger transactions summarized below, no public company utilized
as a comparison is identical to the Company and such analyses necessarily
involve complex considerations and judgments concerning the differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading values of the companies concerned. The analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. The analyses do not purport to be appraisals or to
reflect the prices at which the Company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the future,
In addition, as described above, Merrill Lynch's opinion was only one of many
factors taken into consideration by the Company's Board of Directors.
The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the senior management of the Company. The Company does
not publicly disclose internal management projections of the type provided to
Merrill Lynch in connection with its review of the Merger, and as a result, such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions, and accordingly, actual results could vary
significantly form those set forth in such projections.
The following is a summary of the material terms of the analyses presented by
Merrill Lynch to the Company's Board of Directors on November 21, 1996, in
connection with its fairness opinion.
Summary of Proposal. Merrill Lynch reviewed the terms of the proposed
transaction, including the cash consideration to be paid by AANA pursuant to the
Merger Agreement and the aggregate transaction value. Based on the transaction
value per share of $59.00, Merrill Lynch calculated the price to market, price
to book, price to tangible book, and price to earnings multiples, and the
implied deposit premium paid (defined as the transaction value minus the
tangible book value divided by total deposits) in the contemplated transaction.
This analysis yielded a price to current market multiple of 1.04x, a price to
market 30 days prior of 1.21x, a price to book
15
20
value multiple of 2.11x, a price to tangible book value multiple of 2.60x, a
price to earnings multiple of 14.05x (based on the Company's earnings, before
extraordinary charges, for the twelve months ended September 30, 1996), and an
implied deposit premium of 10.80%.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, Merrill Lynch estimated the present value of the future streams of
after tax cash flows that the Company could produce through 2001 and distribute
to shareholders ("dividendable net income"). In this analysis, Merrill Lynch
assumed that the Company performed in accordance with the earnings forecasts
provided to Merrill Lynch by the Company's senior management and that its
tangible common equity to tangible asset ratios would be maintained at a minimum
5.50% level. Merrill Lynch estimated the terminal values for the Company's
Common Stock at 8.0, 8.5 and 9.0 times the Company's 2002 estimated operating
income (defined as net income before intangible amortization). The dividendable
net income streams and terminal values were then discounted to present values
using different discount rates (ranging from 13% to 15%) chosen to reflect
different required rates of return of holders or prospective buyers of Company
Common Stock. This discounted dividend stream analysis indicated a reference
range of between $45.53 and $54.54 per share for Company Common Stock. The
analysis was based upon the Company's senior management's projections, which
were based upon many factors and assumptions, many of which were beyond the
control of the Company. As indicated above, this analysis did not purport to be
indicative of actual values or actual future results and did not purport to
reflect the prices at which any securities may trade at the present or at any
time in the future. Merrill Lynch noted that the discounted cash flow analysis
was included because it is a widely used valuation methodology, but noted that
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, including earnings growth rates, dividend payout
rates, terminal values and discount rates.
Analysis of Selected Thrift Merger Transactions. Merrill Lynch reviewed publicly
available information regarding nine nationwide thrift merger transactions with
a value greater than $500 million which have been announced since January 1,
1992. Merrill Lynch compared the price to book value, price to tangible book
value, price to earnings ratios and the implied deposit premium paid in the
contemplated transaction and in such selected thrift merger transactions. This
analysis yielded a range of price to book value multiples of 0.85x to 1.80x with
a mean of 1.51x and a median of 1.57x (compared with a transaction multiple of
2.11x for the Company), a range of price to tangible book value multiples of
1.11x to 2.07x with a mean of 1.61x and a median of 1.58x (compared with a
transaction multiple of 2.60x for the Company), a range of price to earnings
multiples of 11.19x to 14.37x with a mean of 12.70x and a median of 12.65x
(compared with a transaction multiple of 14.05x for the Company), and a range of
implied deposit premiums paid of 1.08% to 11.92% with a mean of 5.84% and a
median of 5.14% (compared with a transaction multiple of 10.80% for the
Company). This analysis yielded an overall imputed reference range per share of
Company Common Stock of $23.65 to $62.44, and $35.58 to $53.99 based on the mean
and median imputed range.
Merrill Lynch also reviewed publicly available information regarding 42
mid-Western thrift merger transactions with a value greater than $25 million
which have been announced since January 1, 1994. Merrill Lynch compared the
price to market value 30 days prior to announcement, price to book value, price
to tangible book value, price to earnings ratios and the implied deposit premium
paid in the contemplated transaction and in such selected thrift merger
transactions.
This analysis yielded a range of price to market (30 days prior to announcement)
multiples of 0.95x to 1.64x with a mean of 1.24x and a median of 1.24x (compared
with a transaction multiple of 1.21x for the Company), a range of price to book
value multiples of 0.95x to 2.19x with a mean of 1.41x and a median of 1.36x
(compared with a transaction multiple of 2.11x for the Company), a range of
price to tangible book value multiples of 0.95x to 2.19x with a mean of 1.44x
and a median of 1.38x (compared with a transaction multiple of 2.60x for the
Company), a range of price to earnings multiples of 10.00x to 19.33x with a mean
of 14.80x and a median of 14.57x (compared with a transaction multiple of 14.05x
for the Company), and a range of implied deposit premiums paid of 3.34% to
12.18% with a mean of 6.84% and a median of 6.33% (compared with a transaction
multiple of 10.80% for the Company). This analysis yielded an overall imputed
reference range per share of Company Common Stock of $21.46 to $82.10, and
$31.14 to $62.84 based on the mean and median imputed range.
16
21
No company or transaction used in the above analysis as a comparison is
identical to the Company or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the mean or median) is not, in itself, a
meaningful method of using comparable data.
Comparison of Selected Comparable Companies. Merrill Lynch also compared
selected operating and stock market results of the Company to the publicly
available corresponding data of certain other companies which Merrill Lynch
deemed to be relevant, including Commercial Federal Corporation, Collective
Bancorp, Inc., Charter Financial, Inc., Charter One Financial, Inc., First
Financial Corporation, Peoples Heritage Financial Group, Inc., Roosevelt
Financial Group, Inc., Sovereign Bancorp, Inc., TCF Financial Corp., Washington
Federal, Inc., and Washington Mutual, Inc. (collectively the "Standard Federal
Composite"). This comparison showed, among other things, that (i) as of November
19, 1996, the ratio of Company's market price to fully-diluted core earnings per
share (excluding net gains on sales of assets) for the twelve months ended
September 30, 1996, was 15.01x, compared to a mean of 12.81x for the Standard
Federal Composite, (ii) as of November 19, 1996, the ratio of the Company's
market price to book value per share at September 30, 1996, was 1.98x, compared
to a mean of 2.00x for the Standard Federal Composite, (iii) as of November 19,
1996, the ratio of the Company's market price to tangible book value per share
at September 30, 1996, was 2.43x, compared to a mean of 2.22x for the Standard
Federal Composite, (iv) as of November 19, 1996, the ratio of the Company's
market price to estimated earnings for the twelve month period ending December
31, 1997, was 10.24x, compared to a mean of 10.23x for the Standard Federal
Composite (assuming reported average Wall Street earnings estimates for both the
Company and the Standard Federal Composite) (v) for the twelve month period
ended September 30, 1996, the Company's return on average assets was 0.92%
compared to a mean of 1.16% for the Standard Federal Composite (vi), for the
twelve month period ended September 30, 1996, the Company's return on average
equity was 14.61% compared to a mean of 15.95% for the Standard Federal
Composite, (vii) at September 30, 1996, the Company's ratio of nonperforming
loans to total loans was 0.37% compared with a mean of 0.66% for the Standard
Federal Composite and (viii) at September 30, 1996, the Company's ratio of loan
loss reserves to nonperforming assets was 93.49% compared with a mean of 145.96%
for the Standard Federal Composite.
Mark-to-Market Analysis. Merrill Lynch evaluated the estimated market value of
key components of the Company's balance sheet, including, among other things,
its investment securities and mortgage-backed securities portfolios, loan
portfolio and other borrowings. This analysis indicated a valuation of
approximately $27.96 per share of Company Common Stock (on a fully diluted
basis), before any analysis of credit quality related adjustments to the
portfolios or deposit premium attributable to the franchise.
In connection with its opinion dated as of the date of this Proxy Statement,
Merrill Lynch performed procedures to update, as necessary, certain of the
analyses described above and reviewed the assumptions on which such analyses
described above were based and the factors considered in connection therewith.
Merrill Lynch did not perform any analyses in addition to those described in
updating its November 21, 1996, opinion.
Merrill Lynch has been retained by the Board of Directors of the Company as an
independent contractor to act as financial adviser to the Company with respect
to the Merger. Merrill Lynch is a nationally recognized investment banking firm
which, among other things, regularly engages in the valuation of businesses and
securities, including banking institutions, in connection with mergers and
acquisitions. In addition, within the past three years, Merrill Lynch has
provided financial advisory, investment banking and other services to the
Company and ABN AMRO Holding N.V. and has received customary fees for the
rendering of such services. In the ordinary course of its securities business,
Merrill Lynch and its affiliates may trade the debt and/or equity securities of
the Company or ABN AMRO Holding N.V. for its own account and the accounts of its
customers, and accordingly, may from time to time hold a long or short position
in such securities.
The Company and Merrill Lynch have entered into a letter agreement, dated July
15, 1996, relating to the services to be provided by Merrill Lynch in connection
with the Merger. The Company has agreed to pay Merrill Lynch fees as follows:
(i) a fee of $500,000, payable in cash upon execution of the Merger Agreement;
(ii) an
17
22
additional cash fee of $500,000, contingent upon and payable upon the mailing of
this Proxy Statement; and (iii) an additional cash fee of $11,750,000,
contingent upon and payable upon the completion of the Merger. In such letter,
the Company also agreed to reimburse Merrill Lynch for its reasonable and
necessary out-of-pocket expenses incurred in connection with its advisory work,
including the reasonable fees and disbursements of its legal counsel, and to
indemnify Merrill Lynch against certain liabilities relating to or arising out
of the Merger, including liabilities which might arise under the federal
securities laws.
THE MERGER AGREEMENT
General Description. The terms of the Merger are set forth in the Merger
Agreement, which is attached hereto as Annex A. The following description of the
material terms of the Merger Agreement is qualified in its entirety by reference
to the Merger Agreement. Shareholders are urged to review the Merger Agreement
carefully and in its entirety. Exhibits to the Merger Agreement which are
described or referred to therein but not included in Annex A are available from
the Company upon request to Garry G. Carley, Executive Vice President and
Secretary, Standard Federal Bancorporation, Inc., 2600 West Big Beaver Road,
Troy, Michigan 48084, telephone (810) 643-9600.
The Merger Agreement provides that, subject to the terms and conditions of the
Merger Agreement, including the receipt of all requisite regulatory and
shareholder approvals, MergerSub will be merged with and into the Company, the
separate corporate existence of MergerSub will cease and the Company, as the
surviving corporation, will become a wholly-owned subsidiary of AANA. The
Effective Time of the Merger will be either the time of filing of a certificates
of merger as required by Michigan and Delaware corporate law, or a time agreed
to by the Company and AANA and provided in the certificates of merger. Although
following the Merger the Company will continue as the Surviving Corporation, all
current shareholders of the Company (exclusive of AANA and MergerSub) will have
each of their shares of Common Stock converted into the right to receive $59.00
in cash, which is the Merger Consideration, and each option granted under the
Company Incentive Plans will be converted into the right to receive in cash the
difference between the Merger Consideration and the applicable option exercise
price. Each issued and outstanding share of common stock of MergerSub will be
converted into one share of common stock of the Surviving Corporation. The
Merger Agreement also provides that the Certificate of Incorporation and Bylaws
of MergerSub, as in effect immediately prior to the Effective Time, will be the
governing documents of the Surviving Corporation. The Merger Agreement further
provides that the officers and directors of MergerSub at the Effective Time will
be the officers and directors, respectively, of the Surviving Corporation until
their successors are duly elected or appointed in accordance with the bylaws of
the Surviving Corporation.
At the Effective Time, by virtue of the Merger, each share of Common Stock
outstanding immediately prior to the Effective Time (other than shares of Common
Stock owned by AANA or any of AANA's affiliates) automatically will be converted
into the right to receive the Merger Consideration and each option granted under
the Company Incentive Plans automatically will be converted into the right to
receive in cash the difference between the Merger Consideration and the
applicable option exercise price. After the Effective Time of the Merger, the
certificates representing outstanding Common Stock of the Company will represent
only the right to receive the Merger Consideration from AANA and there will be
no transfer on the stock transfer books of the Company of its Common Stock.
Until presented and surrendered in exchange for the Merger Consideration, each
certificate which represented issued and outstanding Company Common Stock will
be deemed for all purposes to evidence ownership of the Merger Consideration.
See "The Merger -- No Dissenters' Rights" and "The Merger -- Payment for Shares
of Common Stock."
Closing Date of Merger. Subject to the conditions contained in the Merger
Agreement, the closing date is expected to occur during the second quarter of
1997.
Representations and Warranties; Conditions Precedent. The Company and AANA have
made certain representations and warranties to each other in the Merger
Agreement as to the authorization, validity and enforceability of the Merger
Agreement and similar corporate matters. The Company has also made certain
additional representations and warranties regarding, among other things: its
capitalization; its subsidiaries; its financial statements and absence of
liabilities; its insurance; its books and records; its title to assets; its real
18
23
properties; the disclosure of litigation; its taxes; its compliance with
applicable laws and permits; performance of its obligations; its employees;
disclosure of material contracts; the absence of certain changes; its loans and
investments; its intellectual properties; its benefit plans; regulatory
approvals and reports; its facilities and environmental conditions; insider
interests; brokers and finders fees related to the Merger; amendment of its
Rights Agreement, and certain other matters. The representations and warranties
in the Merger Agreement expire at the Effective Time.
The obligations of the parties to effect the transactions contemplated by the
Merger Agreement are subject to the fulfillment, at or prior to the Effective
Time, of the following conditions: (i) obtaining necessary regulatory approvals
and (ii) the absence of any threatened, instituted or pending legal proceeding
challenging, seeking to make illegal, or otherwise seeking to restrain or
prohibit the transactions contemplated by the Merger Agreement.
The obligation of AANA to consummate the transactions contemplated by the Merger
Agreement is subject to the following conditions, among others: (i) all
representations and warranties of the Company remain true and correct, except
where the failure to be true and correct would not have a material adverse
effect on the Company at the Effective Time; (ii) the Company will, in all
material respects, have performed or complied with all obligations, agreements
and covenants in the Merger Agreement; (iii) the Company will have furnished to
AANA (A) a certificate of the Chief Executive Officer and the Chief Financial
Officer of the Company, dated as of the Effective Time, in which the officers
certify that they have no reason to believe that conditions (i) and (ii) above
have not been fulfilled, (B) copies of the text of the resolutions by which the
corporate action on the part of the Company necessary to approve the Merger
Agreement and the transactions contemplated by the Merger Agreement were taken,
(C) a certificate dated the Effective Time executed on behalf of the Company by
its corporate secretary or an assistant corporate secretary, certifying that the
copies of the resolutions are true, correct and complete and that the
resolutions were duly adopted, and not amended or rescinded and (D) an
incumbency certificate, dated the Effective Time, certifying the signature and
office of the Company officers executing the Merger Agreement or any other
agreement, certificate or instrument executed by the Company pursuant to the
Merger Agreement; (iv) an opinion of the Company's outside legal counsel will
have been delivered to AANA; (v) the Company shall not have experienced a
material adverse effect since the date of the Merger Agreement unless it has
been disclosed to AANA and cured within the applicable cure period by the
Company, or has resulted primarily from changes in the general level of interest
rates; and (vi) a "comfort letter" of Deloitte & Touche LLP, independent
certified public accountants to the Company, dated no earlier than five (5) days
prior to the Closing, shall have been delivered to AANA.
The obligations of the Company to consummate the transactions contemplated by
the Merger Agreement are subject to the following conditions, among others: (i)
all representations and warranties of AANA remain true and correct at the
Effective Time, except where the failure to be true and correct would not have a
material adverse effect on AANA, (ii) AANA will, in all material respects, have
performed or complied with all obligations, agreements and covenants in the
Merger Agreement; (iii) the Merger shall have been approved by the Company's
shareholders; (iv) an opinion of AANA's outside legal counsel shall have been
delivered to the Company; and (v) AANA will have furnished to the Company (A) a
certificate of an executive officer and the Chief Financial Officer of AANA,
dated as of the Effective Time, in which the officers certify that they have no
reason to believe that conditions (i) and (ii) above have not been fulfilled,
(B) copies of the text of the resolutions by which the corporate action on the
part of AANA necessary to approve the Merger Agreement and the transactions
contemplated by the Merger Agreement were taken, (C) certificates dated the
Effective Time executed on behalf of the AANA and MergerSub by their respective
corporate secretaries or assistant corporate secretaries, certifying that the
copies of the resolutions are true, correct and complete and that the
resolutions were duly adopted, and not amended or rescinded and (D) an
incumbency certificate, dated the Effective Time, executed on behalf of each of
AANA and MergerSub, certifying the signature and office of each officer of AANA
and MergerSub executing the Merger Agreement or any other agreement, certificate
or instrument executed by AANA or MergerSub pursuant to the Merger Agreement.
Conduct of Business by the Company. In the Merger Agreement the Company agrees
that, until the Effective Time, it will operate its business and cause each of
its subsidiaries to operate its business in the ordinary course and consistent
with past practices. The Company also agrees to use all reasonable efforts to
preserve
19
24
intact the present business organizations of the Company, the Bank and each
non-bank subsidiary (each a "Non-Bank Subsidiary") and maintain in effect all
material licenses, permits and approvals of governmental authorities and
agencies necessary for the conduct of its business. The Company further agrees
in the Merger Agreement that neither it, the Bank nor any Non-Bank Subsidiary
will do any of the following, except as contemplated by the Merger Agreement or
otherwise permitted with the prior written consent of AANA:
(i) issue, sell, purchase or redeem or commit or agree to issue, sell,
purchase or redeem any shares (other than shares issued pursuant to the
exercise of stock options outstanding on the date of the Merger Agreement
or any Voting Debt (as defined in the Merger Agreement)) or grant any
options, warrants or rights to purchase shares of its Common Stock; or
issue, sell or authorize the issuance or sale of securities of any kind
convertible into or exchangeable for shares of its capital stock or any
Voting Debt;
(ii) declare, set aside or pay any dividend or make any distribution in
respect of its capital stock, other than regular quarterly cash dividends
payable by the Company on dates consistent with dividend payment
practices during 1995 not to exceed $0.20 per share of Company Common
Stock per quarter, except that the Bank and the Non-Bank Subsidiary may
pay dividends to the Company in amounts sufficient to enable the Company
to pay its ordinary operating expenses and accrued liabilities;
(iii) amend its Articles of Incorporation, Charter or Bylaws, or issue or agree
to issue any additional shares of capital stock or issue or create any
warrants, obligations, subscriptions, options, convertible securities, or
other commitments under which additional shares of capital stock of any
class might be directly or indirectly authorized or issued, except in
connection with options previously granted under the Company Incentive
Plans;
(iv) make any general or unusual increase in compensation or rate of
compensation payable or to become payable to hourly, salaried or
commissioned employees or officers, except for those which are normal,
reasonable and consistent with past practices or as required by or
specifically provided for by contracts in existence as of the date of the
Merger Agreement, nor enter into any written or oral employment agreement
which by its terms cannot be terminated on thirty (30) days' notice or
less without penalty;
(v) accrue, set aside, or pay to any officer or employee any bonus,
profit-sharing, severance, retirement, insurance, death, fringe benefit
or other extraordinary compensation (except pursuant to pension, profit
sharing, bonus and other fringe benefit plans, agreements and
arrangements presently in effect and in accordance with past practices)
or adopt or amend any employee benefit plan;
(vi) commit to purchase, purchase or otherwise acquire any derivative or
synthetic mortgage product or enter into any interest rate swap
transaction;
(vii) except for loans secured by one-to-four family residences in amounts less
that $1 million, make any loan, loan commitment or renewal or extension
thereof to any person which would, when aggregated with all outstanding
loans, commitments for loans or renewals or extensions thereof made by
the Bank to such person and such person's immediate family and
affiliates, exceed $500,000, provided, however, that AANA will be deemed
to have consented to any such loan or commitment if it has not objected
to it within five business days after receiving written notice of the
loan or commitment;
(viii) acquire any business entity or assets thereof, except as it relates to a
foreclosure or other exercise of creditors' rights in the usual and
ordinary course of its business;
(ix) enter into any contract or agreement to buy, sell, exchange or otherwise
deal in any assets or series of assets in a single transaction in excess
of $500,000 in aggregate value (including, but not limited to, options or
commodities or any tangible real or personal properties of the Company or
any Company subsidiary), except for the origination, purchase and sale of
mortgage loans and loan participations and the purchase and sale of
readily marketable investment securities in the ordinary course of
business and consistent with past practices, and sales of real estate
owned and other repossessed properties or acceptance of a deed in lieu of
foreclosure;
20
25
(x) make any one capital expenditure or any series of related capital
expenditures (other than emergency repairs and replacements), the
amount or aggregate amount of which (as the case may be) is in excess
of $500,000;
(xi) file, withdraw, or fail to renew any applications for additional
branches or to relocate operations from existing locations;
(xii) create or incur any liabilities in excess of $500,000, other than the
taking of deposits and other liabilities incurred in the ordinary
course of business and consistent with past practices or as
contemplated or permitted by or in connection with the Merger Agreement
and the consummation of the Merger;
(xiii) create or incur or suffer to exist any mortgage, lien, pledge, security
interest, charge, encumbrance or restriction of any kind against or in
respect of any property or right of the Company or any Company
subsidiary securing any obligation in excess of $500,000, except for
pledges or security interests given in connection with the acceptance
of repurchase agreements or government deposits or Federal Home Loan
Bank borrowings;
(xiv) make or become a party to any contract or commitment in excess of
$500,000, or renew, extend, amend or modify any contract or commitment
in excess of $500,000, except in the usual and ordinary course of
business or as otherwise contemplated or permitted by the Merger
Agreement;
(xv) discharge or satisfy any mortgage, lien, charge or encumbrance other
than as a result of the payment of liabilities in accordance with the
terms thereof, or except in the ordinary course of business, if the
cost to the Company or any Company subsidiary to discharge or satisfy
any such mortgage, lien, charge or encumbrance is in excess of
$500,000, unless such discharge or satisfaction is covered by general
or specific reserves;
(xvi) pay any obligation or liability, absolute or contingent, in excess of
$500,000 except liabilities shown on the Company financial statements
or except in the usual and ordinary course of business or in connection
with the transactions contemplated by the Merger Agreement;
(xvii) institute, settle or agree to settle any claim, action or proceeding,
whether or not initiated in a court of law, involving an expenditure in
excess of $500,000;
(xviii) invest in any real estate, except for investments in real estate owned
as a result of foreclosure or deed in lieu of foreclosure;
(xix) enter into or amend any continuing contract or series of related
contracts in excess of $500,000 for the purchase of materials,
supplies, equipment or services which cannot be terminated without
cause with less than thirty (30) days' notice and without payment of
any amount as a penalty, bonus, premium or other compensation for such
termination except as contemplated or permitted by the Merger
Agreement;
(xx) enter into or amend any contract, agreement or other transaction, other
than the Bank's employee loan program, with any officer, director or
principal shareholder of the Company or any affiliate of such person on
terms that are less favorable than could be obtained from an unrelated
third party on an arm's-length basis;
(xxi) change any basic policies and practices with respect to liquidity
management and cash flow planning, marketing, deposit origination,
lending, budgeting, profit and tax planning, personnel practices,
accounting or any other material aspect of its business or operations,
except for such changes as may be required in the opinion of management
of the Company to respond to then current market or economic conditions
or as may be required by the rules of the AICPA, the FASB or by
applicable governmental authorities; or
(xxii) default under any agreement or understanding to which the Company or
any Company subsidiary is a party, and which, individually or together
with other agreements or understandings with respect to which a default
exists, would have a material adverse effect on the Company.
Acquisition Transaction. In the Merger Agreement, the Company agreed that
neither it nor any of its subsidiaries nor any officer, director, employee,
agent or affiliate thereof shall, directly or indirectly, solicit, authorize,
initiate
21
26
or encourage submission of, any proposal, offer, tender offer or exchange offer
from any person relating to any Acquisition Transaction, or participate in any
negotiations in connection with or in furtherance of any Acquisition Transaction
or permit any person, other than AANA or its representatives, to have any access
to the facilities of, or furnish to any person, other than AANA or its
representatives, any nonpublic information with respect to the Company or any of
its subsidiaries in connection with or in furtherance of any of the foregoing.
The Company also agreed that it would immediately cease and cause to be
terminated any existing activities, discussions, or negotiations with any
parties (other than AANA) conducted before November 21, 1996, with respect to
any of the foregoing, and to immediately provide AANA with telephone notice of
any such proposal or offer and to promptly provide AANA with the name of the
party seeking to engage in such discussions or negotiations, or requesting such
information, and, after receipt of a written offer or proposal from such party,
provide AANA with copies of any written offers, proposals, agreements or other
documents with respect to such offer or proposal. The Merger Agreement defines
an Acquisition Transaction to be: (i) a bona fide tender or exchange offer for
at least 10% of the outstanding shares of capital stock of the Company by any
person other than AANA or its affiliates; (ii) a merger, consolidation or other
business combination with the Company or the Bank involving any person other
than AANA or one of its affiliates; (iii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition involving a substantial part of the
Company's consolidated assets, including stock of any of the Company's
subsidiaries, to any person other than AANA or one of its affiliates; (iv) the
acquisition by any person (other than AANA or one of its affiliates) of
beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of
10% or more of the outstanding shares of any class of capital stock of the
Company, including shares of capital stock owned by such person; (v) any
reclassification of securities or recapitalization of the Company or other
similar transaction that has the effect, directly or indirectly, of increasing
the proportionate share of any class of equity security, including securities
convertible into equity securities, of the Company which is owned by any person
other than AANA or one of its affiliates; (vi) a public proxy or consent
solicitation made to shareholders of the Company seeking proxies or consents in
opposition to any proposal relating to any of the transactions contemplated by
the Merger Agreement that has been recommended by the Board of Directors of the
Company; (vii) the filing of an application or notice with the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision (the "OTS") or any other
federal or state regulatory authority seeking approval to engage in one or more
of the transactions described in the foregoing clauses (i) through (vi): or
(viii) the making of a bona fide proposal to the Company or its shareholders by
public announcement or written communication, that is or becomes the subject of
public disclosure, to engage in one or more of the transactions described in the
foregoing clauses (i) through (vi). However, nothing in the Merger Agreement is
intended to prohibit the Company or its officers and directors from taking any
of such prohibited actions if the Board of Directors of the Company determines,
upon receipt of a written opinion of its outside counsel, that it is necessary
to take such action in order to fulfill their fiduciary duties to the
shareholders of the Company under the MBCA.
Dividend During Closing Quarter. The Merger Agreement provides that the Company
may declare and pay a final cash dividend in respect of the Company Common
Stock, in an amount not to exceed $0.20 per share of Company Common Stock, if a
regular dividend declaration date is scheduled to occur during the twenty (20)
day period immediately prior to Closing.
Indemnification. AANA and MergerSub agree in the Merger Agreement that for six
(6) years after the Effective Time, AANA and the Surviving Corporation will
cause to be maintained in effect the Company's current policy of officers' and
directors' liability insurance with respect to actions and omissions occurring
on or prior to the Closing; provided, however, that the Surviving Corporation
can substitute for the current liability insurance policy, policies which are no
less advantageous to the covered persons and provided that such substitution
will not result in any gaps or lapses in coverage with respect to matters
occurring on or prior to the Effective Time. The Merger Agreement further
provides that the Surviving Corporation will not be required to pay an annual
premium in excess of 125% of the last annual premium paid by the Company prior
to the date of the Merger Agreement, and if the Surviving Corporation is unable
to obtain the insurance required by this section, it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
In the Merger Agreement, AANA acknowledges the exculpation, indemnification,
advancement of expenses and like obligations of the Company and the Bank
contained in their Articles of Incorporation and Charter,
22
27
respectively, and Bylaws with respect to current and former directors, officers,
employees and agents, collectively defined as Indemnified Persons, and agrees,
for six (6) years from and after the Effective Time, to honor, in accordance
with their terms in effect on November 21, 1996, all such obligations. The
provisions of this section are intended to be for the benefit of, and will be
enforceable by, each Indemnified Person and his or her heirs, beneficiaries and
representatives.
Termination. The Merger Agreement may be terminated prior to the Effective Time
as follows:
(a) by the mutual consent of the Boards of Directors of AANA and the Company; or
(b) by the Board of Directors of either AANA or the Company if any conditions to
such party's obligation to consummate the transactions contemplated by the
Merger Agreement become impossible to satisfy and if, but only if, such
party has used its best efforts and acted in good faith in attempting to
satisfy all such conditions and is not in breach of or default in any
material respect of the Merger Agreement;
(c) by the Board of Directors of AANA if (i) there has been a material breach or
default by the Company of any representation or warranty or in the
observance of its covenants and agreements contained in the Merger Agreement
or which notice has been given in writing by AANA and which has not been
cured within thirty (30) business days of receipt of such notice; or (ii)
the Effective Time has not occurred prior to December 31, 1997 without fault
on the part of AANA; or (iii) a public announcement with respect to a
proposal, plan or intention to effect an Acquisition Transaction will have
been made by any person other than AANA or an affiliate of AANA and the
Board of Directors of the Company will have (A) failed to publicly reject or
oppose such proposed Acquisition Transaction within ten (10) days of the
public announcement of such proposal, plan or intention or (B) will have
modified, amended or withdrawn its recommended approval of the Merger
Agreement and the Merger to the Company's shareholders; or
(d) by the Board of Directors of the Company if (i) there has been a material
breach or default by AANA of any representation or warranty or in the
observance of its covenants and agreements contained in the Merger Agreement
of which notice has been given in writing by the Company and which has not
been cured within thirty (30) business days of receipt of such notice; or
(ii) the Effective Time has not occurred prior to December 31, 1997, without
fault on the part of the Company; or
(e) by the Board of Directors of either AANA or the Company at any time after
the date that (i) the shareholders of the Company fail to approve the Merger
Agreement and the Merger by an affirmative vote of at least a majority of
the outstanding shares of the Company's Common Stock at a meeting held for
such purpose; or (ii) if any one of the federal or state governmental
authorities having jurisdiction over the Merger and/or the transactions
contemplated by the Merger Agreement has denied approval for the Merger and,
if such denial is appealable, neither AANA nor the Company has filed a
petition seeking review of such order of denial or taken other similar
action under applicable law, within thirty (30) days after the issuance or
entry by the governmental agency of such order of denial; or
(f) by AANA if supplements and amendments to the Company's representations and
warranties in the Merger Agreement, required to be provided to AANA by the
Company from and after November 21, 1996, to the Effective Time (defined in
the Merger Agreement as Disclosure Schedule Updates), together with the
information in any or all of the Disclosure Schedule Updates previously
provided by the Company indicates that the Company, in the good faith
judgment of AANA, has suffered or is reasonably likely to suffer a material
adverse effect (i) which either has not or cannot be cured within 30 days
after receipt by AANA of a Disclosure Schedule Update, or (ii) which does
not result primarily from changes in the general level of interest rates.
Effect of Termination. In the event of termination of the Merger Agreement by
either mutual consent of the Boards of Directors of AANA and the Company or by
either AANA or the Company because conditions to such party's obligation to
consummate the transactions contemplated by the Merger Agreement shall have
become impossible to satisfy, written notice will be given to the other party or
parties specifying the provision under which the termination is made, and the
Merger Agreement with become null and void, and there will be no liability on
the part of AANA or the Company except for (i) fraud or willful material breach
of the Merger
23
28
Agreement and (ii) as otherwise set forth in this section and under the section
of the Merger Agreement providing for responsibility for expenses, summarized
below.
If the Merger Agreement is terminated by the Board of Directors of AANA because
(i) of the public announcement regarding an Acquisition Transaction by any
person other AANA or an affiliate of AANA that the Company has failed to
publicly reject or oppose within the applicable period of time or that has
caused the Board of Directors of the Company to modify, amend or withdraw its
recommended approval of the Merger Agreement, or (ii) the shareholders of the
Company fail to approve the Merger Agreement as required, and within twenty-four
(24) months of any such termination an Acquisition Transaction shall occur, or
if the Merger Agreement is terminated by the Board of Directors of AANA because
there has been a material breach or default by the Company of any representation
or warranty or in the observance of its covenants and agreements that has not
been cured within thirty (30) days of notice, then the Company will pay to AANA,
within two (2) business days after demand therefor, $10 million as an expense
reimbursement (the "Termination Fee"). Notwithstanding the preceding sentence,
the Termination Fee, when aggregated with all amounts actually received by AANA
for the Option Shares or the Option (as defined in the Option Agreement) prior
to making demand for payment shall not exceed the Limit (as defined in the
Option Agreement). It is the intent of the parties that, if AANA has previously
received Stock Option Consideration under the Option Agreement equal to the
Limit, then no further expense reimbursement payment will be due from the
Company under the Merger Agreement. See "The Merger -- Option Agreement."
If the Merger Agreement is terminated by the Board of Directors of the Company
because there has been a material breach or default by AANA of any
representation or warranty or in the observance of its convenants and agreements
that has not been cured within thirty (30) days' notice, AANA will pay the
Company, not later than two business days after demand, $5 million as expense
reimbursement.
If the Merger Agreement is terminated by either AANA or the Company, as the case
may be, for the reasons outlined above, there will be no liability or obligation
on the part of either party to the other or on the part of any of their officers
or directors, other than (i) pursuant to the provisions of the Merger Agreement
relating to access to and confidentiality of information, (ii) as summarized in
this section, and (iii) as otherwise set forth under the section of the Merger
Agreement providing for responsibility for expenses, summarized below. This
limitation on liability or obligation is inapplicable to the extent such
termination results from the willful breach by a party to the Merger Agreement
of any of its representations, warranties, covenants or agreements contained in
the Merger Agreement, or a wrongful termination of the Merger Agreement by AANA
or the Company, as the case may be.
24
29
Payment of Expenses. The parties agreed in the Merger Agreement that, except as
otherwise provided as an effect of termination, the costs and expenses of AANA
and the Company will be allocated as follows:
(a) AANA will bear all fees and expenses of its counsel, accountants and
investment bankers and all other costs and expenses incurred by it in the
preparation of the Merger Agreement, the investigation of the Company, the
preparation and prosecution of its applications for regulatory approvals,
and all costs and expenses of any appeals therefrom.
(b) The Company or the Bank will bear all fees and expenses of its counsel,
accountants and investment bankers, all filing fees to be paid to the SEC in
connection with the proxy statement, the costs of printing and mailing the
proxy statement for use at the meeting of Company shareholders to consider
the Merger, and all other costs and expenses incurred by such persons or
firm in the preparation of the Merger Agreement, the calling, noticing and
holding of a meeting of shareholders to consider and act upon the Merger and
the furnishing of information or other cooperation to AANA in connection
with the preparation of regulatory applications.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger Agreement and side letter regarding employee benefits executed by
AANA and the Company (the "Benefits Letter") provide for additional agreements
concerning compensation for executive officers and employees of the Company and
the Bank. Set forth below is certain information relating to these plans and
arrangements as they are affected by the Merger, the Merger Agreement and
Benefits Letter, including an estimate of settlement and termination amounts to
be paid thereunder.
Holders of Stock Options and Shareholder Value Units. Under the Company
Incentive Plans, as of February , 1997, options to purchase shares of
Common Stock ("Stock Options") are outstanding, and all such Stock Options
become immediately exercisable upon a change in control; the Merger will
constitute such a change in control. Pursuant to the Merger Agreement, each
Stock Option not previously exercised shall be cancelled immediately prior to
the Effective Time for a per share cash payment equal to the difference between
the Merger Consideration and the exercise price of each Stock Option. Such
payment will be made only upon receipt of a cancellation agreement from the
Stock Option holder. Set forth below are the number of shares of Common Stock
covered by such Stock Options held by the Company's executive officers (the
"Named Executive Officers") and the cash value of such Stock Options, assuming
surrender in exchange for a per share payment equal to the excess of $59.00 over
the option exercise price thereof.
NUMBER OF CASH VALUE
NAME OF EXECUTIVE OFFICER STOCK OPTIONS OF STOCK OPTIONS
- - - -------------------------------------------------------------- ------------- ----------------
Thomas R. Ricketts............................................
Garry G. Carley...............................................
Ronald J. Palmer..............................................
Joseph Krul...................................................
The Merger Agreement provides that prior to the Effective Time the Company will
terminate the Company Incentive Plans and cancel each outstanding Shareholder
Value Unit ("SVU") granted under the Company's 1995 Stock Option and Shareholder
Value Plan (the "1995 Plan"). In consideration for such cancellation, the
Company will pay to the holders of SVUs an amount based upon the then value of
the SVUs, prorated to reflect the number of months remaining in the original SVU
measurement period. Based upon the estimated value of
25
30
the SVUs as of December 31, 1996, the amounts payable to the Named Executive
Officers with respect to SVUs held by each of them is as follows:
NUMBER OF AMOUNT OF
NAME OF EXECUTIVE OFFICER SVUs HELD PAYMENT
- - - ------------------------------------------------------------------------ --------- ---------
Thomas R. Ricketts...................................................... 400
Garry G. Carley......................................................... 200
Ronald J. Palmer........................................................ 120
Joseph Krul............................................................. 120
Pursuant to the Benefits Letter, AANA agreed to permit the Company to amend the
Company Incentive Plans to enable the Compensation, Organization and Stock
Option Committee of the Company's Board of Directors to authorize the advance
payment in 1996 of all or a portion of the amount estimated to be payable with
respect to the SVUs, and to accelerate into 1996 the exercisability of certain
Stock Options scheduled to vest on January 1, 1997. The purpose of any such
payments or acceleration would be to obtain certain tax benefits to preserve the
value of those awards to such holders. On December 19, 1996, the Company's Board
of Directors so amended the Plans. The Committee authorized the advance payment
to Messrs. Carley, Palmer and Krul against the amount to be paid at the
Effective Time with respect to the SVUs equal to the estimated SVU amounts set
forth above, and the acceleration of Stock Options with respect to 1,307 shares
held by Mr. Carley and 1,328 shares held by each of Messrs. Palmer and Krul.
Retention Bonus Program and 1997 Incentive Plan Participation. The Merger
Agreement restricts the Company from granting any further stock options or SVUs
to employees of the Company or the Bank. Historically, the Company has followed
the practice of granting stock options and SVUs to officers and key employees
during December of each year. In December 1995, the Company granted stock
options to over officers and key employees and awarded SVUs to over
officers and key employees. In recognition of this benefit program, the Bank,
with AANA's consent and approval, has established a retention bonus program for
the benefit of those employees who would have received options during December
1996 but for the Merger Agreement (other than those 16 senior executive officers
of the Bank who will receive severance payments pursuant to existing employment
or severance agreements). The retention bonus awards will be equal to the number
of stock options which would have been awarded, multiplied by $ , the
difference between $59.00 and the average of the high and low sales prices for
the Company's Common Stock on the NYSE on December 19, 1996, the date of the
Company's Board of Directors meeting at which such stock options would have been
granted. Such retention bonuses will be paid to employees only if they remain
continuously employed until the Effective Time.
In the Benefits Letter, AANA has agreed to establish an incentive plan for those
senior management officers of the Bank identified in the Benefits Letter (other
than Mr. Ricketts), which will provide that each such officer who remains
employed by the Bank (or AANA or another AANA subsidiary) through December 31,
1997, will receive a minimum cash bonus equal to 15% or such officer's annual
base salary as in effect immediately following the Effective Time. Such bonuses
will be paid only if the officer (a) remains continuously employed by the Bank
until December 31, 1997 or (b) remains continuously employed by the Bank (or
AANA or another AANA subsidiary) through the Effective Time and retires or is
involuntarily terminated prior to December 31, 1997 (in which event the bonus
otherwise payable will be pro-rated based on the number of days from the date of
the Effective Time through the date of retirement or involuntary termination as
a percentage of the number of days from the Effective Time to December 31,
1997).
Employee Severance Compensation Plan. The Benefits Letter provides that AANA
will establish or cause to be established a severance benefits program for those
employees of the Company or the Bank who are involuntarily terminated as a
result of the Merger (other than those employees who are parties to employment
or similar agreements). In connection therewith, the Company will terminate
benefit plans or programs (other than the employment and severance agreements
with the Company's senior executive officers, and the severance plan applicable
to former Bell Federal Savings and Loan Association employees) that provide,
directly or indirectly, for the payment of separation or severance benefits of
the type to be provided under AANA's new severance benefits program. The
material terms of the AANA severance benefits program are as follows: Each
person who is employed by the Company at the Effective Time and whose employment
with AANA and all of its subsidiaries
26
31
(including the Bank) is terminated within one year after the Effective Time as
the result of employer-initiated action for reasons attributable the Merger, and
not for reasons attributable to misconduct or unsatisfactory performance below
acceptable standards (as determined pursuant to AANA's applicable progressive
discipline policy), will, upon execution of a release reasonably required by
AANA, be eligible to receive severance pay. The amount of severance pay payable
to an eligible employee in the event of such termination of employment is based
upon the employee's weekly base pay. The severance pay shall be paid in
installments on the regular pay dates following termination of employment for
the designated severance pay period. The length of time during which continued
payment of an employee's weekly base pay will be made is based on the employee's
full years of service and his or her employment classification at the time of
termination. The following table sets for the basis for this determination:
MAXIMUM
BASE SERVICE SEVERANCE PAY
TITLE/CLASSIFICATION COMPONENT COMPONENT PERIOD
- - - ----------------------------------------------------------- ---------- --------- --------------
Vice President............................................. 16 weeks 2 weeks 52 weeks
Assistant Vice President and Other Officers................ 12 weeks 2 weeks 52 weeks
Exempt Employees........................................... 6 weeks 1 week 52 weeks
Non-Exempt Employees....................................... 4 weeks 1 week 52 weeks
Any employee who is entitled to receive severance pay under the AANA program
shall also be entitled to maintain COBRA coverage during the severance pay
period at a cost equal to the cost charged to an active employee for similar
coverage in lieu of the cost otherwise applicable under COBRA. Terminated
employees who are [Vice Presidents or above] will be eligible for individual
outplacement counseling, and other terminated employees will be provided with
group outplacement counseling.
Standard Federal Employment and Severance Agreements. The Bank has maintained
employment agreements with the Named Executive Officers which provide, among
other things, for a three-year term of employment and for payments to the Named
Executive Officer upon an event of termination following a change in control.
Upon an event of termination, the executive officer is entitled to a payment
equal to the greater of the payments remaining under the agreement or three
times the average of the executive officer's W-2 compensation for the five
preceding years provided that such payments cannot exceed the limitations on
parachute payments contained in the Internal Revenue Code of 1986, as amended
(the "Code"). The Merger will constitute a change in control under the
Employment Agreements. Pursuant to the Benefits Letter, the Bank has amended
each of the Employment Agreements to provide that an event of termination shall
be deemed to occur following the Effective Time. As a result, the Named
Executive Officers will be entitled to receive payments as follows: Mr. Ricketts
- - - -- $ ; Mr. Carley -- $ ; Mr. Palmer -- $ ; and Mr. Krul --
$ .
The Bank has entered into Severance Compensation Agreements with its other
senior management officers pursuant to which payments shall be made following
the Effective Time.
Employment Arrangements and Directorships with the Bank. In connection with the
execution of the Merger Agreement, AANA has extended offers of employment to
Messrs. Carley, Palmer and Krul, at positions whose titles, duties and
responsibilities will be developed over the next several months. The offers
specify annual salaries of $250,000, $200,000 and $175,000, for Messrs. Carley,
Palmer and Krul, respectively, and each will be eligible to receive annual cash
bonuses under the annual incentive plan described above, as well as participate
in AANA's long-term incentive plan. AANA has agreed to appoint Mr. Ricketts as a
Director and Chairman of the Board of Standard Federal Bank at the Effective
Time and as a Director of AANA's subsidiary, LaSalle Bank, FSB, and to pay Mr.
Ricketts $350,000 annual compensation for such services. Mr. Ricketts will not
be an employee of AANA or any of its affiliates. In the Benefits Letter, AANA
has agreed to appoint Garry G. Carley, William E. Hoglund, John M. O'Hara, E.G.
Wilkinson, Jr., and David P. Williams, each of whom is currently a director of
the Company and the Bank, as continuing directors of the Bank, in addition to
Mr. Ricketts. All other directors of the Company will cease to serve as
directors of either the Company or the Bank at the Effective Time.
27
32
EFFECT ON EMPLOYEE BENEFIT PLANS
Under the Merger Agreement, AANA covenants to comply with its agreements to take
certain actions described in the Merger Agreement and the Benefits Letter
affecting employee benefits. The Merger Agreement provides that at the Effective
Time, AANA or a subsidiary of AANA will, to the extent required by AANA, be
substituted for the Company or its subsidiary as the sponsoring employer under
those Company benefit plans with respect to which the Company or one of its
subsidiaries is a sponsoring employer immediately prior to the Effective Time.
Except as otherwise specifically provided in the Merger Agreement or the
Benefits Letter, each such Company benefit plan shall be continued in effect by
AANA or a subsidiary of AANA without termination or discontinuance, subject to
AANA's right to subsequently amend or terminate any such benefit plan in
accordance with its terms and with the provisions of any applicable law. The
Merger Agreement also provides that after the Effective Time, at such times and
to the extent set forth in the Benefits Letter, AANA shall provide each employee
of the Company and any Company subsidiary (a) the opportunity to participate in
each employee benefit plan and program maintained by AANA for similarly situated
employees of AANA and its subsidiaries, (b) credit for service with the Company,
the Bank or the Company's other subsidiaries under the AANA benefit plans with
respect to the participation of such employees in the AANA benefit plans, and
(c) waiver of waiting periods and preexisting condition exclusions under the
AANA benefit plans.
In the Benefits Letter, AANA agrees that it will maintain or cause to be
maintained the Company's Retirement Plan from and after the Effective Time
through the last day of the plan year ending December 31, 1997, or such later
date as AANA shall in its sole discretion determine, at which time the Company's
Retirement Plan will be merged with and into the AANA retirement plan. At the
time of such plan merger, the AANA retirement plan will be amended to, in
substance, provide that (i) the vesting and benefit service credited to the
Company's employees under the Company's Retirement Plan shall be treated as
vesting and benefit service, respectively, under the AANA retirement plan, (ii)
upon the subsequent termination of employment of a Company employee who was a
participant in the Company's Retirement Plan, such participant's retirement
benefit will be equal to the greater of the benefit accrued under the Company's
Retirement Plan as of the date of conversion into the AANA retirement plan or
the benefit accrued under the AANA retirement plan, taking into account service
under the Company's Retirement Plan for periods prior to the date of conversion
and under the AANA retirement plan thereafter, through the date of retirement
and (iii) certain lump sum retirement benefits will be payable to former
employees of Bell Federal Savings and Loan Association as a result of that
bank's former retirement plan, which was merged into the Company's Retirement
Plan by the Company following the Company's acquisition of Bell Federal Savings
and Loan Association in 1996.
REGULATORY APPROVALS
General. Consummation of the Merger is conditioned, among other things, on the
approval of the Merger by the Board of Governors of the Federal Reserve System
(the "Federal Reserve") under the Bank Holding Company Act of 1956, as amended
("BHCA"), by the Michigan Banking Commissioner of Financial Institutions (the
"Michigan Commissioner") under the Michigan Savings and Loan Act of 1980, as
amended (the "Michigan Act"), and the Dutch Central Bank ("DCB"). These
approvals are required by law and must be obtained before the Merger is
consummated.
Federal Reserve Board. The Federal Reserve is authorized under the BHCA to
approve an application by a bank holding company to acquire a savings
association. AANA filed an application for approval of the Merger under the BHCA
on , 1997. In determining whether to approve transactions such as
the Merger, the Federal Reserve is directed by statute to consider whether the
transactions can be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency that outweigh possible
adverse effects, such as undue concentration of resources, decreased
competition, conflicts of interest or unsound banking practices. The Federal
Reserve is also required to evaluate the financial and managerial resources of
AANA and the Company and the effect of the Merger on those resources. The
decision of the Federal Reserve on the application is subject to judicial review
by any aggrieved party. A requirement of a hearing or a judicial review of the
order of the Federal Reserve could delay or prevent the completion of the
Merger.
28
33
The regulations of the Federal Reserve provide for the publication of notice and
the opportunity for public comment relating to the application for approval
discussed above.
AANA has been advised that its application for approval of the Merger was
accepted for processing under delegated authority by the Federal Reserve Bank of
Chicago (the "Federal Reserve Bank") on , 1997. Under the
regulations of the Federal Reserve, the Federal Reserve Bank will act on the
application within the 30-day period that began on the date the application was
accepted for processing (a period that will be tolled by any public comments or
other circumstances that may trigger further requests for information from the
Federal Reserve Bank). There can be no assurance that the Federal Reserve Bank
will continue processing the application under delegated authority.
There can be no assurance that the Federal Reserve will approve the Merger, and
if the Merger is approved, there can be no assurance as to the date of such
approval. There can likewise be no assurance that the Department of Justice will
not challenge the Merger or, if such a challenge is made, as to the result
thereof.
Michigan Commissioner of Financial Institutions. AANA filed an application with
the Michigan Commissioner on , 1997 for approval of the Merger. The
Michigan Commissioner is authorized under the Michigan Act to approve the Merger
provided the Michigan Commissioner determines that (i) Illinois law authorizes a
Michigan holding company to take action in Illinois similar to the Merger, under
conditions not unduly restrictive; (ii) the powers or privileges of any Illinois
savings association if acquired by a Michigan holding company would not be
unduly restricted as a result of such acquisition; (iii) the Merger will not
impair the safety and soundness of Standard Federal Bank; and (iv) AANA has
otherwise complied with certain requirements under Michigan law. In making its
determination, the Michigan Commissioner is required to assess the composite
record of the applicant and its subsidiaries in meeting the credit needs of the
communities in the state in which they are located, including low- and
moderate-income neighborhoods. In assessing the composite record of the
applicant, the Michigan Commissioner is required to consider the factors
considered by the appropriate federal bank regulatory agency pursuant to the
Community Reinvestment Act and the regulations promulgated thereunder.
Under Michigan law, the Michigan Commissioner shall make such determination
within 60 days of receipt of the application. There can be no assurance that the
Michigan Commissioner will approve the Merger, and if the Merger is approved,
there can be no assurance as to the date of such approval.
Dutch Central Bank. ABN AMRO Bank filed an application with De Nederlandsche
Bank pursuant to Article 26 Paragraph 2 in connection with Article 24 of the Act
on the Supervision of the Credit System 1992 (Wet Toezicht Kredietwezen 1992) to
obtain a declaration of no objection for the Merger on November 26, 1996. By
letter dated December 6, 1996, the Minister of Finance informed ABN AMRO Bank
that it granted ABN AMRO Bank a declaration of no objection for acquiring and
holding an indirect participation in the Company on the basis of a 100%
participation in the share capital of the Bank through ABN AMRO Bank's
wholly-owned subsidiary, AANA.
Exon-Florio Amendment. AANA provided the Committee on Foreign Investment in the
United States (the "CFIUS") with written notification of the Merger on
, 1997 and requested a determination that no investigation of the
Merger is necessary under the Exon-Florio Amendment. The Exon-Florio Amendment
authorizes the President of the United States to investigate and evaluate the
effects on national security of mergers, acquisitions and takeovers by or with
foreign persons. The Exon-Florio Amendment establishes the following 90-day
timetable: (i) the CFIUS must determine whether to investigate a proposed
acquisition within 30 days of its receipt of written notification; (ii) in the
event the CFIUS elects to commence an investigation, it must be completed within
45 days of such election; and (iii) the President has 15 days following the
completion of the investigation to take any action to suspend or prohibit the
proposed acquisition. If no action is commenced within the 90-day time frame,
the Merger may be completed. The President has delegated his investigative
authority under the Exon-Florio Amendment to the CFIUS. There can be no
assurance that the CFIUS will determine that no investigation of the Merger is
necessary.
Office of Thrift Supervision. As a bank holding company, AANA is exempt from
regulation under the Savings and Loan Holding Company Act pursuant to The
Economic Growth and Regulatory Paperwork Act of 1996 (the "1996 Act"). As a
result of the exemption, it is not anticipated that AANA will file a regulatory
application or
29
34
notice for prior approval of the Merger with the OTS. The 1996 Act directs the
Federal Reserve to consult with the OTS in considering bank holding company
acquisitions of thrifts. Given the recent enactment of the 1996 Act, there can
be no assurance that the OTS will not comment on the application filed with the
Federal Reserve, or if the OTS comments on such application, that the comments
will not delay the processing of the application by the Federal Reserve.
OPTION AGREEMENT
At the time the Merger Agreement was executed, and in order to encourage AANA to
enter into the Merger Agreement, the Company also entered into the Option
Agreement with AANA. AANA has expressly indicated to the Company that it would
be unwilling to enter into the Merger Agreement and consummate the transactions
contemplated thereby without the benefit of the Option Agreement. Under the
Option Agreement, the Company granted to AANA the right to purchase up to
6,209,894 newly issued, fully paid and nonassessable shares of Company Common
Stock, as adjusted (19.9% of the authorized and outstanding shares of Common
Stock), at a purchase price of $52.50 cash per share of Common Stock (the
"Purchase Price"). The Option is exercisable by AANA, in whole or in part prior
to its termination following the occurrence of any of the following events:
(a) if the Board of Directors of the Company withdraws its support of the Merger
or fails to recommend approval of the Merger; or
(b) a person, other than AANA or any of its affiliates:
(i) acquires beneficial ownership of 10% or more of the then outstanding
Common Stock of the Company or any security representing the right or
option to acquire 10% or more of the then outstanding Common Stock of
the Company and if, after the occurrence of such an acquisition, the
Board of Directors of the Company: (A) recommends such acquisition to
the Company's shareholders for acceptance; (B) fails to undertake such
acts as AANA reasonably requests to oppose such an acquisition; or (C)
fails to recommend or withdraws its approval of the Merger Agreement
to the shareholders of the Company;
(ii) enters into an agreement with the Company pursuant to which such
person or any affiliate of such person would (A) merge or
consolidate, or enter into any similar transaction, with the Company
or (B) acquire all or substantially all of the assets of the Company;
or
(iii) makes a bona fide proposal for any merger, consolidation or
acquisition of all or substantially all of the assets of the Company
or other business combination with the Company, and thereafter, but
before such proposal has been unconditionally withdrawn or the
Company has formally rejected the proposal in writing, the Company
willfully commits any material breach of the Merger Agreement and
such breach (A) would entitle AANA to terminate the Merger Agreement
without regard to the cure periods provided for in the Merger
Agreement, (B) is not cured and (C) would materially interfere with
the Company's ability to consummate the Merger or materially reduce
the value of the transaction to AANA.
Each of the events described above in items (a) and (b) is referred to
hereinafter as a "Triggering Event." The Option Agreement provides AANA with
certain abilities to require the Company to repurchase the Option for cash.
Certain repurchase rights are triggered if (i) the Triggering Event described in
item (b)(ii) in the preceding paragraph occurs and the events relating to such
transaction are consummated; or (ii) if any person other than AANA or any of its
affiliates acquires beneficial ownership of 50% or more of the then outstanding
Company Common Stock. Upon the occurrence of the foregoing, AANA will have the
right to receive (in lieu of exercising the Option) a cash payment equal to the
Spread (as hereinafter defined) (the "Repurchase Consideration"). The "Spread"
is defined as the amount equal to the excess, if any, over the Purchase Price of
the higher of (i) the highest price per share of Company Common Stock as
reported on the New York Stock Exchange within the six (6) months immediately
preceding the date that AANA requests cash in lieu of shares; (ii) the price per
share of Company Common Stock at which a tender offer or an exchange offer has
been made; (iii) the price per share of Company Common Stock to be paid by any
third party pursuant to an agreement with the Company; or (iv) in the event of a
sale of substantially all of the assets of the Company, the sum of the price
30
35
paid in such sale for such assets and the current market value of the remaining
assets of the Company divided by the number of shares of Common Stock
outstanding at the time of such sale.
The Merger Agreement and the Option Agreement work in tandem to limit the
aggregate consideration that AANA, or any successor-in-interest, may receive to
$90,000,000 in the aggregate (the "Limit"). All amounts received by AANA, or any
successor-in-interest, affiliate or transferee, as (a) consideration for the
Option Shares or the Option, including any Repurchase Consideration, less any
Purchase Price actually paid by AANA; or (b) costs, fees and expenses or other
reimbursement amounts paid to AANA under certain provisions of the Merger
Agreement shall be included in calculating the Limit. See "The Merger -- The
Merger Agreement."
Under the Option Agreement, the Company also granted AANA certain registration
rights with respect to shares of Common Stock acquired upon exercise of the
Option and has agreed, upon AANA's request, to file an application to list such
shares of Common Stock on the NYSE or on any other national securities exchange
or automated quotation system.
The Option Agreement also provides for a substitute option in the event the
Company enters into an agreement: (i) to consolidate with or merge into any
person, other than AANA or one of its subsidiaries, and not be the surviving
entity; (ii) to merge or consolidate with an entity other than AANA or one of
its subsidiaries, wherein the Company is the surviving entity, but in connection
with such merger, the then outstanding shares of Common Stock of the Company are
changed into or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged entity; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than AANA or one of its
subsidiaries. In each case, the agreement governing such transaction will, upon
consummation of any such transaction and upon the terms and conditions set forth
in the Option Agreement, make proper provision so that the Option provided for
in the Option Agreement will be converted into, or exchanged for, an option, at
the election of AANA, of either the Acquiring Corporation (as hereinafter
defined) or any person that controls the Acquiring Corporation (the "Substitute
Option"). Acquiring Corporation means (i) the continuing or surviving
corporation of a consolidation or merger with the Company; (ii) the Company in a
merger in which the Company is the surviving or continuing entity; and (iii) the
transferee of all or substantially all of the Company's assets. The Substitute
Option will have all the same terms and conditions as the Option.
The Option Agreement will terminate upon the earliest to occur of (i) the
Effective Time, as defined in the Merger Agreement; (ii) twenty-four (24) months
after the occurrence of a Triggering Event; (iii) the wrongful termination of
the Merger Agreement by AANA or termination by mutual agreement of the parties;
(iv) six (6) months after termination of the Merger Agreement by the Company due
to a material breach of or default by AANA under the Merger Agreement; or (v)
twelve (12) months after the termination of the Merger Agreement for any other
reason. See "The Merger -- The Merger Agreement". The description in this Proxy
Statement of the Option Agreement is qualified in its entirety by reference to
the Option Agreement, a copy of which is attached hereto as Annex B.
NO DISSENTERS' RIGHTS
Section 762(2)(b) of the Michigan Business Corporation Act provides that a
shareholder is not entitled to dissent from and obtain payment of the fair value
of his or her shares in the event of the consummation of a plan of merger to
which the corporation is a party if such shareholder will receive cash as
consideration for his or her shares. Thus, holders of Company Common Stock will
not have appraisal or dissenters' rights in connection with the Merger and their
rights as stockholders will not be affected by how they vote on the Merger.
INFORMATION REGARDING ABN AMRO NORTH AMERICA, INC.
AANA is the wholly-owned management company for the North American operations of
ABN AMRO Bank. ABN AMRO Bank is a bank and international multi-bank holding
company organized under the laws of The Netherlands, which is owned by ABN AMRO
Holding N.V., a Netherlands corporation and an international multi-bank holding
company. As of June 30, 1996, ABN AMRO Bank had consolidated assets of
approximately $385
31
36
billion. As of June 30, 1996, ABN AMRO Bank ranked 14th in the world, fifth in
Europe and first in The Netherlands in terms of assets among bank holding
companies.
The principal offices of ABN AMRO Bank are located at Foppingadreef 22, 1102 BS
Amsterdam, The Netherlands.
Headquartered in Chicago, Illinois, AANA oversees the operations and management
of ABN AMRO Bank's U.S branch and agency structure, ABN AMRO Bank's Canadian and
Mexican banking operations and various other U.S. activities. As of December 31,
1996, AANA had assets of more than $ billion and employed over 11,000 people in
North America. The principal offices of AANA are located at 135 South LaSalle
Street, Chicago, Illinois 60674.
AANA's principal subsidiaries are (i) LaSalle National Corporation, a Delaware
corporation and fourth largest bank holding company in the Chicago area ("LNC"),
and (ii) LaSalle Bank, FSB, a federally chartered stock savings bank, which,
with assets of $ billion as of December 31, 1996, is the largest
thrift in the United States. LNC is a Chicago-based multi-bank holding company,
the principal subsidiary of which is LaSalle National Bancorp., Inc., the parent
company of LaSalle National Bank, the fifth largest bank in Chicago. LaSalle
National Bank is a commercial bank providing a full range of banking services to
individual and commercial customers from offices and branches in Chicago's Loop.
LaSalle National Bank's commercial customers are primarily middle-market
companies, for which the bank provides loans, trade finance, cash management,
letters of credit and other banking services. Effective December 31, 1996,
LaSalle National Trust, N.A., a full-service trust company and wholly-owned
subsidiary of LNC located in downtown Chicago, was merged into LaSalle National
Bank. As a result of the merger, LaSalle National Bank will provide both
corporate and personal trust services.
LNC is also the parent company of three community banks, LaSalle Bank, LaSalle
Bank NI and LaSalle Northwest National Bank, all of which LNC operates as
banking subsidiaries. LaSalle Bank is located in Westmont, Illinois and serves
southwest suburban Cook County and the western Chicago suburbs of DuPage County.
LaSalle Bank NI and LaSalle Northwest National Bank are located in the northwest
Chicago metropolitan area.
LaSalle Bank, FSB, is the largest thrift in the Chicago metropolitan area. Its
principal lending activity is making loans secured by first mortgage liens on
one-to-four family residences.
AANA also operates two banks acquired in 1996, LaSalle/Columbia National Bank of
Chicago and LaSalle Bank Illinois, as wholly-owned stand alone bank subsidiaries
in the Chicago metropolitan area.
AANA'S FINANCIAL ABILITY TO CONSUMMATE THE MERGER
AANA has informed the Company that any funds required to consummate the Merger
and pay the Merger Consideration would be met through funding contributed to
AANA by its parent company or its affiliates.
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion of material federal income tax consequences of the
Merger under present law is for general information only and does not purport to
be complete analysis of all tax consequences that may be relevant to any
particular shareholder. Certain holders (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, employee shareholders, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. The discussion assumes that each shareholder holds shares
of Common Stock as a capital asset. However, certain shareholders who are
employees of the Company will not be entitled to treat certain of the shares
which they may have acquired from the Company pursuant to the exercise of
incentive stock options as capital assets or a portion of the gain on the sale
of such shares as capital gain because they will be required to report any gain
on the sale of such shares as taxable compensation from the Company.
The receipt of cash in exchange for shares of Common Stock pursuant to the
Merger will be treated as a sale or exchange of the shares of Common Stock for
federal income tax purposes, and may also be a taxable
32
37
transaction for state, local and other tax purposes. Each shareholder will
recognize gain or loss for federal income tax purposes in an amount equal to the
difference between the amount of cash received and the cost or other tax basis
of his, her or its shares of Common Stock surrendered. Except for gain
attributable to certain shares owned by employees or directors of the Company as
described above, gain or loss on the sale of the shares will be long-term
capital gain or loss if the shares of Common Stock have been held by the
shareholder for more than one year. Otherwise, gain or loss will be short-term
capital gain or loss. The holding period with respect to the shares of Common
Stock must be calculated separately with respect to each block of shares of
Common Stock held by a shareholder.
Net capital gains of corporate taxpayers (i.e., the excess of net long-term
capital gain over net short-term capital loss) and ordinary income are taxed at
the same rate, to a maximum of 35%, except as to certain taxpayers which have
taxable income in excess of $15 million, in which case the tax can increase to
the lesser of 38% of such excess income over $15 million or $100,000. For
non-corporate taxpayers, the maximum tax rate on long-term capital gains is 28%.
However, the maximum tax rate on ordinary income and short-term capital gains is
36% while, in general, for taxpayers who have taxable income in excess of
$250,000, the effective tax rate on the excess net income is increased to 39.6%.
For certain categories of taxpayers such as for trusts and estates and married
taxpayers who elect to file separate returns, the 39.6% tax bracket rate is
applicable to net income below $250,000. The distinction between capital gains
and ordinary income is relevant in that taxpayers may be limited in their
ability to deduct net capital losses (which may be deducted in full against
capital gains) against ordinary income. The receipt of cash for shares of Common
Stock may be subject to backup withholding at the rate of 31% unless the holder
(i) is a corporation or comes within certain other exempt categories, or (ii)
provides a certified taxpayer identification number and otherwise complies with
the back-up withholding rules. Back-up withholding is not an additional tax; any
amounts so withheld may be credited against the federal income tax liability of
the person subject to the withholding. The back-up withholding rate should be
checked to make sure it has not been changed. There is no assurance that
applicable tax laws will not change prior to the Effective Time.
EACH SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH
RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES, AS WELL AS WITH RESPECT TO ANY
STATE, LOCAL OR OTHER TAX CONSEQUENCES OF THE MERGER AS WELL AS POSSIBLE ACTIONS
WHICH MAY BE TAKEN PRIOR TO THE MERGER IN LIGHT OF EACH SHAREHOLDER'S PARTICULAR
SITUATION.
PAYMENT FOR SHARES OF COMMON STOCK
The Merger Agreement provides that as soon as practicable after the Effective
Time, AANA will cause to be mailed or otherwise delivered to each person who
was, at the Effective Time, a holder of record of issued and outstanding Company
Common Stock, a letter of transmittal and instructions for use in effecting the
surrender of stock certificates which, immediately prior to the Effective Time,
represented such shares. Upon surrender to LaSalle National Bank, as exchange
agent (the "Exchange Agent"), of such certificates (or such documentation as is
acceptable to and required by the Exchange Agent with respect to lost
certificates), together with such letter of transmittal, duly executed and
completed in accordance with the instructions with the letter of transmittal,
the Exchange Agent will promptly cause to be paid to the persons entitled to
payment a check in the amount of which such persons are entitled, after giving
effect to any required tax withholdings. No interest will accrue or be payable
with respect to the Merger Consideration.
DO NOT SEND ANY CERTIFICATES WITH THE ENCLOSED PROXY CARD AND DO NOT DELIVER ANY
CERTIFICATES TO THE EXCHANGE AGENT PRIOR TO RECEIVING WRITTEN INSTRUCTIONS TO DO
SO.
If payment is to be made to a person other than the registered holder of the
certificate(s) surrendered, it will be a condition of such payment that the
certificate(s) so surrendered be properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment will pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the certificate(s) surrendered, or that such person
establish to the satisfaction of AANA or the Exchange Agent that such tax has
been paid or is not applicable. One hundred eighty (180) days following the
Effective Time, AANA will be entitled to cause the Exchange Agent to deliver to
it any funds made available to the Exchange Agent which have not been disbursed
33
38
to holders of certificates formerly representing Company Common Stock
outstanding at the Effective Time, and thereafter such holders will be entitled
to look to AANA only as general creditors thereof with respect to the cash
payable upon due surrender of their certificates. Except as otherwise provided
in the Merger Agreement or the letter of transmittal, AANA will pay all charges
and expenses, including those of the Exchange Agent, in connection with the
payment of the Merger Consideration in exchange for Company Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of the Record Date, with
respect to the only persons known by the Company to have filed a beneficial
ownership report with the SEC pursuant to Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") with respect to 5% or more of the
Company's outstanding Common Stock.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- - - ---------------------------------------------------------- ----------------- --------
Loomis, Sayles & Company, L.P. ........................... [TO BE COMPLETED BASED
One Financial Center ON FEBRUARY 1997
Boston, Massachusetts 02111 FILINGS]
Legg Mason Wood Walker, Inc. .............................
7 East Redwood Street
Baltimore, Maryland 21203-7023
FMR Corp. ................................................
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger & Berman........................................
605 Third Avenue
New York, New York 21203-7023
- - - -------------------------
[FOOTNOTES TO COME]
34
39
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of the Record Date, information as to Common
Stock beneficially owned, as of the Record Date, by directors and executive
officers of the Company, and by the directors and executive officers as a group.
NUMBER PERCENT
NAME OF SHARES OF CLASS
- - - ---------------------------------------------------------------------- --------- --------
Beverly Beltaire...................................................... *
Garry G. Carley....................................................... *
Ernest L. Grove, Jr................................................... *
Norman P. Hahn........................................................ *
William P. Hoglund.................................................... *
John M. O'Hara........................................................ *
Jack L. Otto.......................................................... *
Thomas R. Ricketts.................................................... *
E. G. Wilkinson, Jr................................................... *
David P. Williams..................................................... *
Joseph Krul........................................................... *
Ronald J. Palmer...................................................... *
All Directors and Officers as a group.................................
- - - -------------------------
* Less than 0.1%
[FOOTNOTES TO COME]
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
incorporated by reference into this Proxy Statement have been audited by
Deloitte & Touche LLP, independent auditors, for the periods indicated in their
report thereon, which is included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995. The consolidated financial
statements audited by Deloitte & Touche LLP have been incorporated herein by
reference in reliance on their report given on their authority as experts in
accounting and auditing. Representatives of Deloitte & Touche LLP will be
present at the Special Meeting, will be given an opportunity to make a
statement, if they so desire, and will be available to respond to any
appropriate questions.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
If the Merger is not completed, the next annual meeting of shareholders of the
Company is expected to be held during the second quarter of 1997. Any proposal a
shareholder wishes to have included in the Company's Proxy Statement for the
1997 Annual Meeting must be received at the Company's executive offices, 2600
West Big Beaver Road, Troy, Michigan 48084, not later than , 1997.
The Bylaws of the Company provide an advance notice procedure for certain
business to be brought before an annual meeting. In order for a shareholder to
properly bring business before an annual meeting, the shareholder must give
written notice to the Secretary of the Company not less than sixty (60) days
before the anniversary of the preceding year's annual meeting, provided,
however, that in the event that the date of the annual meeting is advanced by
more than twenty (20) days, notice by the shareholder to be timely must be
delivered or received not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or the tenth day following the
day on which notice of the date of the annual meeting was mailed. The notice
must include the shareholder's name and address, as it appears on the Company's
record of shareholders, a brief description of the proposed business and the
reasons for conducting such business at the annual meeting, the class and number
of shares of the Company's capital stock that are beneficially owned by such
shareholder and any material interest of such shareholder in the proposed
business.
35
40
In the case of nominations to the Board, certain information regarding the
nominee must be provided ninety (90) days in advance of the annual meeting.
Nothing in the Bylaws of the Company requires the Company to include in its
proxy statement and proxy relating to an annual meeting any shareholder proposal
that does not meet all of the requirements for inclusion established by the SEC
in effect at the time such proposal is received.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to the
Exchange Act are hereby incorporated by reference into this Proxy Statement:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996, and September 30, 1996;
(3) The Company's Current Reports on Form 8-K, filed on May 15, 1996, June 14,
1996 and November 22, 1996; and
(4) All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the date of the
Special Meeting.
Any statement contained in a document incorporated by reference shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed documents which also are
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
This Proxy Statement incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge, upon the
oral or written request of any shareholder entitled to vote at the Special
Meeting, including any beneficial owner of Common Stock, to whom this Proxy
Statement is delivered, a copy of any and all information (excluding exhibits,
except such exhibits as have been specifically incorporated by reference) that
has been incorporated by reference into this Proxy Statement. Requests for such
information should be directed to Garry G. Carley, Executive Vice President and
Secretary, Standard Federal Bancorporation, Inc., 2600 West Big Beaver Road,
Troy, Michigan 48084 (telephone (810) 643-9600). Copies of such information may
also be inspected and copied at the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Room 1400 75 Park Place, New York, New
York 10007. In addition, the Commission maintains a World Wide Web site that
contains reports, proxy and information statements that are filed electronically
with the Commission. The address of the site is http://www.sec.gov.
OTHER BUSINESS
The Board of Directors is not aware of any matters to be presented for
consideration at the Special Meeting other than those matters described in this
Proxy Statement. If any other matters should properly come before the Special
Meeting, the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the holders of the proxies.
BY ORDER OF THE BOARD OF DIRECTORS,
GARRY G. CARLEY
GARRY G. CARLEY
Executive Vice President and Secretary
Troy, Michigan
February , 1997
36
41
ANNEX A
AGREEMENT AND PLAN OF MERGER
by and among
ABN AMRO NORTH AMERICA, INC.,
a Delaware corporation,
HEITRITZ CORP.,
a Delaware corporation
and
STANDARD FEDERAL BANCORPORATION, INC.,
a Michigan corporation
November 21, 1996
42
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Merger; Closing; Effective Time; Definitions
1.1 The Merger...................................................................... A-1
1.2 Closing; Effective Time......................................................... A-1
1.3 Articles of Incorporation; Bylaws............................................... A-2
1.4 Directors and Officers.......................................................... A-2
1.5 Definitions..................................................................... A-2
ARTICLE II
Conversion of Shares in the Merger
2.1 Terms of Merger................................................................. A-5
2.2 Payment for Shares.............................................................. A-6
ARTICLE III
Representations and Warranties of the Company
3.1 Organization, Standing and Power................................................ A-6
3.2 Capitalization.................................................................. A-7
3.3 Subsidiaries.................................................................... A-8
3.4 Company Financial Statements; Absence of Liabilities............................ A-8
3.5 Authority of the Company; No Violation.......................................... A-8
3.6 Insurance....................................................................... A-9
3.7 Books and Records............................................................... A-9
3.8 Title to Assets................................................................. A-9
3.9 Real Properties................................................................. A-9
3.10 Litigation...................................................................... A-9
3.11 Taxes........................................................................... A-10
3.12 Compliance with Applicable Laws; Company Permits................................ A-11
3.13 Performance of Obligations...................................................... A-11
3.14 Employees....................................................................... A-11
3.15 Material Contracts.............................................................. A-12
3.16 Absence of Certain Changes...................................................... A-12
3.17 Loans and Investments........................................................... A-13
3.18 Intellectual Properties......................................................... A-13
3.19 Company Benefit Plans........................................................... A-14
3.20 Regulatory Approvals............................................................ A-16
3.21 Company Regulatory Reports...................................................... A-16
3.22 Company Facilities.............................................................. A-17
3.23 Environmental Conditions........................................................ A-17
3.24 Proxy Statement................................................................. A-17
3.25 Insider Interests............................................................... A-17
3.26 Fairness Opinion................................................................ A-18
3.27 Brokers and Finders............................................................. A-18
3.28 Bylaws; State Takeover Statutes................................................. A-18
3.29 Rights Agreement................................................................ A-18
3.30 Accuracy of Information Furnished............................................... A-18
ARTICLE IV
Representations and Warranties of Purchaser
4.1 Organization, Standing and Power................................................ A-18
4.2 Authority; No Violation......................................................... A-18
4.3 Regulatory Approvals............................................................ A-19
4.4 Litigation...................................................................... A-19
4.5 Adequate Funds.................................................................. A-19
4.6 Proxy Statement................................................................. A-19
A-i
43
PAGE
----
4.7 Accuracy of Information Furnished............................................... A-19
4.8 Share Ownership................................................................. A-19
ARTICLE V
Additional Covenants and Agreements
5.1 Conduct of Business by the Company.............................................. A-19
5.2 Filings and Approvals........................................................... A-21
5.3 Securities Reports.............................................................. A-22
5.4 Acquisition Transaction......................................................... A-22
5.5 Notification of Certain Matters................................................. A-22
5.6 Access to Information; Confidentiality.......................................... A-23
5.7 Shareholder Approval............................................................ A-24
5.8 Employee Benefits............................................................... A-24
5.9 Company Incentive Plans......................................................... A-25
5.10 Indemnification................................................................. A-26
5.11 Bank Director Matters........................................................... A-26
5.12 Rights Agreement................................................................ A-26
5.13 Further Assurances; Form of Transaction......................................... A-26
5.14 WARN Act........................................................................ A-26
5.15 Action by MergerSub............................................................. A-26
5.16 Dividend During Closing Quarter................................................. A-27
ARTICLE VI
Conditions
6.1 Conditions to Obligations of Each Party......................................... A-27
6.2 Additional Conditions to Obligations of Company................................. A-27
6.3 Additional Conditions to Obligations of Purchaser and MergerSub................. A-28
ARTICLE VII
Termination, Amendment and Waiver
7.1 Termination..................................................................... A-29
7.2 Effect of Termination........................................................... A-29
ARTICLE VIII
General Provisions
8.1 Publicity....................................................................... A-30
8.2 Expenses........................................................................ A-30
8.3 Survival........................................................................ A-30
8.4 Notices......................................................................... A-31
8.5 Amendment....................................................................... A-32
8.6 Waiver.......................................................................... A-32
8.7 Interpretation.................................................................. A-32
8.8 Severability.................................................................... A-32
8.9 Miscellaneous................................................................... A-32
8.10 Counterparts.................................................................... A-32
A-ii
44
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into on November 21,
1996, by and among ABN AMRO NORTH AMERICA, INC., a Delaware corporation
("Purchaser"), HEITRITZ CORP., a Delaware corporation and wholly-owned
subsidiary of Purchaser ("MergerSub"), and STANDARD FEDERAL BANCORPORATION,
INC., a Michigan corporation (the "Company").
Purchaser and the Company desire to have MergerSub merge with and into the
Company (the "Merger"), as the result of which the Company will be the surviving
corporate entity, with the Merger to be upon the terms and subject to the
conditions set forth herein.
As an inducement to the willingness of Purchaser to enter into this Agreement,
the Company will, immediately after the execution and delivery of this Agreement
by the parties hereto, enter into an Option Agreement in an amount up to 19.9%
of the outstanding shares of Company Common Stock upon the terms and conditions
set forth therein.
The Boards of Directors of Purchaser, MergerSub and the Company have each duly
approved this Agreement.
In consideration of the premises and the mutual covenants, representations,
warranties and agreements contained herein, Purchaser and the Company agree as
follows:
ARTICLE I
MERGER; CLOSING; EFFECTIVE TIME; DEFINITIONS
1.1 The Merger.
(a) Subject to the terms and conditions of this Agreement, including the receipt
of all requisite regulatory and shareholder approvals, the Company and
MergerSub shall consummate the Merger, pursuant to which (i) MergerSub shall
be merged with and into the Company and the separate corporate existence of
MergerSub shall thereupon cease, (ii) the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall become a
wholly-owned subsidiary of Purchaser, (iii) the Company shall continue to be
governed by the laws of the State of Michigan with all its rights,
privileges, powers and franchises unaffected by the Merger, and (iv) the
Surviving Corporation shall possess all assets and property of every
description, and every interest in the assets and property, contingent or
otherwise, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as a private nature, of each
of the Company and MergerSub, including, without limitation, any possible
recoveries due to the Bank under existing goodwill litigation, and all
obligations belonging or due to each of the Company or MergerSub, all of
which shall vest in the Surviving Corporation without further act or deed.
(b) The Company will cooperate in the preparation by Purchaser and MergerSub of
such applications to the Applicable Governmental Authorities and any other
regulatory authorities as may be necessary in connection with all
governmental approvals requisite to the consummation of the transactions
contemplated hereby. Purchaser and the Company will each cooperate in the
preparation of such applications, statements or materials as may be required
to be furnished to the shareholders of the Company or filed or submitted to
appropriate governmental agencies in connection with the Merger and with
solicitation of the approval by shareholders of the Company in respect
thereof.
1.2 Closing; Effective Time. The Closing of the Merger shall take place on a
date which (i) shall be no later than the first business day of the calendar
month following twenty (20) calendar days after the last of the conditions set
forth in Sections 6.1(a), 6.1(b) and 6.2(e) has been fulfilled or waived, or
(ii) is mutually agreed upon by the parties at the offices of Vedder, Price,
Kaufman & Kammholz, 222 North LaSalle Street, Suite 2600, Chicago, Illinois, at
a time to be mutually agreed upon by the parties. The Merger shall become
effective upon the filing, on the day of Closing or as soon thereafter as is
practicable, of a certificate of merger as provided in the DGCL and MBCA, or at
such time thereafter as Purchaser and the Company may agree upon in writing to
provide in such certificate of merger.
45
1.3 Articles of Incorporation; Bylaws. At the Effective Time, the Charter and
the Bylaws of MergerSub, as in effect immediately prior to the Effective Time,
shall become the Articles of Incorporation and Bylaws, respectively, of the
Surviving Corporation.
1.4 Directors and Officers. The directors and officers of MergerSub at the
Effective Time shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their successors have
been duly elected or appointed in accordance with the Bylaws of the Surviving
Corporation.
1.5 Definitions. In addition to capitalized terms otherwise defined herein, as
used in this Agreement the following capitalized terms shall have the meanings
provided in this Section 1.5:
"Acquisition Transaction" means (i) a bona fide tender or exchange offer for at
least 10% of the then outstanding shares of any class of capital stock of the
Company by any Person other than Purchaser or an Affiliate of Purchaser, (ii) a
merger, consolidation or other business combination with the Company or the Bank
involving any Person other than Purchaser or an Affiliate of Purchaser, (iii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(whether in one transaction or a series of related transactions) involving a
substantial part of the Company's consolidated assets, including stock of any of
the Company's subsidiaries, to any Person other than Purchaser or an Affiliate
of Purchaser, (iv) the acquisition by any Person (other than Purchaser or an
Affiliate of Purchaser or any of the Company's subsidiaries in a fiduciary
capacity for third parties) of beneficial ownership (within the meaning of Rule
13d-3 under the 1934 Act, but including any shares that may be acquired pursuant
to the exercise of any right, option, warrant or other agreement regardless of
when such exercise may occur) of 10% or more of the then outstanding shares of
any class of capital stock of the Company, including shares of capital stock
currently owned by such Person, (v) any reclassification of securities or
recapitalization of the Company or other similar transaction that has the
effect, directly or indirectly, of increasing the proportionate share of any
class of equity security, including securities convertible into equity
securities, of the Company which is owned by any Person other than Purchaser or
an Affiliate of Purchaser, (vi) a public proxy or consent solicitation made to
shareholders of the Company seeking proxies or consents in opposition to any
proposal relating to any of the transactions contemplated by this Agreement that
has been recommended by the Board of Directors of the Company, (vii) the filing
of an application or notice with the Applicable Governmental Authorities or any
other federal or state regulatory authority seeking approval to engage in one or
more of the transactions described in clauses (i) through (vi) above, or (viii)
the making of a bona fide proposal to the Company or its shareholders by public
announcement or written communication, that is or becomes the subject of public
disclosure, to engage in one or more of the transactions described in clauses
(i) through (vi) above;
"Affiliate" of, or a person "Affiliated" with, a specific person is a person
that directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified;
"Applicable Governmental Authorities" means the Federal Reserve, OTS, FDIC,
CFIUS, U.S. Department of Justice, DCB, Michigan Banking Commissioner, and any
other federal or state governmental authority having jurisdiction over the
Merger and/or the transactions contemplated herein;
"Bank" means Standard Federal Bank, a federally-chartered stock savings bank
that is wholly-owned by the Company, with its principal office at 2600 West Big
Beaver Road, Troy, Michigan, 48084;
"Bank Common Stock" shall have the meaning given such term in Section 3.1(a)
hereof;
"Benefits Letter" means the letter agreement of even date herewith between
Purchaser and the Company which is referred to in Section 5.8 hereof;
"Cancellation Agreements" shall have the meaning given such term in Section 5.9
hereof;
"CFIUS" means the Committee on Foreign Investment in the United States;
"Closing" means the performance by the parties of all of the conditions set
forth in Article VI, which shall take place as provided in Section 1.2 hereof;
"Code" means the Internal Revenue Code of 1986, as amended;
A-2
46
"Company Benefit Plans" means the plans, programs, arrangements and agreements
described in Section 3.19(a) hereof;
"Company Certificate" means a stock certificate evidencing ownership of shares
of Company Common Stock;
"Company Common Stock" means the common stock, no par value, of the Company;
"Company Disclosure Schedule" shall have the meaning given such term in Section
3.3 hereof;
"Company Financial Statements" means the audited consolidated financial
statements of the Company contained, or incorporated by reference, in the
Company's Annual Report on Form 10-K for the year most recently ended, as filed
with the SEC, and as updated by the unaudited consolidated financial statements
of the Company included as a part of the Company's Quarterly Reports on Form
10-Q filed with the SEC subsequent thereto;
"Company Incentive Plans" means the Standard Federal Bancorporation, Inc. First
Amended Employee Stock Option and Appreciation Rights Plan and Standard Federal
Bancorporation, Inc. 1995 Stock Option and Shareholder Value Plan;
"Company Pension Plans" shall have the meaning given to such term in Section
3.19(a) hereof;
"Company Permits" shall have the meaning given such term in Section 3.12;
"Company Qualified Plans" shall have the meaning given to such term in Section
3.19(b) hereof;
"Company Regulatory Reports" shall have the meaning given to such term in
Section 3.21 hereof;
"Company Report" shall have the meaning given to such term in Section 5.6(b)
hereof;
"Company Subsidiary" shall mean each of the Bank and any of the Non-Bank
Subsidiaries individually or collectively, the "Company Subsidiaries";
"Confidentiality Agreement" means that agreement dated August 13, 1996 between
Purchaser and Merrill Lynch & Co., as agent for the Company;
"DCB" means the Dutch Central Bank;
"DGCL" means the Delaware General Corporation Law, as amended;
"Disclosure Schedule Updates" shall have the meaning given such term in Section
5.5(b) thereof;
"Effective Time" means the time at which the certificate of merger relating to
the Merger to be filed pursuant to Section 1.2 hereof shall become effective in
accordance with the DGCL and MBCA;
"Environmental Laws" means any law, regulation, rules, ordinance or similar
requirement which governs or protects the environment, enacted by the United
States, any state, or any county, city or agency or subdivision of the United
States or any state;
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended;
"Exchange Agent" means LaSalle National Bank, as agent for the purpose of
effectuating the exchange of Company Certificates for the Merger Consideration
in accordance with Article II hereof;
"FDIC" means the Federal Deposit Insurance Corporation;
"FHLBI" means the Federal Home Loan Bank of Indianapolis;
"FHLBC" means the Federal Home Loan Bank of Chicago;
"Federal Reserve" means the Board of Governors of the Federal Reserve System;
"GAAP" means generally accepted accounting principles consistently applied;
"Hazardous Materials" means any material or substance: (1) which is a "hazardous
substance," "pollutant," or "contaminant" pursuant to the Comprehensive
Environmental Response Compensation and Liability Act
A-3
47
("CERCLA") (42 U.S.C. 9601 et seq.), as amended, and the regulations promulgated
thereunder; (2) containing gasoline, oil, diesel fuel or other petroleum
products; (3) which is "hazardous waste" pursuant to the Federal Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. 6901 et seq.), as amended, and
the regulations promulgated thereunder; (4) containing asbestos; (5) which is
radioactive; (6) the presence of which requires investigation or remediation
under any Environmental Law; or (7) which is defined or identified as a
"hazardous waste," "hazardous substance," "pollutant," "contaminant," or
"biologically hazardous material" under any Environmental Law;
"HOLA" means the federal Home Owners' Loan Act, as amended;
"Immediate Family" means a person's spouse, parents, in-laws, children and
siblings;
"IRS" means the Internal Revenue Service;
"Knowledge" or "to the knowledge of" means to the knowledge of Thomas R.
Ricketts, Garry C. Carley, Ronald J. Palmer, Joseph E. Krul, Michael R. Maher
and Margaret Makela;
"MBCA" means the Michigan Business Corporation Act, as amended;
"Material Adverse Effect" means, with respect to an entity, any condition,
event, change or occurrence that has or may reasonably be expected to have a
material adverse change on the business, operations, prospects, results of
operations or financial condition of such entity on a consolidated basis but
shall not include (i) an adverse change with respect to, or effect on such
entity resulting from any change in law, rule or regulation generally applicable
to financial institutions, GAAP or regulatory accounting principles, as such
would apply to the financial statements of such entity; or (ii) an adverse
change with respect to, or effect on, such entity resulting from the fee paid to
Merrill Lynch & Co. as contemplated by Section 3.27 and the reasonable expenses
incurred in connection with this Agreement or the transactions contemplated
hereby;
"Merger" means the merger of MergerSub with and into the Company pursuant to
Section 1.1(a) hereof;
"Merger Consideration" means the right to receive $59.00 in cash per share of
Company Common Stock, into which shares of Company Common Stock shall be
converted in the Merger pursuant to Section 2.1 hereof;
"Mortgaged Premises" shall mean each (1) real property interest (including
without limitation any fee or leasehold interest) which is encumbered or
affected by any mortgage, deed of trust, deed to secure debt or other similar
document or instrument granting to the Bank a lien on or security interest in
such real property interest and (2) any other real property interest upon which
is situated assets or other property affected or encumbered by any document or
instrument granting to the Bank a lien thereon or security interest therein;
"Non-Bank Subsidiary" means each corporation of which the Company or the Bank
owns, directly or indirectly, at least fifty percent (50%) of the issued and
outstanding voting stock, including without limitation, each of Standard
Financial Corporation, Kercheval Development Company, Standard Brokerage
Services, Inc., Eureka Service Corporation, Standard Service Corporation,
Standard Insurance Agency, Inc., a Michigan corporation, Tower Service
Corporation, Bankers Home Loan Insurance Agency, Inc., Central Mortgage
Corporation, Central Venture Corporation, Mackinac Agency, Inc., Mackinac
Realty, Inc., Standard Insurance Agency, Inc., an Indiana corporation, Fidelity
Corporation, Standard-Curti Insurance Agency, Inc. and Bell Savings Service
Corporation;
"Option Agreement" means that certain Option Agreement of even date herewith
pursuant to which the Company has granted Purchaser the right to purchase from
the Company shares of Company Common Stock, subject to certain conditions
precedent, and has granted to Purchaser certain other rights;
"OTS" means the Office of Thrift Supervision;
"PBGC" means the Pension Benefit Guaranty Corporation;
"Person" means any individual, corporation, association, partnership, joint
venture, other entity, government or governmental department or agency;
"Properties" means (1) the real estate owned or leased by the Company and its
subsidiaries and used as a banking or mortgage-related facility; (2) other real
estate owned ("REO") by the Bank or any Non-Bank
A-4
48
Subsidiary as defined by any federal or state financial institution regulatory
agency with regulatory authority for the Bank; (3) real estate that is in the
process of pending foreclosure or forfeiture proceedings conducted by the Bank
or any Non-Bank Subsidiary; (4) real estate that is held in trust for others by
the Bank; (5) real estate owned or leased by the Company, the Bank or any
Non-Bank Subsidiary or owned or leased by a partnership or joint venture in
which the Company, the Bank or any Non-Bank Subsidiary has an ownership
interest; and (6) the Mortgaged Premises;
"Proxy Statement" means the proxy statement to be used by the Company in
connection with the solicitation by its Board of Directors of proxies for use at
the meeting of its shareholders to be convened for the purpose of voting on the
Merger, pursuant to Section 5.7 hereof;
"Regulatory Approvals" means the approval of the Merger and transactions
contemplated herein of the Applicable Governmental Authorities;
"Rights Agreement" means that Rights Agreement by and between the Company and
Registrar and Transfer Company dated February 16, 1995;
"SAIF" means the Savings Association Insurance Fund administered by the FDIC;
"SEC" means the Securities and Exchange Commission;
"SVU" shall have the meaning given such term in Section 5.9 hereof;
"Surviving Corporation" shall have the meaning given such term in Section 1.1(a)
hereof;
"1933 Act" means the Securities Act of 1933, as amended;
"1934 Act" means the Securities Exchange Act of 1934, as amended; and
"Voting Debt" shall have the meaning given such term in Section 3.2(a) hereof.
ARTICLE II
CONVERSION OF SHARES IN THE MERGER
2.1 Terms of Merger. Upon the Merger becoming effective:
(a) At the Effective Time, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger, other
than Company Common Stock owned by Purchaser or any Affiliate of Purchaser,
shall, ipso facto and without any action on the part of the holder thereof,
become and be converted into the right to receive the Merger Consideration.
The certificates representing outstanding Company Common Stock shall, after
the Effective Time of the Merger, represent only the right to receive the
Merger Consideration from Purchaser. Each holder of Company Common Stock,
upon surrender to the Exchange Agent, in proper form for cancellation, of
the stock certificate or certificates representing such Company Common
Stock, shall be entitled to receive a check from the Exchange Agent in an
appropriate amount of Merger Consideration for such shares. Until so
presented and surrendered in exchange for the Merger Consideration, each
certificate which represented issued and outstanding Company Common Stock
shall be deemed for all purposes to evidence ownership of the Merger
Consideration. After the Effective Time, there shall be no transfer on the
stock transfer books of the Company of Company Common Stock. No interest
shall accrue or be payable with respect to the Merger Consideration.
(b) Each share of Company Common Stock issued and owned of record by Purchaser
or any Affiliate of Purchaser on the Effective Time of the Merger shall be
cancelled and retired, and no securities shall be issuable and no cash paid
with respect thereto.
(c) Each share of common stock of MergerSub issued and outstanding on the
Effective Time of the Merger shall, ipso facto and without any action on the
part of the holder thereof, continue as one share of the common stock of the
Surviving Corporation and all of such shares of common stock of the
Surviving Corporation shall be owned by Purchaser. Outstanding certificates
representing shares of common stock of
A-5
49
MergerSub shall be deemed to represent an identical number of shares of
common stock of the Surviving Corporation.
(d) Each option granted under the Company Incentive Plans issued andnd
without any action on the part of holders thereof, become and be
converted into the right to receive the difference between the Merger
Consideration and the applicable option exercise price.
2.2 Payment for Shares. At and from time to time after the Effective Time,
Purchaser shall make available or cause to be made available to the Exchange
Agent amounts sufficient in the aggregate to provide all funds necessary for the
Exchange Agent to make payments of the Merger Consideration hereof to holders of
the Company Common Stock issued and outstanding immediately prior to the
Effective Time. As soon as practicable after the Effective Time, Purchaser shall
cause to be mailed to each person (or otherwise to be delivered to each person,
at such person's expense, who requests delivery) who was, at the Effective Time,
a holder of record of issued and outstanding Company Common Stock, a letter of
transmittal and instructions for use in effecting the surrender of the Company
Certificate(s) which, immediately prior to the Effective Time, represented such
shares. Upon surrender to the Exchange Agent of such certificates (or such
documentation as is acceptable to and required by the Exchange Agent with
respect to lost certificates), together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, the Exchange
Agent shall promptly cause to be paid to the Persons entitled thereto a check in
the amount to which such Persons are entitled, after giving effect to any
required tax withholdings. If payment is to be made to a Person other than the
registered holder of the Company Certificate(s) surrendered, it shall be a
condition of such payment that the Company Certificate(s) so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Company Certificate(s) surrendered or established to the satisfaction of
Purchaser or the Exchange Agent that such tax has been paid or is not
applicable. One Hundred Eighty (180) days following the Effective Time,
Purchaser shall be entitled to cause the Exchange Agent to deliver to it any
funds (including any interest received with respect thereto) made available to
the Exchange Agent which have not been disbursed to holders of certificates
formerly representing Company Common Stock outstanding at the Effective Time,
and thereafter such holders shall be entitled to look to Purchaser only as
general creditors thereof with respect to the cash payable upon due surrender of
their Company Certificates. Notwithstanding anything in this Section 2 or
elsewhere in this Agreement to the contrary, neither the Exchange Agent nor any
party hereto shall be liable to a former holder of Company Common Stock for any
cash delivered to a public official pursuant to applicable escheat or abandoned
property laws. The Exchange Agent shall also deliver to Purchaser a certified
list of the names and addresses of all former registered holders of Company
Common Stock who have not then surrendered their Company Certificates to receive
the Merger Consideration to which they are entitled. Except as otherwise
provided herein or in the Letter of Transmittal, Purchaser shall pay all charges
and expenses, including those of the Exchange Agent, in connection with the
payment of the Merger Consideration in exchange for Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that each of the following
statements is true and correct on the date hereof:
3.1 Organization, Standing and Power.
(a) The Company is duly organized and existing as a corporation under the laws
of the State of Michigan and is registered with the OTS as a savings and
loan holding company. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry
on its business as presently conducted. Neither the scope of the business of
the Company nor the location of any of its properties requires that it be
licensed to do business in any jurisdiction other than the State of Michigan
and where the failure to be so licensed or qualified will not have a
Material Adverse Effect on the Company.
A-6
50
True and correct copies of the Company's Articles of Incorporation and
Bylaws, both as amended to the date hereof, have been delivered to Purchaser
prior to the date hereof.
(b) The Bank is duly organized and existing as a federally-chartered stock
savings bank under HOLA and is authorized by the OTS to conduct a savings
bank business. The Bank is a member of the FHLBI, and its deposits are
insured by the SAIF in the manner and to the extent provided by law. The
Bank has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. True and correct copies of the Bank's Charter and Bylaws, both as
amended to the date hereof, have been delivered to Purchaser prior to the
date hereof.
(c) Each Non-Bank Subsidiary is duly organized and existing as a corporation
under the laws of the state of its incorporation and is duly qualified or
licensed as a foreign corporation in each other state or jurisdiction in
which the ownership of property or the conduct of business requires such
licensing or qualification, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect on the Company. Each
Non-Bank Subsidiary has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently conducted. True and correct copies of the Certificate of
Incorporation or Articles of Incorporation, as the case may be, and Bylaws
of each Non-Bank Subsidiary have been delivered to Purchaser prior to the
execution of this Agreement.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 200,000,000
shares of Company Common Stock, no par value, of which 31,205,498 shares
were issued and outstanding as of October 31, 1996; and (ii) 50,000,000
shares of preferred stock, of which 350,000 shares are designated Series A
Preferred, no par value, none of which are outstanding. All of the
outstanding shares of Company Common Stock are validly issued, fully paid
and nonassessable. Except for the option granted to Purchaser pursuant to
the Option Agreement and except for stock options covering 1,377,175 shares
of Common Stock granted pursuant to the Company Incentive Plans and
outstanding on October 31, 1996 and the Company's obligations under the
Rights Agreement, there are no outstanding options, warrants or other rights
in or with respect to the unissued shares of Company Common Stock nor any
securities convertible into such stock; and the Company is not obligated to
issue any additional shares of Company Common Stock or any additional
options, warrants or other rights in or with respect to the unissued shares
of Company Common Stock or any other securities convertible into Company
Common Stock. The Company does not have outstanding any indebtedness which
entitles the holder or holders thereof to exercise voting rights in
connection with the election of its directors ("Voting Debt"), nor does the
Company have outstanding any options, warrants, calls, rights, commitments
or agreements of any kind obligating the Company or any of its subsidiaries
to issue or sell any Voting Debt. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of its capital stock.
(b) The authorized capital stock of the Bank consists of (i) 50,000,000 shares
of common stock, par value $1.00 per share ("Bank Common Stock"), 10,000,000
of which are issued and outstanding; and (ii) 10,000,000 shares of serial
preferred stock of which 350,000 shares are designated Series A Preferred,
par value $1.00 per share, none of which are outstanding. All of the
outstanding shares of the Bank Common Stock are validly issued, fully paid
and nonassessable and are owned by the Company, free and clear of all liens
and encumbrances. There are no outstanding options, warrants or other rights
in or with respect to the unissued shares of the Bank common stock nor any
securities convertible into such stock and the Bank is not obligated to
issue any additional shares of its common stock or any additional options,
warrants or other rights in or with respect to the unissued shares of the
Bank Common Stock or any other securities convertible into such common
stock.
(c) All of the outstanding shares of common stock of each Non-Bank Subsidiary
are validly issued, fully paid and nonassessable and are owned by the
Company or the Bank, free and clear of all liens and encumbrances. There are
no outstanding options, warrants or other rights in or with respect to the
unissued shares of each Non-Bank Subsidiary's common stock nor any
securities convertible into such stock and no Non-Bank Subsidiary is
obligated to issue any additional shares of its common stock or any
additional
A-7
51
options, warrants or other rights in or with respect to the unissued shares
of its common stock or any other securities convertible into such common
stock.
3.3 Subsidiaries. Except for the Bank and the Non-Bank Subsidiaries, and except
as set forth on Schedule 3.3 to the Company's disclosure schedule attached
hereto and made a part hereof (together with all the other schedules, the
"Company Disclosure Schedule"), neither the Company nor the Bank owns or holds,
directly or indirectly, any equity interest in any Person that is not readily
marketable on a nationally recognized exchange or securities market.
3.4 Company Financial Statements; Absence of Liabilities.
(a) There have been delivered by the Company to Purchaser copies of the Company
Financial Statements. The Company Financial Statements: (i) fairly present
the consolidated financial condition of the Company and its subsidiaries as
of the respective dates indicated and its consolidated results of operations
and the consolidated changes in its shareholders' equity and cash flows for
the respective periods indicated, except for the unaudited consolidated
financial statements of the Company and its subsidiaries, which are subject
to normal year-end adjustments; (ii) have been prepared in accordance with
GAAP; (iii) are based on the books and records of the Company and its
subsidiaries; and (iv) contain and reflect reserves for all material accrued
liabilities as of the date thereof and for all reasonably anticipated losses
as of the date thereof, including (but not limited to) adequate reserves for
reasonably anticipated loan and other losses.
(b) The Company has no liabilities or obligations, either accrued or contingent,
which are material to it and which have not been reflected or disclosed in
the Company Financial Statements other than liabilities and obligations
incurred subsequent to December 31, 1995 in the ordinary course of business
or as set forth on any Schedule hereto. The Company does not know of any
basis for the assertion against it of any liability, obligation or claim
(including, without limitation, that of any regulatory authority) that might
result in or cause a material adverse change in the financial condition of
the Company which is not fairly reflected in the Company Financial
Statements or in the Company Regulatory Reports (including the accompanying
financial statements thereto) filed with the SEC subsequent to the filing of
the Company's most recent Annual Report on Form 10-K.
3.5 Authority of the Company; No Violation.
(a) The Company has all requisite corporate power and authority to enter into
this Agreement, and, subject to approval by the requisite majority of its
shareholders, to consummate the Merger and the transactions contemplated
hereby. The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the
Company (other than as described in the immediately preceding sentence), and
this Agreement has been duly executed and delivered by the Company and is a
valid and binding obligation of the Company, enforceable in accordance with
its terms except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium, and other similar laws affecting creditors' rights
generally, and (ii) general principles of equity regardless of whether
asserted in a proceeding in equity or at law. All of the conditions
specified in the Company's Articles and Bylaws and the MBCA have been met,
and approval of this Agreement and the Merger by the shareholders of the
Company requires only the affirmative vote of a majority of the outstanding
shares of Company Common Stock entitled to vote at the meeting of
shareholders to be held pursuant to Section 5.7 hereof.
(b) Except as set forth on Schedule 3.5 to the Company Disclosure Schedule,
neither the execution and delivery by the Company of this Agreement, the
consummation of the transactions contemplated herein, nor compliance by the
Company with any of the provisions hereof, will: (i) conflict with or result
in a breach of any provision of its Articles of Incorporation or Bylaws;
(ii) constitute a breach of or result in a default, or give rise to any
rights of termination, cancellation or acceleration, or any right to acquire
any securities, including without limitation, under the Rights Agreement
(other than the options currently outstanding under the Company Incentive
Plans), or assets, under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, lease agreement
or other instrument or obligation to which the Company or any Company
Subsidiary is a party, by which the Company or any Company
A-8
52
Subsidiary or any of their respective properties or assets is bound, if in
any such circumstances such event could have a Material Adverse Effect on
the Company or materially impair the Company's ability to perform its
obligations hereunder; or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any Company
Subsidiary or any of their respective properties or assets, the result of
which could have a Material Adverse Effect on the Company or materially
impair the Company's ability to perform its obligations hereunder. Except as
set forth on Schedule 3.5 to the Company Disclosure Schedule, no consent of,
approval of, notice to or filing with any governmental authority having
jurisdiction over any aspect of the business or assets of the Company, and
no consent of, approval of or notice to or filing with any other Person is
required in connection with the execution and delivery by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby, except (A) the approval of this Agreement and the
transactions contemplated hereby by the shareholders of the Company, and (B)
such approvals of the Applicable Governmental Authorities and any other
governmental authorities having jurisdiction that are required by law or
regulation to consummate the transactions contemplated by this Agreement.
3.6 Insurance. The Company and each Company Subsidiary have in full force and
effect policies of insurance (including, without limitation, a blanket bond,
fire, third-party liability, use and occupancy), with respect to their assets
and business, against such casualties and contingencies and in such amounts,
types and forms as are appropriate for their business, operations, properties
and assets and usual and customary in the industry of which they are a part.
3.7 Books and Records. The minute books of the Company and the Bank contain true
and accurate records of all meetings and actions taken by their Boards of
Directors, any committee thereof and their shareholders, and the books and
records of the Company and the Bank truly and accurately reflect their
respective businesses and affairs.
3.8 Title to Assets. The Company and each Company Subsidiary have good and
marketable title to all properties and assets, other than real property, owned
or stated to be owned by them, free and clear of all mortgages, liens,
encumbrances, pledges or charges of any kind or nature except for: (a)
encumbrances reflected in the Company Financial Statements or described in the
notes thereto; (b) liens for current taxes not yet due; (c) liens incurred in
the ordinary course of business; or (d) encumbrances, if any, which are not
substantial in character, amount or extent or which do not materially detract
from the value, or interfere with present use of the property subject thereto or
affected thereby, or otherwise materially impair the conduct of business of the
Company or the Company Subsidiaries.
3.9 Real Properties. Schedule 3.9 to the Company Disclosure Schedule contains a
list of real properties owned or leased by the Company or any Company Subsidiary
and contains, among other things, an accurate summary of all material
commitments which the Company or any Company Subsidiary have to improve real
estate owned by them. True, correct and complete copies of all leases in which
the Company or any Company Subsidiary is either a lessor or a lessee and which
are listed or referred to in Schedule 3.9 have been delivered to Purchaser prior
to the date hereof. The Company and each Company Subsidiary have good and
marketable title to all the real properties, and valid leasehold interests in
the leaseholds, described in Schedule 3.9 to the Company Disclosure Schedule,
free and clear of all mortgages, covenants, conditions, restrictions, easements,
liens, security interests, charges, claims, assessments and encumbrances, except
for: (a) rights of lessors, co-lessees or sublessees in such matters which are
reflected in the lease; (b) current taxes not yet due and payable; (c) such
imperfections of title and encumbrances, if any, as do not materially detract
from the value of or materially interfere with the present use of such property;
and (d) except as described in Schedule 3.9 to the Company Disclosure Schedule.
3.10 Litigation. Except as set forth on Schedule 3.10 to the Company Disclosure
Schedule, there is no private or governmental suit, claim, action or proceeding
(arbitral or otherwise) pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary which, if adversely determined,
may, in the reasonable belief of the Company, involve a payment by the Company
or any Company Subsidiary of more than $250,000 in excess of available insurance
coverage, or which involve a demand for equitable relief, or against any of
their respective directors or officers relating to the performance of their
duties in such capacities
A-9
53
that may have a Material Adverse Effect on the Company or on the transactions
contemplated hereby. Except as set forth on Schedule 3.10 to the Company
Disclosure Schedule, there are no material judgments, decrees, stipulations or
orders against the Company or any Company Subsidiary enjoining them or any of
their directors or officers in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any property or the
conduct of business in any area. The Company has delivered to Purchaser summary
reports of its attorneys, dated on or after January 1, 1996, on all pending
litigation to which the Company, any Company Subsidiary or any of their
directors or officers is a party and which names the Company, any Company
Subsidiary or any of their directors or officers as a defendant or
cross-defendant and prays for damages or such other remedy or remedies that, if
sustained, could have a Material Adverse Effect on the Company or which could
impair the ability of the Company to perform its obligations hereunder.
3.11 Taxes. (a) The Company and each Company Subsidiary has filed all federal
and all material state and local tax returns required to be filed by it (all
such returns being accurate and complete in all material respects) including,
but not limited to, returns relating to income tax, franchise tax, Michigan
Single Business Tax, real and personal property tax, sales and use tax, premium
tax, excise tax and other tax returns of every character required to be filed by
it and has paid all taxes, together with any interest and penalties owing in
connection therewith, shown on such returns to be due in respect of the periods
covered by such returns, other than taxes which are being contested in good
faith and for which adequate reserves have been established and reflected on the
books and records of the Company and the Company Subsidiaries. Without limiting
the foregoing, the Company and each Company Subsidiary has filed all required
payroll tax returns, has fulfilled all tax withholding obligations and has paid
over to the appropriate governmental authorities the proper amounts with respect
to the foregoing to the extent such amounts are due. The tax and audit positions
taken by the Company and each Company Subsidiary in connection with the tax
returns described in the preceding sentences were reasonable and asserted in
good faith. Adequate provision has been made in the books and records of the
Company and each Company Subsidiary and, to the extent required by GAAP,
reflected in the Company Financial Statements, for all tax liabilities,
including interest or penalties, whether or not due and payable and whether or
not disputed, with respect to any and all federal, foreign, state, local and
other taxes of any kind or nature for the periods covered by the Company
Financial Statements and for all prior periods. The IRS has examined, or the
statute of limitations has expired with respect to, the federal tax returns of
the Company and each Company Subsidiary (to the extent not filed as part of a
consolidated return of the Company) for all taxable years ending prior to and
including December 31, 1989. Schedule 3.11 to the Company Disclosure Schedule
sets forth (a) the date or dates through which any federal, foreign, state,
local or other taxing authority has examined any other tax returns of the
Company; (b) a complete list of each year for which any federal, state or local
tax authority has obtained or has requested an extension of the statute of
limitations from the Company and lists each tax case of the Company currently
pending in audit, at the administrative appeals level or in litigation; and (c)
the date and issuing authority of each statutory notice of deficiency, notice of
proposed assessment and revenue agent's report issued to the Company within the
last 12 months. Schedule 3.11 to the Company Disclosure Schedule also identifies
any examination by taxing authorities of the federal, state or local tax returns
of the Company or its subsidiaries which have taken place since January 1, 1993,
and which have not been closed and completed without unresolved matters. To the
knowledge of the Company, neither the IRS nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith) except as set forth in Schedule 3.11 to the Company Disclosure
Schedule. All taxes which the Company or any Company Subsidiary has been
required to collect or withhold (other than backup withholdings pursuant to
Section 3406 of the Code) have been duly withheld or collected and, to the
extent required, have been paid to the proper taxing authority. With respect to
backup withholdings, the Company and each Company Subsidiary have exercised the
degree of care required under Section 6724 of the Code to avoid the imposition
of any penalties for failure to obtain certified and correct taxpayer
identification numbers from payees or for failure to make backup withholdings.
(b) Set forth on Schedule 3.11 to the Company Disclosure Schedule is a complete
list of all material tax elections made by the Company or any Company
Subsidiary on any income tax return filed during the past five years which
have the effect of deferring the realization of an item of income to a
period after the period for which such item of income was reported on the
financial statements of the Company or any Company Subsidiary, or
accelerating an item of deduction to a period prior to the period for which
the corresponding
A-10
54
item of loss or expense was reported on the financial statements. Neither
the Company nor any Company Subsidiary is a party to, has any liability
under or is bound by, any tax indemnity, tax sharing or tax allocation
agreement other than as described in Schedule 3.11 to the Company Disclosure
Schedule. There are no liens for taxes (other than for current taxes not yet
due and payable) upon the assets of the Company or any Company Subsidiary.
The Company has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code ("Affiliated Group"), other
than as a common parent corporation, and, except for those Non-Bank
Subsidiaries, that have been acquired by the Company, no Company Subsidiary
has ever been a member of an Affiliated Group except where the Company was
the common parent of the Affiliated Group. To the knowledge of the Company,
neither the Company nor any Company Subsidiary has any liability for the
taxes of any person, corporation, association, partnership, limited
liability company, or other entity (other than the Company and the Company
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law) as a transferee or successor, by
contract or otherwise.
(c) Neither the Company nor any Company Subsidiary has agreed to, or to the best
knowledge of the Company is required to, make any adjustments under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Neither the Company nor any Company Subsidiary is a "United States Real
Property Holding Corporation" as defined in Section 897 of the Code. Neither
the Company nor any Company Subsidiary has filed a consent under Section
341(f) of the Code.
3.12 Compliance with Applicable Laws; Company Permits. The Company and each
Company Subsidiary holds all permits, licenses, variances, exemptions, orders
and approvals of all governmental entities which are necessary for the operation
of the businesses of the Company and each Company Subsidiary (the "Company
Permits"), except for Company Permits the failure of which to hold would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
All of the material Company Permits are listed on Schedule 3.12 to the Company
Disclosure Schedule. The Bank is an approved seller-servicer for the Federal
Home Loan Mortgage Corporation ("FHLMC"), the Government National Mortgage
Association ("GNMA") and the Federal National Mortgage Association ("FNMA") and
as such holds all necessary permits, authorizations or approvals of FHLMC and
FNMA necessary to carry on a mortgage banking business with such governmental
agencies. The Bank is qualified to originate loans insured by the Federal
Housing Administration, the Department of Housing and Urban Development and the
Veteran's Administration. The Company and the Company Subsidiaries are in
compliance in all material respects with the terms of the Company Permits and
all applicable laws and regulations, except for possible violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. No investigation by any governmental entity with respect to the
Company or any of the Company Subsidiaries is pending or, to the knowledge of
the Company, threatened, other than, in each case, those the outcome of which
will not have a Material Adverse Effect on the Company.
3.13 Performance of Obligations. The Company and the Bank have performed in all
respects all material obligations required to be performed by them to date and
are not in default under or in breach of any term or provision of any covenant,
contract, lease, loan servicing agreement or arrangement, indenture or any other
covenant to which they are a party, are subject or are otherwise bound, and no
event has occurred which, with the giving of notice or the passage of time or
both, would constitute such default or breach, where such default or breach
would have a Material Adverse Effect on Company. Except for loans and leases
made by the Company or the Bank in the ordinary course of business, to the
knowledge of the Company, no party with whom the Company or the Bank has an
agreement which is of material importance to the business of the Company or the
Bank is in default thereunder.
3.14 Employees. There are no controversies pending or threatened between, or
related to, the Company, the Bank or any Non-Bank Subsidiary and any of their
employees which could have consequences that may reasonably be expected to have
a Material Adverse Effect on the Company or impair the ability of the Company to
perform its obligations hereunder. Except as disclosed in the Company Financial
Statements, all material sums due for employee compensation and benefits have
been duly and adequately paid or accrued on its books in accordance with GAAP.
Neither the Company nor any Company Subsidiary is a party to any collective
bargaining agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
A-11
55
3.15 Material Contracts. (a) Except as disclosed in the Company Regulatory
Reports or described on Schedule 3.15 to the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any agreement or
understanding described below:
(i) any agreement, arrangement or commitment not made in the ordinary
course of business consistent with past practices that is material to
the Company on a consolidated basis, or any contract, agreement or
understanding relating to the sale or disposition by the Company or
any Company Subsidiary or any significant assets or businesses of the
Company or any Company Subsidiary;
(ii) any material agreement, indenture, credit agreement or other
instrument relating to the borrowing of money by the Company or any
Company Subsidiary (other than certificates of deposit and customary
deposit instruments) or the guarantee by the Company or any such
Company Subsidiary of any such obligation;
(iii) any contract containing covenants which limit the ability of the
Company or any Company Subsidiary to compete in any line of business
or with any person or which involve any restriction in the
geographical area in which, or method by which, the Company and the
Company Subsidiaries may carry on their respective businesses (other
than as may be required by law or applicable regulatory authority);
(iv) any other contract or agreement that would be required to be
disclosed as an exhibit to the Company's Annual Report on Form 10-K
and which has not been so disclosed;
(v) any agreement or understanding which obligates the Company or any
Company Subsidiary for a period in excess of one year, which has a
value in excess of $500,000, to purchase, sell or provide services,
materials, supplies, merchandise, facilities or equipment and which
is not terminable without penalty on not more than thirty (30) days
notice;
(vi) any agreement or understanding of any kind, except for deposit
relationships or loans made prior to January 1, 1996, with any
current director or executive officer of the Company, the Bank or any
Non-Bank Subsidiary or with any Affiliate thereof or any member of
the Immediate Family of any such director or executive officer; or
(vii) any material agreement or understanding which would be terminable by
any other party other than the Company, the Bank or any Non-Bank
Subsidiary as a result of the consummation of the transactions
contemplated by this Agreement.
(b) True and correct copies of all documents identified in Schedule 3.15 to the
Company Disclosure Schedule have been delivered to Purchaser prior to the
date hereof.
3.16 Absence of Certain Changes. Except as set forth in Schedule 3.16 to the
Company Disclosure Schedule or
the Company Regulatory Reports, since December 31, 1995, the business of the
Company and the Bank (inclusive of the activities and operations of the Non-Bank
Subsidiaries) has been conducted diligently and only in the ordinary course, in
the same manner as theretofore conducted, and there has not been:
(a) any change in the financial condition, results of operations, prospects or
business of the Company and the Bank, taken as a whole, which has had a
Material Adverse Effect on the Company;
(b) any damage, destruction or loss (whether or not covered by insurance)
individually or in the aggregate which has had a Material Adverse Effect on
the Company;
(c) any material contract, agreement, license or understanding which the Company
or any Company Subsidiary has entered into or to which the Company or any
Company Subsidiary is a party which has been terminated or amended other
than in the ordinary course of business, which termination or amendment
would have a Material Adverse Effect on the Company;
(d) except for supplies or equipment purchased in the ordinary course of
business, any capital expenditure exceeding individually or in the aggregate
$500,000;
A-12
56
(e) any labor trouble, dispute or problem of any character involving employees
having a Material Adverse Effect on the Company;
(f) any change in accounting methods or practices by the Company or any Company
Subsidiary, except as required by the rules of the American Institute of
Certified Public Accountants ("AICPA"), the Financial Accounting Standards
Board ("FASB"), applicable governmental authorities or GAAP;
(g) any write-down in excess of $500,000 by the Bank of any of its loans or
other real estate owned which is not reflected in the Company's statement of
financial condition as of September 30, 1996;
(h) any increase in the salary schedule, compensation, rate, fee or commission
of the Company or Bank employees, officers or directors, or the declaration,
commitment or obligation of any kind for the payment by the Company or any
Company Subsidiary of a bonus or other additional salary, compensation, fee
or commission to any Person, except increases made in the ordinary course of
business and consistent with past practices and increases required under or
specifically contemplated by employment agreements disclosed on Schedule
3.15 to the Company Disclosure Schedule;
(i) any sale, assignment or transfer of any assets in excess of $500,000 other
than in the ordinary course of business or pursuant to a contract or
agreement disclosed on Schedule 3.15 to the Company Disclosure Schedule;
(j) any mortgage, pledge or encumbrance of any asset of the Company other than
liens for taxes not yet due, except in the ordinary course of business and
except as set forth in Sections 3.8 and 3.9 hereof;
(k) any waiver or release of any material right or claim of the Company or the
Bank except in the ordinary course of business; and
(l) except for the declaration or payment of regular quarterly cash dividends
not in excess of $.20 per share of Company Common Stock, any declaration,
setting aside or payment of any dividend or distribution with respect to the
Company Common Stock or the issuance of any shares of Company Common Stock
or any other securities of the Company, except for stock options granted
pursuant to the Company Incentive Plans and shares issued upon exercise
thereof.
3.17 Loans and Investments. To the knowledge of the Company, all loans and
investments of the Company and each Company Subsidiary are legal and enforceable
in accordance with the terms thereof, except as may be limited by any
bankruptcy, insolvency, moratorium or other laws affecting creditors' rights
generally or by the exercise of judicial discretion. Except as set forth in
Schedule 3.17 to the Company Disclosure Schedule, no loans or investments held
by the Company or the Bank with outstanding principal balances in excess of
$500,000 are as of October 31, 1996 (a) more than 90 days past due with respect
to any scheduled payment of principal or interest, (b) classified as "loss,"
"doubtful," "substandard" or "special mention" by any federal regulators or by
the Company's or the Bank's internal credit review system, (c) on a non-accrual
status in accordance with the Company's or the Bank's loan review procedures or
(d) "renegotiated loans," as that term is defined in Financial Accounting
Standards No. 15.
3.18 Intellectual Properties. Schedule 3.18 to the Company Disclosure Schedule
sets forth a complete and correct list of all United States material trademarks,
trade names, service marks and copyrights owned by or licensed to the Company or
any Company Subsidiary for use in their respective businesses, and all licenses
and other agreements relating thereto and all agreements relating to third party
Intellectual Property that the Company or any Company Subsidiary is licensed or
authorized to use in their businesses, including without limitation, any
software licenses (collectively, the "Intellectual Property"). With respect to
each item of Intellectual Property owned by the Company or any Company
Subsidiary, the Company, or such Company Subsidiary possesses all right, title
and interest in and to the item, free and clear of any lien, claim, royalty
interest or encumbrance. With respect to each item of Intellectual Property that
the Company or such Company Subsidiary is licensed or authorized to use, the
license, sublicense, agreement or permission covering such item is legal, valid,
binding, enforceable and in full force and effect and, to the knowledge of the
Company, has not been breached by any party thereto. Neither the Company nor any
Company Subsidiary has ever received (or to the knowledge of the Company, is
threatened) any charge, complaint, claim, demand or notice alleging any
A-13
57
interference, infringement, misappropriation or violation with or of any
intellectual property rights of a third party (including any claims that the
Company or any Company Subsidiary must license or refrain from using any
intellectual property rights of a third party). To the knowledge of the Company,
none of the Company or any Company Subsidiary has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any intellectual
property rights of third parties and no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
intellectual property rights of the Company or any Company Subsidiary.
3.19 Company Benefit Plans. (a) Schedule 3.19(a)(1) to the Company Disclosure
Schedule contains a list of each compensation, consulting, employment,
termination or collective bargaining agreement, and each stock option, stock
purchase, stock appreciation right, recognition and retention, life, health,
accident or other insurance, bonus, deferred or incentive compensation,
severance or separation plan or any agreement providing any payment or benefit
resulting from a change in control, profit sharing, retirement, or other
employee benefit plan, practice, policy or arrangement of any kind, oral or
written, covering employees, former employees, directors or former directors of
the Company or any Company Subsidiary or their respective beneficiaries,
including, but not limited to, any employee benefit plans within the meaning of
Section 3(3) of ERISA, which the Company or any Company Subsidiary maintains, to
which the Company or any Company Subsidiary contributes, or under which any
employee, former employee, director or former director of the Company or any
Company Subsidiary is covered or has benefit rights and pursuant to which any
liability of the Company or any Company Subsidiary exists or is reasonably
likely to occur (the "Company Benefit Plans"). Except as set forth on Schedule
3.19(a)(2) to the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary maintains or has entered into any Company Benefit Plan or
other document, plan or agreement which contains any change in control
provisions which would cause an increase or acceleration of benefits or benefit
entitlements to employees or former employees of the Company or any Company
Subsidiary or their respective beneficiaries, or other provisions which would
cause an increase in the liability to the Company or any Company Subsidiary or
to Purchaser as a result of the transactions contemplated by this Agreement or
any related action thereafter including, but not limited to, termination of
employment or directorship (a "Change in Control Benefit"). Neither the
execution of this Agreement or the Option Agreement constitutes a "change in
control" for purposes of any Company Benefit Plan or any Change in Control
Benefits. The term "Company Benefit Plans" as used herein refers to all plans
contemplated under the preceding sentences of this Section 3.19, provided that
the term "Plan" or "Plans" is used in this Agreement for convenience only and
does not constitute an acknowledgment that a particular arrangement is an
employee benefit plan within the meaning of Section 3(3) of ERISA. Except as
disclosed in Schedule 3.19(a)(3) to the Company Disclosure Schedule, no Company
Benefit Plan is a multiemployer plan within the meaning of Section 3(37) of
ERISA and neither the Company nor any Company has since December 31, 1990
maintained, sponsored or had an obligation to contribute to any such
multiemployer plan. Except as disclosed on Schedule 3.19(a)(4) to the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has been
notified by any Applicable Governmental Authority that any payments or other
compensation paid or payable by the Company or any Company Subsidiary under this
Agreement, any Company Benefit Plan or otherwise, to or for the benefit of any
employee or director of the Company or any Company Subsidiary, is not in
compliance with all applicable rules, regulations and bulletins promulgated by
the Applicable Governmental Authorities and, to the best knowledge of the
Company or any Company Subsidiary, all such payments are in compliance with all
applicable rules, regulations and bulletins promulgated by the Applicable
Governmental Authorities.
(b) Except as disclosed on Schedule 3.19(b) to the Company Disclosure Schedule,
each of the Company Benefit Plans that is intended to be a pension, profit
sharing, stock bonus, thrift, savings or employee stock ownership plan that
is qualified under Section 401(a) of the Code (the "Company Qualified
Plans") has been determined by the IRS to qualify under Section 401(a) of
the Code, or an application for determination of such qualification has been
timely made to the IRS prior to the end of the applicable remedial amendment
period under Section 401(b) of the Code (a copy of each such determination
letter or pending application has been provided to Purchaser by the
Company), and, to the knowledge of the Company, there exist no circumstances
that may adversely affect the qualified status of any such Company Qualified
Plan. All such Company Qualified Plans established or maintained by Company
or the Company Subsidiaries or to which Company or the Company Subsidiaries
contribute are in compliance in all material
A-14
58
respects with all applicable requirements of ERISA, and are in compliance in
all material respects with all applicable requirements (including
qualification and nondiscrimination requirements in effect as of the
Effective Time) of the Code for obtaining the tax benefits the Code
thereupon permits with respect to such Company Qualified Plans. All accrued
contributions and other payments required to be made by the Company or any
Company Subsidiary to any Company Benefit Plan through September 30, 1996,
have been made or reserves adequate for such purposes as of September 30,
1996, have been set aside therefor and reflected in the Company Financial
Statements dated as of September 30, 1996. Neither the Company nor any
Company Subsidiary is in material default in performing any of its
respective contractual obligations under any of the Company Benefit Plans or
any related trust agreement or insurance contract, and there are no material
outstanding liabilities of any such Plan other than liabilities for benefits
to be paid to participants in such plan and their beneficiaries in
accordance with the terms of such Plan.
(c) There is no pending or, to the Company's knowledge, threatened litigation or
pending claim (other than benefit claims made in the ordinary course) by or
on behalf of or against any of the Company Benefit Plans (or with respect to
the administration of any of such Plans) now or heretofore maintained by
Company or any Company Subsidiary which alleges violations of applicable
state or federal law which are reasonably likely to result in a liability on
the part of the Company or any Company Subsidiary or any such Plan, and to
the Company's knowledge there is no basis for any such claim.
(d) The Company and the Company Subsidiaries and all other persons having
fiduciary or other responsibilities or duties with respect to any Company
Benefit Plan are, and since the inception of each such plan have been, in
substantial compliance with, and each such plan is and has been operated in
substantial accordance with, its provisions and in substantial compliance
with the applicable laws, rules and regulations governing such plan,
including, without limitation, the rules and regulations promulgated by the
United States Department of Labor, the PBGC and the IRS under ERISA, the
Code or any other applicable law. No "reportable event" (as defined in
Section 4043(b) of ERISA) has occurred with respect to any Company Benefit
Plan. No Company Benefit Plan has engaged in or been a party to a
"prohibited transaction" (as defined in Section 406 of ERISA or Section
4975(c) of the Code) without an exemption thereto under Section 408 of ERISA
or 4975(d) of the Code. All Company Benefit Plans that are group health
plans have been operated in compliance with the group health plan
continuation requirements of Section 4980B of the Code and Section 601 of
ERISA.
(e) Neither the Company nor any Company Subsidiary has incurred, nor to the
Company's knowledge is the Company or any Company Subsidiary reasonably
likely to incur, any liability to the PBGC (except for payment of premiums)
under Title IV of ERISA in connection with any plan subject to the
provisions of Title IV of ERISA now or heretofore maintained or contributed
to by the Company, by any Company Subsidiary or by any other entity which is
considered one employer with the Company under ERISA or the Code (the
"Company Pension Plans"). No Company Pension Plan had an "accumulated
funding deficiency" (as defined in Section 302 of ERISA (whether or not
waived)) as of the last day of the most recently completed plan year. Except
as set forth on Schedule 3.19(e) to the Company Disclosure Schedule, the
fair market value of the assets of each Company Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such Company Pension Plan as of the end of the
most recently completed plan year, calculated on the basis of the actuarial
assumptions used in the most recent valuation for such Company Pension Plan
prior to the date hereof, and there has been no material change in the
financial condition of any such Company Pension Plan since the last day of
the most recently completed plan year. Neither the Company nor any Company
Subsidiary has provided or is required to provide security to any Company
Pension Plan pursuant to Section 401(a)(29) of the Code.
(f) Except as disclosed on Schedule 3.19(f) to the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary has made any payments, or is
a party to any agreement or any Company Benefit Plan that under any
circumstances could obligate it, any Company Subsidiary, or any successor of
either of them, to make any payment for which the deductibility for federal
income tax purposes by the Company, any Company Subsidiary or any successor
to the Company or any Company Subsidiary is or will be limited because of
Section 162(m) or Section 280G of the Code.
A-15
59
(g) The Company has delivered to Purchaser copies of (i) each Company Benefit
Plan (or a description with respect to any oral employee benefit plan,
practice, policy or arrangement) and all amendments thereto, (ii) current
summary plan descriptions of each Company Benefit Plan, (iii) each trust
agreement, insurance policy or other instrument relating to funding of any
Company Benefit Plan, (iv) the three most recent Annual Reports (Form 5500
series) and accompanying schedules filed with the IRS or the United States
Department of Labor with respect to each Company Benefit Plan, (v) the most
recent determination letter issued by the IRS with respect to each Company
Qualified Plan, (vi) the most recent available financial statements for each
Company Benefit Plan that has assets, (vii) the most recent actuarial report
for any Company Pension Plan and any other Company Benefit Plan that is a
defined benefit pension plan (including, but not limited to, any
nonqualified or supplemental plan), and if any such plan has been amended or
been party to a plan merger subsequent to the date of such report,
information substantially describing the financial effects of such amendment
or plan merger, (viii) the most recent audited financial statements for each
Company Benefit Plan for which audited financial statements are required by
ERISA, (ix) listing of installment amounts payable from the FIRF Retirement
Fund to any Company Qualified Plan, (x) a listing of stock options awarded
under the Company Incentive Plans, showing with respect to each holder
thereof, the number of shares, the exercise price per share and a copy of
the form of option agreements relating thereto, (xi) a listing of the
shareholder value units awarded under the Company Incentive Plans, showing
the number of outstanding shareholder value units credited to each
participant, the measurement dates applicable thereto, and the estimated
payout value thereof as of the most recent practicable date, and (xii) each
officer or director for whom a deferred compensation or supplemental
retirement benefit is maintained, showing the amounts due thereunder and the
payment schedule thereof, and the respective amounts accrued in the Company
Financial Statements dated December 31, 1995 and September 30, 1996.
(h) Schedule 3.19(h) to the Company Disclosure Schedule describes any obligation
that the Company or any Company Subsidiary has to provide health or welfare
benefits to retirees or other former employees, directors or their
dependents (other than rights under Section 4980B of the Code or Section 601
of ERISA), including information as to the number of retirees, other former
employees or directors and dependents entitled to such coverages and their
ages.
(i) Schedules 3.19(i)(1) and (2) to the Company Disclosure Schedule list: (1)
each officer of the Company and any Company Subsidiary and each director of
Company and any Company Subsidiary who is eligible to receive a Change in
Control Benefit, showing the estimated amount of each such Change in Control
Benefit and the basis of the calculation thereof, estimated compensation for
1996 based upon compensation received to the date of this Agreement, the
individual's rate of compensation in effect on the date of this Agreement,
the individual's participation in any Company Benefit Plan (including the
Company Incentive Plans) and such individual's compensation from Company or
any Company Subsidiary for each of the calendar years 1992 through 1995 as
reported, and for calendar year 1996 as estimated to be reported, by the
Company or an Company Subsidiary on Form W-2 or Form 1099; and (2) each
other employee of Company or the Company Subsidiaries who may be eligible
for a Change in Control Benefit, showing an estimated amount of each such
Change in Control Benefit and the basis of the calculation thereof.
(j) The Company and the Company Subsidiaries have filed or caused to be filed,
and will continue to file or cause to be filed, in a timely manner all
filings pertaining to each Company Benefit Plan with the IRS, the PBGC and
the United States Department of Labor, as prescribed by the Code or ERISA,
or regulations issued thereunder. All such filings, as amended, were and
will be complete and accurate in all material respects as of the dates of
such filings.
3.20 Regulatory Approvals. To the knowledge of the Company, no fact or condition
exists which the Company has reason to believe will prevent Purchaser from
obtaining approval of the Applicable Governmental Authorities or any other
applicable state or federal regulatory authority to consummate the Merger and
the transactions contemplated herein.
3.21 Company Regulatory Reports. The Company has filed on a timely basis all
proxy statements, reports and other documents required to be filed by it under
the 1934 Act or HOLA after December 31, 1992 (collectively,
A-16
60
the "Company Regulatory Reports"), and the Company has furnished Purchaser
copies of its Annual Report on Form 10-K for the fiscal year ended December 31,
1995, and all quarterly and periodic reports and proxy statements filed under
the 1934 Act by the Company after such date, each as filed with the SEC. Each
Company Regulatory Report was in compliance in all material respects with the
requirements of its respective report form and did not on the date of filing
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.
3.22 Company Facilities. To the knowledge of the Company, all "alterations" (as
such term is defined in the Americans with Disabilities Act and the regulations
issued thereunder (collectively, the "ADA")) to the respective business of the
Company, the Bank and each Non-Bank Subsidiary, including, without limitation,
automated teller machines (collectively, the "Company Facilities") undertaken
after January 26, 1992, are in compliance in all material respects with the ADA
and the ATBCB Accessibility Guidelines for Buildings and Facilities ("ADAAG").
To the knowledge of the Company, there are no investigations, proceedings or
complaints, formal or informal, pending or overtly threatened against the
Company, the Bank or any Non-Bank Subsidiary in connection with the Company
Facilities under ADA, ADAAG, or any other local, state or federal law concerning
accessibility for individuals with disabilities.
3.23 Environmental Conditions.
(a) Except as disclosed in Schedule 3.23 to the Company Disclosure Schedule, to
the knowledge of the Company, there are no present or past conditions on the
Properties, involving or resulting from a past or present storage, spill,
discharge, leak, emission, injection, escape, dumping or release of any kind
whatsoever of any Hazardous Materials or from any generation,
transportation, treatment, storage, disposal, use or handling of any
Hazardous Materials, that may reasonably be expected to result in a Material
Adverse Effect on the Company.
(b) The Company and the Company Subsidiaries are in compliance in all material
respects with all applicable Environmental Laws. Neither the Company nor any
Company Subsidiary has received notice of, nor to the best of their
knowledge after such inquiry and investigation as the Company deems
appropriate, are there outstanding or pending, any public or private claims,
lawsuits, citations, penalties, unsatisfied abatement obligations or notices
or orders of non-compliance relating to the environmental condition of the
Properties, which have or may have a Material Adverse Effect on the Company.
(c) To the knowledge of the Company, no Properties are currently undergoing
remediation or cleanup of Hazardous Materials or other environmental
conditions, the actual or estimated cost of which may have a Material
Adverse Effect on the Company.
(d) To the knowledge of the Company, the Company and the Company Subsidiaries
have all material governmental permits, licenses, certificates of inspection
and other authorizations governing or protecting the environment necessary
under the Environmental Laws to conduct their present business, and such
permits, licenses, certificates of inspection and other authorizations are
fully transferable, to the extent permitted by law, to Purchaser.
3.24 Proxy Statement. None of the information to be supplied by the Company for
inclusion or incorporation by reference in the Company's Proxy Statement as of
the time of its mailing and as of the time of the meeting of the Company's
shareholders in connection therewith, and as amended or supplemented by the
Company, will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein not misleading; in no event, however, shall the
Company be liable for any untrue statement of a material fact or omission to
state a material fact in the Company's Proxy Statement made in reliance upon,
and in conformity with, written information concerning Purchaser or MergerSub
furnished by Purchaser specifically for use in the Proxy Statement. The Proxy
Statement will comply as to form in all material respects with the requirements
of the 1934 Act and the rules and regulations thereunder.
3.25 Insider Interests. No officer or director of the Company or the Bank or any
"affiliate" (as defined in Section 23A of the Federal Reserve Act (12 U.S.C.
Section 371c)) of the Company, has any loan, credit or
A-17
61
other contractual arrangement outstanding with the Company or the Bank which
does not conform to applicable rules and regulations of the OTS and the Federal
Reserve. No officer or director of the Company or any Affiliate of the Company
has any material interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of the Company or any Company
Subsidiary.
3.26 Fairness Opinion. The Board of Directors of the Company has received the
written opinion of Merrill Lynch & Co., to the effect that, as of the date of
this Agreement, the Merger Consideration to be received by shareholders of the
Company in the Merger is fair to such shareholders from a financial point of
view.
3.27 Brokers and Finders. Except for the Company's agreement with Merrill Lynch
& Co., a copy of which has been furnished to Purchaser prior to the execution
hereof, the Company is not a party to any agreement with any broker, finder or
investment banker relating to the transactions contemplated hereby, and neither
the execution of this Agreement nor the consummation of the transactions
provided for herein will result in any liability to any broker or finder. Except
for the fee payable to Merrill Lynch & Co., the Company agrees to indemnify and
hold Purchaser, MergerSub and their Affiliates harmless with respect to any
broker, finder or investment banker fee which any Person may claim or assert
arising from any express or implied agreement or engagement by the Company or
the Bank.
3.28 Bylaws; State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement and the Option Agreement and/or has taken
such other action, and such approval and/or other action is sufficient to render
inapplicable to the Merger, this Agreement, the Option Agreement and the
transactions contemplated by this Agreement and the Option Agreement, the
provisions of the Company's Bylaws and the provisions of Chapters 7A and 7B of
the MBCA. Other than as described above, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement, the Option Agreement and the transactions contemplated by this
Agreement and the Option Agreement.
3.29 Rights Agreement. The Company and the Board of Directors have taken all
necessary action to (i) render the Rights Agreement inapplicable with respect to
the Merger and the other transactions contemplated by this Agreement and the
Option Agreement and (ii) ensure that neither Purchaser nor MergerSub nor any of
their Affiliates will be deemed to be a "Acquiring Person" or an "Adverse
Person" (as such terms are defined in the Rights Agreement) and no "Shares
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) occurs by reason of announcement, approval, execution or
delivery of this Agreement or the Option Agreement or the consummation of the
transactions contemplated hereby and thereby.
3.30 Accuracy of Information Furnished. The representations and warranties made
by the Company in this Agreement and in any Schedules hereto furnished by the
Company do not contain any untrue statement of a material fact or omit to state
any material fact which is necessary under the circumstances in order to make
the statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company that each of the
following statements is true and correct on the date hereof:
4.1 Organization, Standing and Power. Each of Purchaser and MergerSub is duly
organized and existing as a corporation under the laws of the State of Delaware.
Purchaser is registered with the Federal Reserve as a bank holding company. Each
of Purchaser and MergerSub has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
presently conducted. MergerSub was formed for the purpose of engaging in the
Merger and has not engaged in any activities other than those necessary to
effectuate the terms of this Agreement.
4.2 Authority; No Violation.
(a) Each of Purchaser and MergerSub has all requisite corporate power and
authority to enter into this Agreement and to consummate the Merger and the
transactions contemplated hereby. The execution and
A-18
62
delivery by Purchaser and MergerSub of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser and
MergerSub, and this Agreement has been duly executed and delivered by
Purchaser and MergerSub and constitutes the valid and binding obligations of
Purchaser and MergerSub, enforceable against each of Purchaser and MergerSub
in accordance with its terms except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium, and other similar laws affecting
creditors' rights generally, and (ii) general principles of equity
regardless of whether asserted in a proceeding in equity or at law.
(b) Neither the execution and delivery by Purchaser or MergerSub of this
Agreement, the consummation of the transactions contemplated hereby, nor
compliance by Purchaser or MergerSub with any of the provisions hereof,
will: (i) conflict with or result in a breach of any provision of its
Certificate of Incorporation or Bylaws; (ii) constitute a breach of or
result in a default, or give rise to any rights of termination, cancellation
or acceleration under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or
other instrument or obligation to which Purchaser or MergerSub is a party,
or by which Purchaser or MergerSub or any of their respective properties or
assets is bound, if in any such circumstances such event could have a
Material Adverse Effect on Purchaser; or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Purchaser or
MergerSub or any of their respective properties or assets, the result of
which could have a Material Adverse Effect on Purchaser. No consent of,
approval of, notice to or filing with any governmental authority having
jurisdiction over any aspect of the business or assets of Purchaser, and no
consent of, approval of or notice to or filing with any other Person is
required in connection with the execution and delivery by Purchaser or
MergerSub of this Agreement or the consummation by Purchaser or MergerSub of
the transactions contemplated hereby, except for the Regulatory Approvals.
4.3 Regulatory Approvals. To the knowledge of Purchaser, no fact or condition
exists which Purchaser has reason to believe will prevent it or the Company from
obtaining any of the Regulatory Approvals.
4.4 Litigation. There is no private or governmental suit, claim, action or
proceeding pending or threatened, or which reasonably should be expected to be
commenced, against Purchaser, its subsidiaries or against any of their directors
or officers that would impair the ability of Purchaser to perform its
obligations hereunder.
4.5 Adequate Funds. At the Effective Time, Purchaser will have sufficient funds
and capital to carry out its obligations under this Agreement.
4.6 Proxy Statement. None of the information to be supplied by Purchaser for
inclusion in the Proxy Statement as of the time of its mailing and as of the
time of the meeting of the Company's shareholders in connection therewith, and
as amended or supplemented by Purchaser, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading.
4.7 Accuracy of Information Furnished. The representations and warranties made
by Purchaser in this Agreement do not contain any untrue statement of a material
fact or omit to state a material fact which is necessary in order to make the
statements contained herein not misleading.
4.8 Share Ownership. As of the date hereof, Purchaser owns less than ten percent
(10%) of the Company Common Stock.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Conduct of Business by the Company. From the date of this Agreement to the
Effective Time, the Company will operate its business and cause each Company
Subsidiary to operate its business in the ordinary course and consistent with
past practices. The Company will use all reasonable efforts to preserve intact
the present business organizations of the Company, the Bank and each Non-Bank
Subsidiary and maintain in effect all material licenses, permits and approvals
of governmental authorities and agencies necessary for the conduct of
A-19
63
its present business. Except as otherwise contemplated by this Agreement or as
otherwise consented to or approved by Purchaser in writing, none of the Company,
the Bank or any Non-Bank Subsidiary shall:
(a) issue, sell, purchase or redeem or commit or agree to issue, sell, purchase
or redeem any shares of its capital stock other than shares issued pursuant
to the exercise of stock options outstanding on the date hereof, or any
Voting Debt; or issue or create or grant any options, warrants or rights to
purchase shares of its common stock; or issue, sell or authorize the
issuance or sale of securities of any kind convertible into or exchangeable
for shares of its capital stock or any Voting Debt; or declare, set aside or
pay any dividend or make any distribution in respect of its capital stock
other than regular quarterly cash dividends payable by the Company on dates
consistent with dividend payment practices during 1995 not to exceed $.20
per share of Company Common Stock per quarter, except that the Bank and the
Non-Bank Subsidiary may pay dividends to the Company in amounts sufficient
to enable the Company to pay its ordinary operating expenses and its accrued
liabilities, including (but not limited to) litigation expenses and
accounting, legal, printing, investment banking, environmental testing and
regulatory application fees, expenses and costs relating to the transactions
contemplated hereby, provided, however, that no dividend shall be paid by
the Bank or any Non-Bank Subsidiary if it is necessary for such entity to
borrow funds to pay the dividend;
(b) amend its Certificate or Articles of Incorporation (in the case of the
Company or any Company Subsidiary), Charter (in the case of the Bank) or
Bylaws or issue or agree to issue any additional shares of its capital stock
or issue or create any warrants, obligations, subscriptions, options,
convertible security, or other commitments under which additional shares of
its capital stock of any class might be directly or indirectly authorized or
issued except in connection with options previously granted under the
Company Incentive Plans;
(c) make any general or unusual increase in compensation or rate of compensation
payable or to become payable to hourly, salaried or commissioned employees
or officers, except for those which are normal, reasonable and consistent
with past practices or as required by or specifically provided for by
contracts in existence as of the date hereof, nor enter into any written or
oral employment agreement which by its terms cannot be terminated on thirty
(30) days' notice or less without penalty;
(d) accrue, set aside, or pay to any officer or employee any bonus,
profit-sharing, severance, retirement, insurance, death, fringe benefit, or
other extraordinary compensation (except pursuant to pension, profit-
sharing, bonus and other fringe benefit plans, agreements and arrangements
presently in effect and in accordance with past practices) or adopt or amend
any employee benefit plan;
(e) commit to purchase, purchase or otherwise acquire any derivative or
synthetic mortgage product or enter into any interest rate swap transaction;
(f) except for loans secured by one-to-four family residences in amounts less
than $1 million, make any loan, loan commitment or renewal or extension
thereof to any Person which would, when aggregated with all outstanding
loans, commitments for loans or renewals or extensions thereof made by the
Bank to such Person and such Person's Immediate Family and Affiliates,
exceed $500,000; provided, however, that Purchaser shall be deemed to have
consented to any such loan or commitment if it has not objected thereto
within five (5) business days after receiving written notice thereof;
(g) acquire any business entity or assets thereof, except as it relates to a
foreclosure or other exercise of creditor's rights in the usual and ordinary
course of its business;
(h) enter into any contract or agreement to buy, sell, exchange or otherwise
deal in any assets or series of assets in a single transaction in excess of
$500,000 in aggregate value (including, but not limited to, options or
commodities or any tangible real or personal properties of the Company or
any Company Subsidiary), except for the origination, purchase and sale of
mortgage loans and loan participations and the purchase and sale of readily
marketable investment securities in the ordinary course of business and
consistent with past practices, and sales of real estate owned and other
repossessed properties or acceptance of a deed in lieu of foreclosure;
A-20
64
(i) make any one capital expenditure or any series of related capital
expenditures (other than emergency repairs and replacements), the amount or
aggregate amount of which (as the case may be) is in excess of $500,000;
(j) file, withdraw, or fail to renew any applications for additional branches or
to relocate operations from existing locations;
(k) create or incur any liabilities in excess of $500,000, other than the taking
of deposits and other liabilities incurred in the ordinary course of
business and consistent with past practices or as contemplated or permitted
by or in connection with this Agreement and the consummation of the Merger;
(l) create or incur or suffer to exist any mortgage, lien, pledge, security
interest, charge, encumbrance or restriction of any kind against or in
respect of any property or right of the Company or any Company Subsidiary
securing any obligation in excess of $500,000, except for pledges or
security interests given in connection with the acceptance of repurchase
agreements or government deposits or Federal Home Loan Bank borrowings;
(m) make or become a party to any contract or commitment in excess of $500,000,
or renew, extend, amend or modify any contract or commitment in excess of
$500,000, except in the usual and ordinary course of business or as
otherwise contemplated or permitted by this Agreement;
(n) discharge or satisfy any mortgage, lien, charge or encumbrance other than as
a result of the payment of liabilities in accordance with the terms thereof,
or except in the ordinary course of business, if the cost to the Company or
any Company Subsidiary to discharge or satisfy any such mortgage, lien,
charge or encumbrance is in excess of $500,000, unless such discharge or
satisfaction is covered by general or specific reserves;
(o) pay any obligation or liability, absolute or contingent, in excess of
$500,000 except liabilities shown on the Company Financial Statements or
except in the usual and ordinary course of business or in connection with
the transactions contemplated hereby;
(p) institute, settle or agree to settle any claim, action or proceeding,
whether or not initiated in a court of law, involving an expenditure in
excess of $500,000;
(q) invest in any real estate, except for investments in real estate owned as a
result of foreclosure or deed in lieu of foreclosure;
(r) enter into or amend any continuing contract or series of related contracts
in excess of $500,000 for the purchase of materials, supplies, equipment or
services which cannot be terminated without cause with less than thirty (30)
days' notice and without payment of any amount as a penalty, bonus, premium
or other compensation for such termination except as contemplated or
permitted by this Agreement;
(s) enter into or amend any contract, agreement or other transaction, other than
pursuant to the Bank's employee loan program, with any officer, director or
principal shareholder of the Company or any Affiliate of such person on
terms that are less favorable than could be obtained from an unrelated third
party on an arms' length basis;
(t) change any basic policies and practices with respect to liquidity management
and cash flow planning, marketing, deposit origination, lending, budgeting,
profit and tax planning, personnel practices, accounting or any other
material aspect of its business or operations, except for such changes as
may be required in the opinion of management of the Company to respond to
then current market or economic conditions or as may be required by the
rules of the AICPA, the FASB or by applicable governmental authorities; or
(u) default under the terms of any agreement or understanding to which the
Company or any Company Subsidiary is a party, and which, individually or
together with other agreements or understandings with respect to which a
default exists, would have a Material Adverse Effect on the Company.
5.2 Filings and Approvals. Each party will use all reasonable efforts and will
cooperate with the other parties in the preparation and filing, as soon as
practicable, of all applications or other documents required to obtain the
A-21
65
Regulatory Approvals and approval and/or consents from any other applicable
governmental or regulatory authorities for approval of the Merger contemplated
by this Agreement, and provide copies of such applications, filings and related
correspondence to the other parties. Prior to filing each application,
registration statement or other document with the applicable regulatory
authority, each party will provide the other parties with a reasonable
opportunity to review and comment on the non-confidential portions of each such
application, registration statement or other document. Each party will use all
reasonable efforts and will cooperate with the other party in taking any other
actions necessary to obtain such regulatory or other approvals and consents at
the earliest practicable time, including participating in any required hearings
or proceedings. Subject to the terms and conditions herein provided, each party
will use all reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement. In addition, the parties will use all reasonable
efforts and cooperate with each other to obtain any consents or waivers from
third parties that Purchaser reasonably deems to be necessary under any contract
or agreement to which the Company or any Company Subsidiary is a party in order
to prevent any breach or default from arising thereunder; provided, however,
that the failure to obtain any such consent or waiver shall not constitute a
breach of a covenant hereunder or a failure to satisfy any condition precedent
to either party's obligation to consummate the transactions contemplated hereby.
5.3 Securities Reports. As soon as reasonably available, the Company shall
deliver to Purchaser complete copies of its Annual Report on Form 10-K, if any,
for the year ending December 31, 1996, all Quarterly Reports on Form 10-Q, all
Current Reports on Form 8-K or any proxy materials filed hereafter with the SEC
pursuant to the 1934 Act. The financial statements contained in such reports
will be prepared in accordance with GAAP (except for changes required by
applicable governmental authorities or by GAAP) and will present fairly the
consolidated financial condition of the Company and the Bank as of the dates
indicated and for the periods then ended.
5.4 Acquisition Transaction. The Company will not, and will cause the Company
Subsidiaries and its and the Company Subsidiaries' respective officers,
directors, employees, agents and Affiliates not to, directly or indirectly,
solicit, authorize, initiate or encourage submission of, any proposal, offer,
tender offer or exchange offer from any Person relating to any Acquisition
Transaction, or participate in any negotiations in connection with or in
furtherance of any Acquisition Transaction or permit any person other than
Purchaser and its representatives to have any access to the facilities of, or
furnish to any person other than Purchaser and its representatives any
non-public information with respect to, the Company or any of the Company
Subsidiaries in connection with or in furtherance of any of the foregoing. The
Company shall immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any parties (other than the
Purchaser) conducted heretofore with respect to any of the foregoing. The
Company shall immediately provide to Purchaser telephone notice of any such
proposal or offer and shall promptly provide Purchaser with the name of the
party seeking to engage in such discussions or negotiations, or requesting such
information, and, after receipt of a written offer or proposal from such party,
copies of any written offers, proposals, agreements or other documents with
respect to such offer or proposal. Notwithstanding anything contained herein to
the contrary, nothing herein shall prohibit the Company, its directors and
officers from taking any action otherwise prohibited by this Section 5.4 if the
Board of Directors of the Company determines, upon receipt of a written opinion
of its outside counsel, that it is necessary to take such action in order to
fulfill their fiduciary duties to shareholders of the Company under the MBCA.
5.5 Notification of Certain Matters.
(a) Each party shall give prompt notice to the other parties of (i) the
occurrence or failure to occur of any event or the discovery of any
information, which occurrence, failure or discovery would be likely to cause
any representation or warranty on its part contained in this Agreement to be
untrue, inaccurate or incomplete after the date hereof or, in case of any
representation or warranty given as of a specific date, would be likely to
cause any such representation on its part contained in this Agreement to be
untrue, inaccurate or incomplete in any material respect as of such specific
date and (ii) any material failure of such party to comply with or satisfy
any covenant or agreement to be complied with or satisfied by it hereunder.
A-22
66
(b) From and after the date hereof to the Effective Time and at and as of the
Effective Time, the Company shall supplement or amend any of its
representations and warranties which apply to the period after the date
hereof by delivering monthly updates to the Company Disclosure Schedule
("Disclosure Schedule Updates") to Purchaser with respect to any matter
hereafter arising which, in the good faith judgment of the Company, would
render any such representation or warranty after the date of this Agreement
materially inaccurate or incomplete as a result of such matter arising. The
Disclosure Schedule Updates shall be provided to Purchaser on or before the
25th day of each calendar month. Within twenty (20) days after receipt of
any Disclosure Schedule Update (or if cure is promptly commenced by the
Company, but is not effected within thirty (30) days after receipt of any
Disclosure Schedule Update (the "Cure Period")), Purchaser may exercise its
right to terminate this Agreement pursuant to Section 7.1(f) hereof, if the
information in such Disclosure Schedule Update together with the information
in any or all of the Disclosure Schedule Updates previously provided by the
Company indicates that the Company, in the good faith judgment of the
Purchaser, has suffered or is reasonably likely to suffer a Material Adverse
Effect (i) which either has not or cannot be cured within the Cure Period,
or (ii) which does not result primarily from changes in the general level of
interest rates.
5.6 Access to Information; Confidentiality.
(a) Between the date hereof and the Effective Time, the Company will afford, and
will cause the Bank and each Non-Bank Subsidiary to afford, to the officers,
accountants, attorneys and authorized representatives of Purchaser
reasonable access during normal business hours to the banking offices,
personnel, advisors, consultants, properties, examination reports (subject
to regulatory approval), contracts, commitments, books and records of the
Company, the Bank and each Non-Bank Subsidiary, whether such documents are
located on the premises of the Company or elsewhere. The Company shall
furnish Purchaser with all such statements (financial and otherwise),
records, examination reports (to the extent permitted or authorized by the
OTS) and documents or copies thereof, and other information concerning the
business and affairs of the Company, the Bank and each Non-Bank Subsidiary
as Purchaser shall from time to time reasonably request. The Company further
agrees to cause its accountants, attorneys and such other persons as the
parties shall mutually agree upon to fully cooperate with Purchaser and its
representatives in connection with the right of access granted herein.
(b) The Company will promptly furnish to Purchaser (i) a copy of each material
report filed by it with any governmental authority, including without
limitation, any federal, state or local taxing authority and any federal or
state bank regulatory or securities authority (each a "Company Report")
during the period after the date hereof and prior to the Effective Time, and
(ii) all other information concerning its business, properties and personnel
as Purchaser may reasonably request. Each financial statement set forth in a
Company Report so filed and each financial statement provided by the Company
to Purchaser pursuant to the next following sentence, together with any
notes or schedules thereto, will present fairly in all material respects the
information purported to be set forth therein for the period specified
therein (subject, in the case of unaudited statements, to normal year-end
adjustments and any other adjustments described therein or the applicable
principles with respect thereto), in each case in accordance with GAAP
during the periods involved or applicable regulatory principles, as the case
may be, in each case except as otherwise provided herein, stated therein or
in the notes thereto. Throughout the period after the date hereof and prior
to the Effective Time, the Company will provide to Purchaser, on or before
the 25th day of each calendar month, (i) the reports of management of the
Company and Bank to the Board of Directors of the Company and the Bank,
respectively, for the most recently available month, including to the extent
available, delinquency schedules, addition to loan loss reserves, and
payroll reports, (ii) monthly financial statements prepared by the Company
for the preceding month, and (iii) a description of any material changes
with respect to the representations and warranties of the Company or in any
of the lists provided therewith. Throughout the period after the date hereof
and prior to the Effective Time, the Company will cause one or more of its
designated representatives to confer on a regular and frequent basis with
representatives of Purchaser and to report the general status of the ongoing
operations of the Company and each Company Subsidiary. During such period,
the Company promptly will notify Purchaser of any change in the ordinary
course of business or in the operation of the properties of the Company or
any Company Subsidiary or any breach by
A-23
67
the Company of any representation, warranty, covenant or agreement set forth
in this Agreement, and will keep Purchaser promptly and fully informed of
such events. During such period, the Company will consult with Purchaser
before taking any steps to comply with suggestions made by any bank
regulatory authority which could reasonably be considered to be material to
the Company. The Company shall allow a representative of Purchaser to attend
as an observer the Board of Directors', and committees thereof, meetings of
the Company and the Bank. The Company shall give reasonable notice to
Purchaser of any such meeting and, if known, the agenda for or business to
be discussed at such meeting. The Company shall also provide to Purchaser
all written agendas and meeting or written consent materials (other than in
connection with the matters subject to Section 5.4 hereof) provided to the
directors of the Company and each Company Subsidiary in connection with
Board and committee meetings. All information obtained by Purchaser at these
meetings shall be treated in confidence as provided in this Section 5.6.
(c) All information and documents to which Purchaser is given access pursuant
hereto shall be subject to the Confidentiality Agreement. All information
furnished by the Company or any Company Subsidiary to Purchaser pursuant
hereto shall be treated as the sole property of the Company until
consummation of the Merger contemplated hereby and, if such Merger shall not
occur, Purchaser shall at the request of the Company, (i) return to the
Company or any Company Subsidiary or (ii) provide written confirmation of
the destruction of, all documents or other materials containing, reflecting
or referring to such information (and all copies thereof), shall use its
best efforts to keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential
shall continue for two (2) years from the date the proposed Merger is
abandoned, but shall not apply to (i) any information which was already in
the possession of Purchaser prior to disclosure thereof by the Company or
any Company Subsidiary, (ii) information which was then generally known to
the public, information which became known to the public through no fault of
Purchaser or its agents, or (iii) information disclosed in accordance with
an order of any applicable governmental authority or a court of competent
jurisdiction.
5.7 Shareholder Approval. The Company will take all steps necessary to duly
call, give notice of, convene and hold a meeting of its shareholders, as soon as
practicable, but in no event later than forty-five (45) days after the date the
SEC clears the Proxy Statement, for the purpose of obtaining shareholder
approval of this Agreement and the Merger; provided, however, that the Proxy
Statement shall not be mailed to the holders of Company Common Stock until
Merrill Lynch & Co. has delivered to the Board of Directors of the Company for
inclusion in the Proxy Statement an opinion, dated the mailing date, to the
effect that the Merger Consideration is fair to the shareholders of the Company
from a financial point of view in standard industry form with respect to
transactions of this nature. The Company will take all reasonable steps
necessary to submit the Proxy Statement to the SEC within thirty (30) days after
the date of this Agreement. The Proxy Statement will satisfy all requirements of
the 1934 Act and the rules and regulations promulgated thereunder and will
include a unanimous recommendation by the Board of Directors of the Company that
the shareholders of the Company approve this Agreement and the Merger. Purchaser
shall furnish such information concerning Purchaser as is necessary in order to
cause the Proxy Statement, insofar as it relates to Purchaser, to be prepared in
accordance with all applicable requirements of the 1934 Act and the rules and
regulations promulgated thereunder. Purchaser agrees promptly to advise the
Company if at any time prior to such Company shareholder meeting any information
provided by Purchaser in the Proxy Statement becomes incorrect or incomplete in
any material respect, and to provide to the Company the information needed to
correct such inaccuracy or omission.
5.8 Employee Benefits. The Company and Purchaser shall cooperate in effecting
the following treatment of the Company Benefit Plans, except as mutually agreed
upon by Purchaser and the Company prior to the Effective Time:
(a) At the Effective Time, Purchaser or any subsidiary of Purchaser shall, to
the extent required by Purchaser, be substituted for the Company or any
Company Subsidiary as the sponsoring employer under those Company Benefit
Plans with respect to which Company or any Company Subsidiary is a
sponsoring employer immediately prior to the Effective Time, and shall
assume and be vested with all of the powers, rights, duties, obligations and
liabilities previously vested in Company or Company Subsidiary with respect
to each such plan. Except as otherwise provided herein, each such plan and
any Company Benefit Plan
A-24
68
sponsored by the Company or any Company Subsidiary shall be continued in
effect by Purchaser or any applicable subsidiary of Purchaser after the
Effective Time without a termination or discontinuance thereof as a result
of the Merger, subject to the power reserved to Purchaser or any applicable
subsidiary of Purchaser under each such plan to subsequently amend or
terminate the plan, which amendments or terminations shall be limited by and
otherwise comply with the terms of such plan and applicable law. The
Company, each Company Subsidiary and Purchaser will use all reasonable
efforts (i) to effect said substitutions and assumptions, and such other
actions contemplated under this Agreement, and (ii) to amend such plans as
to the extent necessary to provide for said substitutions and assumptions,
and such other actions contemplated under this Agreement or the Benefits
Letter.
(b) After the Effective Time, at such times and to the extent set forth in the
Benefits Letter, Purchaser shall provide, or cause any applicable subsidiary
of Purchaser to provide, to each employee of Company and any Company
Subsidiary as of the Effective Time ("Company Employees") (i) the
opportunity to participate in each employee benefit plan and program
maintained by Purchaser for similarly situated employees of Purchaser and
its subsidiaries (the "Purchaser Benefit Plans"), (ii) credit for service
with the Company, the Bank or the Non-Bank Subsidiaries under the Purchaser
Benefit Plans with respect to the participation of such employees in such
Purchaser Benefit Plans, and (iii) waiver of waiting periods and preexisting
condition exclusions under the Purchaser Benefit Plans. Nothing in the
preceding sentence shall obligate Purchaser to provide or cause to be
provided any benefits duplicative to those provided under any Company
Benefit Plan continued pursuant to subparagraph (a) above. Except as
otherwise provided in this Agreement, the power of Purchaser or Company or
subsidiary of Purchaser to amend or terminate any benefit plan or program,
including any Company Benefit Plan, shall not be altered or affected, but
shall remain subject to any limitations provided in such plans or under
applicable law.
(c) Purchaser agrees to honor or to cause an applicable Purchaser subsidiary to
honor certain other Company Benefit Plans, and to provide severance benefits
to eligible employees, as set forth in the Benefits Letter.
(d) Nothing in this Section 5.8 or the Benefits Letter is intended, nor shall it
be construed, to confer any express or implied third party beneficiary
rights in any person including present or former employees of the Company or
any Company Subsidiary and any beneficiaries or dependents thereof.
5.9 Company Incentive Plans. The Company shall terminate the Company Incentive
Plans and cancel and terminate each outstanding option and shareholder value
unit ("SVU") thereunder, effective prior to the Effective Time. The Company
shall use its best efforts to receive prior to the Effective Time a cancellation
agreement from each option holder and each SVU holder in form and substance
satisfactory to Purchaser ("Cancellation Agreements"), acknowledging such
cancellation and termination of options and SVUs. The Cancellation Agreements
shall provide that in consideration for the cancellation of such options and
SVUs, the Company shall pay to such holders, not more than two (2) days prior to
the Effective Time, an amount (less any applicable withholding and employment
taxes) equal (i) in the case of options, to the amount by which the Merger
Consideration exceeds the exercise price per share of Company Common Stock under
the outstanding options held by such holder, multiplied by the number of shares
of Company Common Stock covered by such options, and (ii) in the case of SVUs,
to the amount determined in accordance with Section 6.02 of the Company's 1995
Stock Option and Shareholder Value Plan. All options held by a person who does
not deliver a Cancellation Agreement to the Company prior to the Effective Time
shall be converted as provided in Section 2.1(d) hereof, and all SVUs held by a
person who does not deliver a Cancellation Agreement prior to the Effective Time
shall be converted into the right to receive cash in accordance with said
Section 6.02, and Purchaser shall pay to such holders, not more than two (2)
days after the receipt of a Cancellation Agreement, an amount (less any
applicable withholding and employment taxes) equal (x) in the case of options,
to the amount by which the Merger Consideration exceeds the exercise price per
share of Company Common Stock under the outstanding options held by such holder,
multiplied by the number of shares of Company Common Stock covered by such
options and (y) in the case of SVUs, to the amount determined in accordance with
Section 6.02 of the Company's 1995 Stock Option and Shareholder Value Plan.
A-25
69
5.10 Indemnification.
(a) Purchaser and MergerSub hereby agree that for six (6) years after the
Effective Time, Purchaser and the Surviving Corporation shall cause to be
maintained in effect the Company's current policy of officers' and
directors' liability insurance with respect to actions and omissions
occurring on or prior to the Closing; provided, however, that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
covered persons and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring on or prior to
the Effective Time; provided, further, that the Surviving Corporation shall
not be required to pay an annual premium in excess of 125% of the last
annual premium paid by the Company prior to the date hereof (which premium
is disclosed in the Schedule 3.6 to the Company Disclosure Schedule) and if
the Surviving Corporation is unable to obtain the insurance required by this
Section 5.10, it shall obtain as much comparable insurance as possible for
an annual premium equal to such maximum amount.
(b) Purchaser acknowledges the exculpation, indemnification, advancement of
expenses and like obligations of the Company and the Bank contained in their
Articles of Incorporation and Charter, respectively, and ByLaws with respect
to current and former directors, officers, employees and agents
("Indemnified Persons") and hereby agrees, for six (6) years from and after
the Effective Time, to honor in accordance with their terms in effect on the
date hereof all such obligations.
(c) The provisions of this Section 5.10 are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Person and his or her heirs,
beneficiaries and representatives.
5.11 Bank Director Matters. At the Effective Time, Purchaser agrees to elect Mr.
Thomas R. Ricketts as Chairman of the Board of the Bank as described in the
Benefits Letter.
5.12 Rights Agreement. The Company shall take all necessary steps to terminate
the Rights Agreement effective upon the Effective Time.
5.13 Further Assurances; Form of Transaction.
(a) Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. In case at any
time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary
action.
(b) If necessary to expedite the Closing of the Merger and any other
transactions contemplated by this Agreement, the parties agree that each
will take or perform any additional reasonably necessary or advisable steps
to restructure the transactions contemplated hereby; provided, however, that
any such restructuring will not result in any change in the Merger
Consideration.
5.14 WARN Act. The Company agrees that, if requested by Purchaser, it shall, on
behalf of Purchaser or any subsidiary of Purchaser, issue such notices as are
required under the Worker Adjustment and Retraining Notification Act of 1988
(the "WARN Act") or any similarly applicable state or local law. Such request by
Purchaser shall be given in time to permit the Company to issue notices
sufficiently in advance of any time of closing of such offices so that Purchaser
or any subsidiary of Purchaser shall not be liable under the WARN Act for any
penalty or payment in lieu of notice to any employee or governmental entity.
Purchaser and the Company shall cooperate in the preparation and giving of such
notices, and no such notices shall be given without the approval of Purchaser.
5.15 Action by MergerSub. As the sole shareholder of MergerSub, Purchaser has
approved this Agreement and the Merger and will provide all funding necessary
for the acquisition by it of all of the issued and outstanding Company Common
Stock.
A-26
70
5.16 Dividend During Closing Quarter. Notwithstanding anything contained herein
to the contrary, the Company shall be entitled to declare and pay a final cash
dividend in respect of the Company Common Stock, in an amount not to exceed $.20
per share of Company Common Stock, if a regular dividend declaration date shall
be scheduled to occur during the twenty (20) day period prior to Closing
referred to in Section 1.2 hereof.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of Each Party. The respective obligations of each
party to effect the transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Regulatory Approvals. The Regulatory Approvals necessary for the
consummation of the transactions contemplated hereby shall have been
obtained, and none of such approvals shall contain or be subject to any
terms or conditions that are materially different from terms and conditions
customarily contained in similar approvals or notices issued prior to the
date hereof, and all applicable statutory or regulatory waiting periods
shall have lapsed.
(b) No Adverse Proceedings. There shall not be threatened, instituted or pending
any action or proceeding before any court or governmental authority or
agency, domestic or foreign, challenging or seeking to make illegal or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to obtain
material damages in connection with the transactions contemplated hereby. No
injunction or other order entered by a state or federal court of competent
jurisdiction shall have been issued and remain in effect which would
prohibit or make illegal the consummation of the transactions contemplated
hereby.
6.2 Additional Conditions to Obligations of Company. The obligation of the
Company to consummate the transactions contemplated hereby in accordance with
the terms of this Agreement is also subject to the following conditions:
(a) Representations; Performance. The representations and warranties of
Purchaser set forth in Article IV shall have been true and correct as of the
date hereof and shall be true and correct as of the Effective Time, except
where the failure to be true and correct would not have, or would not
reasonably be expected to have, a Material Adverse Effect on Purchaser.
Purchaser shall in all material respects have performed each obligation and
agreement and complied with each covenant to be performed and complied with
by it hereunder at or prior to the Effective Time.
(b) Officers' Certificate. Purchaser shall have furnished to the Company a
certificate of an Executive Officer and the Chief Financial Officer of
Purchaser dated as of the Effective Time, in which such officers shall
certify to their best knowledge that they have no reason to believe that the
conditions set forth in Section 6.2(a) above have not been fulfilled.
(c) Secretary's Certificate. Purchaser shall have furnished to the Company (i)
copies of the text of the resolutions by which the corporate action on the
part of Purchaser necessary to approve this Agreement and the transactions
contemplated hereby were taken, (ii) certificates dated as of the Effective
Time executed on behalf of Purchaser and MergerSub by their respective
corporate secretaries or one of their respective assistant corporate
secretaries certifying to the Company that such copies are true, correct and
complete copies of such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded, and (iii) an incumbency
certificate dated as of the Effective Time executed on behalf of each of
Purchaser and MergerSub by their respective corporate secretary or one of
its assistant corporate secretaries certifying the signature and office of
each officer of Purchaser and of MergerSub executing this Agreement or any
other agreement, certificate or other instrument executed pursuant hereto by
Purchaser or MergerSub, as the case may be.
A-27
71
(d) Opinion of Counsel. The Company shall have received an opinion letter dated
as of the Effective Time addressed to the Company from Vedder, Price,
Kaufman & Kammholz, counsel to Purchaser, substantially in the form
previously delivered and agreed upon.
(e) Shareholder Approval. This Agreement and the Merger shall have been approved
by the affirmative vote of the holders of the percentage of the Company's
capital stock required for such approval under the provisions of the
Company's Articles of Incorporation and applicable law.
6.3 Additional Conditions to Obligations of Purchaser and MergerSub. The
obligation of Purchaser and MergerSub to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement is also
subject to the following conditions:
(a) Representations; Performance. The representations and warranties of the
Company in this Agreement shall have been true and correct as of the date
hereof and shall be true and correct as of the Effective Time, as updated
pursuant to Section 5.5 hereof, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a
Material Adverse Effect on the Company, and the Company shall in all
material respects have performed each obligation and agreement and complied
with each covenant to be performed and complied with by it hereunder at or
prior to the Effective Time.
(b) Officers' Certificate. The Company shall have furnished to Purchaser a
certificate of the Chief Executive Officer and the Chief Financial Officer
of the Company, dated as of the Effective Time, in which such officers shall
certify to their best knowledge that they have no reason to believe that the
conditions set forth in Section 6.3(a) above have not been fulfilled.
(c) Secretary's Certificate. The Company shall have furnished to Purchaser (i)
copies of the text of the resolutions by which the corporate action on the
part of the Company necessary to approve this Agreement and the transactions
contemplated hereby were taken, (ii) a certificate dated as of the Effective
Time executed on behalf of the Company by its corporate secretary or an
assistant corporate secretary certifying to Purchaser that such copies are
true, correct and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded and
(iii) an incumbency certificate dated as of the Effective Time executed on
behalf of the Company by its corporate secretary or an assistant corporate
secretary certifying the signature and office of each officer of the Company
executing this Agreement or any other agreement, certificate or other
instrument executed pursuant hereto by the Company.
(d) Opinion of Counsel. Purchaser shall have received an opinion letter dated as
of the Effective Time addressed to Purchaser from Dykema Gossett, PLLC,
counsel to the Company, substantially in the form previously delivered and
agreed upon.
(e) No Material Adverse Effect. Since the date of this Agreement, the Company
shall not have suffered or experienced a Material Adverse Effect; provided,
however, that this Section 6.3(e) shall not apply to (i) matters properly
disclosed to Purchaser by the Company in a Disclosure Schedule Update and
cured by the Company within the applicable Cure Period for which Purchaser
has a specific right of termination under Section 7.1(f) hereof or (ii) a
Material Adverse Effect resulting primarily from changes in the general
level of interest rates.
(f) Accountant's Letter. The firm of Deloitte & Touche LLP, independent
certified public accountants for the Company, shall have delivered to
Purchaser a letter, dated as of the Closing Date, with a review stated to
have been done as of a date which is not more than five (5) business days
prior to the date of Closing, in standard industry form with respect to
transactions of this nature.
A-28
72
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated prior to the Effective Time:
(a) by mutual consent of the Boards of Directors of Purchaser and the Company;
or
(b) by either Purchaser or the Company, if any of the conditions to such party's
obligation to consummate the transactions contemplated in this Agreement
shall have become impossible to satisfy if, but only if, such party has used
its best efforts and acted in good faith in attempting to satisfy all such
conditions and if such party is not then in breach or default in any
material respect of this Agreement; or
(c) by the Board of Directors of Purchaser if (i) there has been a material
breach or default by the Company of any representation or warranty or in the
observance of its covenants and agreements contained in this Agreement of
which notice has been given in writing by Purchaser and which has not been
cured within thirty (30) business days of receipt of such notice; or (ii)
the Effective Time has not occurred prior to December 31, 1997 without fault
on the part of Purchaser; or (iii) a public announcement with respect to a
proposal, plan or intention to effect an Acquisition Transaction shall have
been made by any Person other than Purchaser or an Affiliate of Purchaser
and the Board of Directors of the Company shall have (A) failed to publicly
reject or oppose such proposed Acquisition Transaction within ten (10) days
of the public announcement of such proposal, plan or intention or (B) shall
have modified, amended or withdrawn its recommended approval of this
Agreement and the Merger to the Company's shareholders; or
(d) by the Board of Directors of the Company if (i) there has been a material
breach or default by Purchaser of any representation or warranty or in the
observance of its covenants and agreements contained in this Agreement of
which notice has been given in writing by the Company and which has not been
cured within thirty (30) business days of receipt of such notice; or (ii)
the Effective Time has not occurred prior to December 31, 1997 without fault
on the part of the Company; or
(e) by the Board of Directors of either Purchaser or the Company at any time
after the date that (i) the shareholders of the Company fail to approve this
Agreement and the Merger by an affirmative vote of at least a majority of
the outstanding shares of the Company Common Stock at a meeting held for
such purpose; or (ii) if any one of the Applicable Governmental Authorities
has denied approval for the Merger and, if such denial is appealable,
neither Purchaser nor the Company has filed a petition seeking review of
such order of denial or taken other similar action under applicable law,
within thirty (30) days after the issuance or entry by the governmental
agency of such order of denial; or
(f) by Purchaser pursuant to Section 5.5(b).
7.2 Effect of Termination.
(a) In the event of the termination of this Agreement as provided in Section
7.1(a) or 7.1(b), written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void, and there shall be no liability on the part of Purchaser or the
Company except (i) for fraud or willful and material breach of this
Agreement and (ii) as set forth in this Section 7.2 and Section 8.2.
(b) If this Agreement is terminated by the Board of Directors of Purchaser
pursuant to Section 7.1(c)(iii), or Section 7.1(e)(i) and within twenty-four
(24) months of any such termination an Acquisition Transaction shall occur
or if this Agreement is terminated by the Board of Directors of Purchaser
pursuant to Section 7.1(c)(i), then in such case the Company shall pay to
Purchaser in immediately available funds not later than two business days
after demand therefor an amount equal to Ten Million Dollars ($10,000,000)
as reasonable reimbursement to Purchaser for all costs, fees and expenses
incurred or to be incurred by Purchaser in connection with this Agreement
and the transactions contemplated hereby. Notwithstanding the foregoing, the
amount of the expense reimbursement payment hereunder, when aggregated with
all amounts actually received by Purchaser for the Option Shares or the
Option (as defined in the Option Agreement) prior to the making of a demand
by Purchaser for payment pursuant to this
A-29
73
Section 7.2(b), including, without limitation, any Repurchase Consideration
paid under the Option Agreement from any Person, including the Company in a
single transaction or a series of transactions, less any Purchase Price (as
defined in the Option Agreement) actually paid for the Option Shares by
Purchaser under the Option Agreement (such amount being referred to as the
"Stock Option Consideration"), shall not exceed the Limit (as defined in the
Option Agreement), it being the intention of the parties that if Purchaser
has previously received Stock Option Consideration pursuant to the Option
Agreement equal to the Limit, then no further expense reimbursement payment
shall be due from the Company under this Agreement.
(c) If this Agreement is terminated by the Board of Directors of the Company
pursuant to Section 7.1(d)(i), Purchaser shall pay to the Company not later
than two business days after demand therefor an amount equal to Five Million
Dollars ($5,000,000) as reasonable reimbursement to the Company for all
costs, fees and expenses actually incurred or to be incurred by the Company
in connection with this Agreement and the transactions contemplated hereby.
(d) In the event of termination of this Agreement by Purchaser or the Company,
as the case may be, pursuant to Section 7.1(c)(i), Section 7.1 (c)(iii),
Section 7.1(d)(i) or Section 7.1(e)(i) hereof, there shall be no liability
or obligation on the part of either Purchaser or the Company to the other or
on the part of any of their officers or directors, except pursuant to
Section 5.6, Section 7.2(b), Section 7.2(c) and Section 8.2 hereof and
except to the extent such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or
agreements contained herein, or a wrongful termination hereof by Purchaser
or the Company, as the case may be.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Publicity. Neither the Company nor Purchaser shall make any public
announcement or statement with respect to the Merger, this Agreement or any
related transactions without the approval of the other parties; provided,
however, that either Purchaser or the Company may, upon reasonable notice to the
other party, make any public announcement or statement that it believes is
required by federal securities law. To the extent practicable, each of the
Company and Purchaser will consult with the other with respect to any such
public announcement or statement.
8.2 Expenses. Except as otherwise provided in Section 7.2, the costs and
expenses of Purchaser and the Company shall be allocated as follows:
(a) Purchaser shall bear all fees and expenses of its counsel, accountants and
investment bankers and all other costs and expenses incurred by it in the
preparation of this Agreement, the investigation of the Company, the
preparation and prosecution of its application for regulatory approval, and
all costs and expenses of any appeals therefrom.
(b) The Company or the Bank shall bear all fees and expenses of its counsel,
accountants and investment bankers, all filing fees to be paid to the SEC in
connection with the Proxy Statement, the costs of printing and mailing the
Proxy Statement for use at the meeting of Company shareholders to consider
the Merger, and all other costs and expenses incurred by such persons or
firms in the preparation of this Agreement, the calling, noticing and
holding of a meeting of shareholders to consider and act upon the Merger and
the furnishing of information or other cooperation to Purchaser in
connection with the preparation of regulatory applications.
8.3 Survival. The representations and warranties of the parties hereto shall
expire at the Effective Time and shall not survive the consummation of the
Merger. All covenants and agreements contemplated to be performed prior to the
Effective Time shall expire at the Effective Time and shall not survive the
consummation of the Merger, and all covenants and agreements of Purchaser
contemplated to be performed, partially or in full, after the Effective Time,
shall survive the Effective Time and the consummation of the transactions
contemplated hereby.
A-30
74
8.4 Notices. All notices and other communications hereunder shall be in writing
and shall be sufficiently given if made by hand delivery, by fax, by telecopies,
by overnight delivery service, or by registered or certified mail (postage
prepaid and return receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified by it by like
notice):
If to Purchaser or to MergerSub:
ABN AMRO North America, Inc.
135 South LaSalle Street -- Room 340
Chicago, Illinois 60603
Telecopy: (312) 904-2346
Attention: Thomas C. Heagy
Chief Financial Officer
with a copy to:
ABN AMRO North America, Inc.
Legal
135 South LaSalle Street -- Room 325
Chicago, Illinois 60603
Telecopy: (312) 904-2010
Attention: Robert K. Quinn, Esq.
Group Senior Vice President,
General Counsel and Secretary
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Suite 2600
Chicago, Illinois 60601-1003
Telecopy: (312) 609-5005
Attention: Robert J. Stucker, Esq.
If to the Company, addressed to:
Standard Federal Bancorporation, Inc.
2600 West Big Beaver Road
Troy, Michigan 48084
Telecopy: (810) 637-0329
Attention: Thomas R. Ricketts
Chairman and President
with a copy to:
Standard Federal Bancorporation, Inc.
Legal
2600 West Big Beaver Road
Troy, Michigan 48084
Telecopy: (810) 816-4899
Attention: Ronald J. Palmer
Senior Vice President,
and General Counsel
A-31
75
with a copy to:
Dykema Gossett, PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy: (313) 568-6915
Attention: Paul R. Rentenbach, Esq.
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered; when
received, if delivered by registered or certified mail (postage prepaid and
return receipt requested); when receipt acknowledged, if faxed or telecopied;
and the next day delivery after being timely delivered to a recognized overnight
delivery service.
8.5 Amendment. This Agreement may not be amended except by an instrument in
writing approved by the parties to this Agreement and signed on behalf of each
of the parties hereto.
8.6 Waiver. At any time prior to the Effective Time, any party hereto may extend
the time for the performance of any of the obligations or other acts of the
other party hereto or waive compliance with any of the agreements of the other
party or with any conditions to its own obligations, in each case only to the
extent such obligations, agreements and conditions are intended for its benefit.
8.7 Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to Sections and Articles refer to Sections and
Articles of this Agreement unless otherwise stated. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," and words of like
import, unless the context requires otherwise, refer to this Agreement
(including the Company Disclosure Schedule hereto). As used in this Agreement,
the masculine, feminine and neuter genders shall be deemed to include the others
if the context requires.
8.8 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
8.9 Miscellaneous. This Agreement and all other documents and instruments
referred to herein: (i) constitute the entire agreement, and supersede all other
prior agreements and undertakings, both written and oral, among the parties,
with respect to the subject matter hereof; (ii) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware, without giving effect to the principles of conflict of laws
thereof, and by the laws of the United States where applicable; and (iii) shall
not be assigned by operation of law or otherwise.
8.10 Counterparts. This Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
A-32
76
IN WITNESS WHEREOF, the Company, Purchaser and MergerSub have caused this
Agreement to be executed on the date first written above by their respective
officers.
ABN AMRO NORTH AMERICA, INC.
By: /s/ HARRISON F. TEMPEST
- - - -----------------------------------------------------
Its: Chairman and Chief Executive Officer
By: /s/ ROBERT K. QUINN
- - - -----------------------------------------------------
Its: Group Senior Vice President,
General Counsel and Secretary
HEITRITZ CORP.
By: /s/ SCOTT HEITMANN
- - - -----------------------------------------------------
Its: President
By: /s/ DAVID R. PAPRITZ
- - - -----------------------------------------------------
Its: Vice President
STANDARD FEDERAL BANCORPORATION, INC.
By: /s/ THOMAS R. RICKETTS
- - - -----------------------------------------------------
Its: Chairman and President
A-33
77
ANNEX B
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into on November 21, 1996, by
and between STANDARD FEDERAL BANCORPORATION, INC., a Michigan corporation
("Standard"), and ABN AMRO NORTH AMERICA, INC., a Delaware corporation ("AANA").
AANA and Standard have entered into an Agreement and Plan of Merger (the "Merger
Agreement") providing, among other things, for the merger ("Merger") of a wholly
owned subsidiary of AANA with and into Standard with Standard as the surviving
corporation. In connection with the Merger, each share of outstanding common
stock of Standard, no par value ("Common Stock"), would be converted into the
right to receive $59.00 per share in cash from AANA. AANA has expressly
indicated to Standard that it would be unwilling to enter into the Merger
Agreement and consummate the transactions contemplated thereby without the
benefit of this Option Agreement. In order to encourage AANA to proceed with the
Merger and to prepare required federal and state applications for approvals from
the Applicable Governmental Authorities and to incur substantial expense in
connection therewith, Standard has determined that it is in its best interests
to grant to AANA an option to purchase additional shares of its authorized but
unissued Common Stock. Capitalized terms not otherwise defined herein shall have
the meanings given to them in the Merger Agreement.
In consideration of the premises and the respective representations, warranties,
covenants and agreements set forth herein, and intending to be legally bound
hereby, Standard and AANA agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Standard hereby grants to AANA an option (the "Option") to purchase up to
6,209,894 fully paid and nonassessable shares (the "Option Shares") of Standard
Common Stock at a purchase price of $52.50 per share (such price, as adjusted if
applicable, the "Purchase Price"). Notwithstanding anything contained herein or
in the Merger Agreement to the contrary, the amount that AANA (including any
successor-in-interest, Affiliate or transferee) shall be entitled to receive,
whether as (a) consideration for the Option Shares or the Option (including,
without limitation, any payments in the form of Repurchase Consideration) from
any Person, including Standard (whether in a single transaction or a series of
transactions), less any Purchase Price actually paid by AANA, or (b) costs, fees
and expenses or other reimbursement amounts paid to AANA pursuant to Section
7.2(b) of the Merger Agreement shall not exceed $90,000,000 in the aggregate
(the "Limit"). In the event that AANA receives or is entitled to receive
consideration and/or payments described in (a) and (b) above in excess of the
Limit, such excess amount shall be deemed to be held in constructive trust by
AANA for the benefit of Standard and shall be immediately paid by AANA to
Standard at the time and in the form such amount is received by AANA. Each
certificate evidencing Option Shares issued to AANA upon exercise of the Option
shall bear a legend in form and substance acceptable to Standard to the effect
that such shares are subject to the foregoing restrictions. The foregoing
restrictions with respect to the Limit shall expire and be of no further force
and effect on the day after the second anniversary of the occurrence of a
Triggering Event (as defined below).
2. Exercise of Option.
(a) The Option may be exercised in whole or in part prior to the termination of
this Agreement and after the occurrence of a Triggering Event, as defined in
Section 4 hereof. In the event that AANA desires to exercise the Option at
any time, AANA shall notify Standard as to the number of shares of Common
Stock it wishes to purchase and a place and date, not less than 2 business
days nor more than 10 business days after the date such notice is given (the
"Closing Date"), for the closing of such purchase; provided, however, that
notwithstanding the establishment of such Closing Date, the consummation of
the exercise of the Option may take place only after all regulatory or
supervisory agency approvals required by any applicable law, rule or
regulation shall have been obtained and each such approval shall have become
final. Standard shall fully cooperate with AANA in the filing of the
required notice or application for approval and the obtaining of any such
approval.
(b) On the Closing Date, AANA shall (i) pay to Standard, in immediately
available funds by wire transfer to a bank account designated by Standard,
an amount equal to the Purchase Price multiplied by the number of
B-1
78
Option Shares to be purchased on the Closing Date, and (ii) present and
surrender this Agreement to Standard at the address of Standard specified in
Section 11(f) hereof.
(c) On the Closing Date, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 2(b)
above, (i) Standard shall deliver to AANA a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and, if the Option is exercised in part
only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the Option Shares hereunder,
and (ii) AANA shall deliver to Standard a letter agreeing that AANA shall
not offer to sell or otherwise dispose of the Option Shares in violation of
the provisions of this Agreement.
(d) Certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, STATE
SECURITIES LAWS AND PURSUANT TO THE TERMS OF AN OPTION AGREEMENT DATED
NOVEMBER 22, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY Standard, INC. OF A WRITTEN
REQUEST THEREFOR.
The above legend shall be removed by delivery of substitute certificate(s)
without the legend if AANA shall deliver to Standard a copy of a letter from
the staff of the Securities and Exchange Commission, or an opinion of
counsel in form and substance reasonably satisfactory to Standard and its
counsel, to the effect that the legend is not required for purposes of the
Securities Act of 1933, as amended (the "1933 Act").
(e) Upon the giving of written notice of exercise by AANA to Standard and the
tender of the applicable purchase price in immediately available funds, AANA
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books
of Standard shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to AANA.
Standard shall pay all expenses, and any and all federal, state and local
taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2
in the name of AANA or its assignee, transferee or designee.
3. Termination of Option. The Option shall terminate and be of no further force
and effect upon the earliest to occur of: (i) the Effective Time (as defined in
the Merger Agreement), (ii) twenty-four (24) months after the occurrence of a
Triggering Event (as defined below), (iii) termination of the Merger Agreement
by reason of wrongful termination thereof by AANA or by mutual agreement of the
parties, (iv) six (6) months after the termination of the Merger Agreement by
Standard pursuant to Section 7.1(d)(i) thereof, or (v) twelve (12) months after
the termination of the Merger Agreement for any other reason.
4. Conditions to Exercise. AANA may exercise the Option, in whole or in part, at
any time prior to its termination following the occurrence of a Triggering
Event. The term "Triggering Event" shall mean the occurrence of any of the
following events:
(a) if the Board of Directors of Standard shall withdraw its support of the
Merger by resolution or by authorization of specific action inconsistent
with consummation of the Merger, or if it fails to recommend approval of the
Merger;
(b) a Person (as defined by Section 13(d)(3)(e) of the 1934 Act), other than
AANA or an Affiliate of AANA:
(i) acquires beneficial ownership (as such term is defined in Rule 13d-3
as promulgated under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act")) of ten percent (10%) or more of the
then outstanding Common Stock of Standard or securities
representing, or the right or option to acquire beneficial ownership
of, or to vote securities representing, ten percent (10%) or more of
the then outstanding Common Stock of Standard, and after the
occurrence of such acquisition the Board of Directors of Standard
(A) recommends such acquisition to its stockholders for acceptance,
(B) fails to undertake such acts as AANA reasonably requests to
B-2
79
oppose such acquisition (provided that in so doing Standard does not
incur significant legal expense), or (C) fails to recommend or
withdraws its approval of the Merger Agreement to the stockholders
of Standard; or
(ii) enters into an agreement with Standard pursuant to which such
Person or any affiliate of such Person would (A) merge or
consolidate, or enter into any similar transaction, with Standard
or (B) acquire all or substantially all of the assets of Standard;
or
(iii) makes a bona fide proposal (a "Proposal") for any merger,
consolidation or acquisition of all or substantially all the
assets of Standard or other business combination involving
Standard, and thereafter, but before such Proposal has been
Publicly Withdrawn, Standard willfully commits any material breach
of any covenant of the Merger Agreement and such breach (A) would
entitle AANA to terminate the Merger Agreement without regard to
the cure periods provided for therein, (B) is not cured and (C)
would materially interfere with Standard's ability to consummate
the Merger or materially reduce the value of the transaction to
AANA.
The phrase "Publicly Withdrawn" for purposes of clause (iii) above shall
mean an unconditional bona fide withdrawal of the Proposal or a formal
rejection of such Proposal by Standard in writing. Standard shall notify
AANA promptly in writing of the occurrence of any of the events set forth
in paragraphs (b)(i), (ii), or (iii) above, it being understood that the
giving of such notice by Standard shall not be a condition to the right of
AANA to transfer or exercise the Option.
5. Representations and Warranties of Standard. Standard hereby represents and
warrants to AANA as follows:
(a) Standard has all requisite corporate power and authority to enter into this
Agreement and, subject to any approvals referred to herein (including,
without limitation, the approval of FRB or OTS, if necessary), to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Standard. This Agreement has been duly executed and delivered by Standard.
(b) Standard has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue, and, at all times from the date hereof
until the obligation to deliver the Option Shares upon the exercise of the
Option terminates, will have reserved for issuance, upon exercise of the
Option, shares of Common Stock necessary for AANA to exercise the Option,
and Standard will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Common Stock or other
securities which may be issued upon exercise of the Option. The Option
Shares, including all additional shares of Standard Common Stock or other
securities which may be issuable pursuant to Section 7 hereof, upon issuance
pursuant hereto and payment therefor, shall be duly and validly issued,
fully paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Standard.
(c) The execution, delivery and performance of this Agreement does not or will
not, and the consummation by Standard of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or
violation of, or a default under, its certificate of incorporation or
bylaws, or the comparable governing instruments of any of its subsidiaries,
or (ii) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it
or any of its subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or nongovernmental permit or
license to which it or any of its subsidiaries is subject, that would, in
any case referred to in this clause (ii), give any other person the ability
to prevent or enjoin Standard's performance under this Agreement; provided,
however, that Standard makes no representations or warranties as to the
enforceability or legality of this Agreement and the Option granted hereby
under the laws of the State of Michigan.
(d) Standard agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and
B-3
80
other rights to purchase Common Stock; (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Standard except pursuant
to the Merger; (iii) promptly to take all action as may from time to time be
required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. section 18a and
regulations promulgated thereunder and (y) in the event, under the Home
Owners' Loan Act, as amended, or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the OTS,
or to any federal or state regulatory authority is necessary before the
Option may be exercised, cooperating fully with AANA in preparing such
applications or notices and providing such information to the OTS and the
FRB or such state regulatory authority as they may require) in order to
permit AANA to exercise the Option and Standard duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of AANA against dilution on or
prior to the Closing Date.
6. Representations and Warranties of AANA. AANA hereby represents and warrants
to Standard that:
(a) AANA has all requisite corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by AANA.
(b) The Option is not being, and any Option Shares or other securities acquired
by AANA upon exercise of the Option will not be, acquired with a view to the
public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration
under the 1933 Act, as amended.
7. Adjustment upon Changes in Capitalization; Repurchase of Option.
(a) In the event of any change in Standard Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements
governing such transaction so that AANA shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
AANA would have received in respect of Standard Common Stock if the Option
had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Standard Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a)), the number of shares
of Standard Common Stock subject to the Option shall be adjusted so that,
after such issuance, it, together with any shares of Standard Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Standard Common Stock then issued and outstanding, without giving effect to
any shares subject to or issued pursuant to the Option.
(b) If a Triggering Event described in Section 4(b)(ii) shall occur and the
transaction that is the subject of such Triggering Event is consummated, or
if any Person other than AANA or an Affiliate of AANA acquires beneficial
ownership of 50% or more of the then outstanding shares of Common Stock,
Standard, if requested by AANA, shall pay to AANA, in lieu of delivery of
the Option Shares an amount in cash equal to the Spread multiplied by the
total number of Option Shares for which the Option is exercisable (such
aggregate amount is referred to as the "Repurchase Consideration").
(c) As used herein, "Spread" shall mean the excess, if any, over the Purchase
Price (as defined in Section 1) of the higher of (i) highest closing price
per share of Standard Common Stock as reported on the New York Stock
Exchange ("NYSE") within six months immediately preceding the date that AANA
requests cash in lieu of shares pursuant to this Section (the "Request
Date"), (ii) the price per share of Common Stock at which a tender offer or
an exchange offer therefor has been made, (iii) the price per share of
Common Stock to be paid to any third party pursuant to an agreement with
Standard, or (iv) in the event of a sale of all or a substantial portion of
Standard's assets the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Standard determined by a
nationally recognized investment banking firm mutually selected by AANA, on
the one hand, and Standard, on the
B-4
81
other, divided by the number of shares of Common Stock of Standard
outstanding at the time of such sale. In determining the Repurchase
Consideration, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm mutually
selected by AANA, on the one hand, and Standard on the other.
(d) Upon exercise of its right to receive cash pursuant to this Section, any and
all obligations of AANA to make payment pursuant to Section 2(b) and all
obligations of Standard to deliver a certificate or certificates
representing shares of Common Stock pursuant to Section 2(b) shall be
terminated. If AANA exercises its rights under this Section 7, Standard
shall, within 10 business days after the Request Date, pay the Repurchase
Consideration to AANA in immediately available funds, and AANA shall
surrender to Standard the Option. Notwithstanding the foregoing, to the
extent that prior notification to or approval of the FRB or other regulatory
authority is required in connection with the payment of all or any portion
of the Repurchase Consideration, AANA shall have the ongoing option to
revoke its request for repurchase pursuant to Section 7(b) or to require
that Standard deliver from time to time that portion of the Repurchase
Consideration that it is not then so prohibited from paying and promptly
file the required notice or application for approval and expeditiously
process the same (and Standard shall cooperate with AANA in the filing of
any such notice or application and the obtaining of any such approval). If
the FRB or any other regulatory authority disapproves of any part of
Standard's proposed repurchase pursuant to Section 7(b), Standard shall
promptly give notice of such fact to AANA and AANA shall have the right to
exercise the Option as to the number of Option Shares for which the Option
was exercisable at the Request Date.
8. Registration Rights.
(a) Upon the occurrence of a Triggering Event Standard shall, at the request of
AANA delivered at the time of and together with a written notice of exercise
in accordance with Section 2 hereof and on one occasion only, promptly
prepare, file and keep current a registration statement under the 1933 Act
covering any shares issued or issuable pursuant to this Option and shall use
its best efforts to cause such registration statement to become effective
and to remain effective for up to 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary in order to permit the sale or other disposition of any shares of
Common Stock issued upon total or partial exercise of this Option in
accordance with any plan of disposition requested by AANA. AANA will provide
such information as may be necessary for Standard's preparation of such a
registration statement, and any such information will not contain any
statement which, at the time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact nor
will such information omit to state any material facts with respect to AANA
or its intended plan of disposition of Option Shares. The foregoing
notwithstanding, if, at the time of any request by AANA for registration of
Option Shares as provided above, Standard is in registration with respect to
an underwritten public offering of shares of Common Stock, and if in the
good faith reasonable judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of AANA's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by
Standard, the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced ("Underwriter
Reduction"); provided, however, that after any such required reduction, the
number of Option Shares to be included in such offering for the account of
AANA shall constitute at least 10% of the total number of shares to be sold
by AANA and Standard in the aggregate; provided, further, however, that if
such reduction occurs, then Standard shall file a registration statement for
the balance as promptly as practical and no reduction shall thereafter
occur. If requested by AANA in connection with such registration, Standard
shall become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Standard.
(b) If after the occurrence of a Triggering Event, Standard effects a
registration under the Securities Act of Standard Common Stock for its own
account or for any other stockholders of Standard (other than on Form S-4 or
Form S-8, or any successor forms or any form with respect to a dividend
reinvestment or similar plan), it shall allow AANA the right to participate
in such registration, and such participation shall not affect the obligation
of Standard to effect a registration statement for AANA under Section 8(a);
B-5
82
provided, however, that if the circumstances give rise to an Underwriter
Reduction as provided in 8(a) above then the procedure set forth in Section
8(a) governing the number of Option Shares to be included in such
registration shall apply.
(c) In connection with any registration pursuant to this Section 8, Standard and
AANA shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution in connection with such registration. Any registration
statement prepared and filed under this Section 8 and any sale covered
thereby shall be at Standard's expense except for underwriting discounts or
commissions, brokers' fees, taxes and the fees and disbursements of AANA's
counsel related thereto.
9. (a) In the event that prior to the termination of the Option, Standard shall
enter into an agreement (i) to consolidate with or merge into any person, other
than AANA or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than AANA or one of its subsidiaries, to merge into Standard and
Standard shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of Common Stock shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than AANA or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of AANA, of either (x) the Acquiring Corporation (as
hereinafter defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Standard (if other than
Standard), (ii) Standard in a merger in which Standard is the
continuing or surviving person, and (iii) the transferee of all or
substantially all of Standard's assets.
(2) "Substitute Common Stock" shall mean the shares of capital stock (or
similar equity interest) with the greatest voting power in respect of
the election of directors (or other persons similarly responsible for
direction of the business and affairs) of the issuer of the Substitute
Option.
(3) "Assigned Value" shall mean the highest of (i) the price per share of
common stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of common stock to be paid by any
third party pursuant to an agreement with Standard, or (iii) in the
event of a sale of all or substantially all of Standard's assets, the
sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Standard as determined by a
nationally recognized investment banking firm selected by AANA divided
by the number of shares of Common Stock of Standard outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by AANA.
(4) "Average Price" shall mean the average closing price of a share of the
Substitute Common Stock for the six months immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided, however, that
if Standard is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Standard or by any company which controls or is
controlled by such person, as AANA may elect.
(c) The Substitute Option shall have the same terms and conditions as the
Option, provided, that if any term or condition of the Substitute Option
cannot, for legal reasons, be the same as the Option, such term or condition
shall be as similar as possible and in no event less advantageous to AANA.
The issuer of the
B-6
83
Substitute Option shall also enter into an agreement with AANA in
substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is
then exercisable, divided by (ii) the Average Price. The exercise price of
the Substitute Option per share of Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
(f) Standard shall not enter into any transaction described in subsection (a) of
this Section 9 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Standard
hereunder.
10. Listing. If Standard Common Stock to be acquired upon exercise of the Option
is then authorized for listing on the NYSE or on any other national securities
exchange or automated quotation system, Standard will promptly file an
application to authorize for listing the shares of Standard Common Stock to be
acquired upon exercise of the Option on the NYSE or such other securities
exchange or quotation system and will use its best efforts to obtain approval of
such listing as soon as practicable.
11. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 8, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at any
time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option does not
permit AANA to acquire, or does not require Standard to repurchase, the full
number of shares of Standard Common Stock as provided in Sections 2 and 7,
it is the express intention of Standard to allow AANA to acquire or to
require Standard to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
B-7
84
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to AANA, addressed to:
ABN AMRO North America, Inc.
135 South LaSalle Street
Room 340
Chicago, Illinois 60603
Telecopy: (312) 904-6318
Attention: Thomas C. Heagy,
Chief Financial Officer
with a copy to:
ABN AMRO North America, Inc.
Legal
135 South LaSalle Street, Suite 925
Chicago, Illinois 60603
Telecopy: (312) 904-5150
Attention: Robert K. Quinn, Esq.,
Group Senior Vice President,
General Counsel and Secretary
and with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
Telecopy: (312) 609-5005
Attention: Robert J. Stucker, Esq.
If to Standard, addressed to:
Standard Federal Bancorporation, Inc.
2600 West Big Beaver Road
Troy, Michigan 48084
Telecopy: (810) 637-0329
Attention: Thomas R. Ricketts,
Chairman
with a copy to:
Dykema Gossett, PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy: (313) 568-6915
Attention: Paul R. Rentenbach, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
(g) Counterparts. This Agreement and any amendments hereto may be executed in
two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF
1933, AS AMENDED. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option may be
B-8
85
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that
AANA may assign this Agreement to a wholly owned subsidiary of AANA. This
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and permitted assigns.
(i) Further Assurances. In the event of any exercise of the Option by AANA,
Standard and AANA shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may be
enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of
any such equitable relief and that this provision is without prejudice to
any other rights that the parties hereto may have for any failure to perform
this Agreement.
(k) Termination by AANA. Notwithstanding anything to the contrary herein, in
the event that AANA or any Related Person (as hereinafter defined) thereof
is a person making an offer or proposal to engage in an action that would
result in a Triggering Event (other than the transaction contemplated by
the Merger Agreement), then the Option held by AANA shall immediately
terminate and be of no further force or effect. A Related Person of AANA
means any Affiliate (as defined in Rule 12b-2 of the rules and regulations
under the Exchange Act) of AANA or any person that is the beneficial owner
of 5% or more of the voting power of AANA.
IN WITNESS WHEREOF, Standard and AANA have caused this Option Agreement to be
signed by their respective officers, all as of the day and year first written
above.
ABN AMRO NORTH AMERICA, INC.
By: /s/ HARRISON F. TEMPEST
--------------------------------------------------------
Its: Chairman and Chief Executive Officer
By: /s/ ROBERT K. QUINN
--------------------------------------------------------
Its: Group Senior Vice President,
General Counsel and Secretary
STANDARD FEDERAL BANCORPORATION, INC.
By: /s/ THOMAS R. RICKETTS
--------------------------------------------------------
Its: Chairman and President
B-9
86
ANNEX C
Investment Banking Group
World Financial Center
North Tower
New York, New York 10282-1325
212-449-1000
[MERRILL LYNCH LOGO]
February , 1997
Board of Directors
Standard Federal Bancorporation
2600 West Big Beaver Road
Troy, Michigan 48084
Members of the Board:
Standard Federal Bancorporation and its wholly owned subsidiary Standard Federal
Bank (together the "Company") and ABN-AMRO North America, Inc. (the "Acquiror)
propose to enter into an agreement (the "Agreement") pursuant to which a
subsidiary of the Acquiror will be merged into the Company in a transaction (the
"Merger") in which each outstanding share of the Company's common stock (the
"Shares") will be converted, as more fully described in the Agreement, into the
right to receive $59.00 in cash (the "Proposed Consideration"). The merger is
expected to be considered and voted upon by the shareholders of the Company at a
special shareholders' meeting to be held as soon as possible. The terms and
condition of the Acquisition are more fully set forth in the Agreement.
You have asked us whether, in our opinion, the Proposed Consideration is fair to
the holders of Shares (other than the Acquiror or its affiliates) of the Company
from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed the Company's Annual Reports, the Company's Annual Reports on Forms
10-K and related audited financial information for the three fiscal years
ended December 31, 1995 and the Company's quarterly reports on Form 10-Q and
related unaudited financial information for the quarterly periods ending
March 31, 1996, June 30, 1996 and September 30, 1996;
2. Reviewed ABN-AMRO Holding N.V.'s Annual Report and related financial
information for the three fiscal years ended December 31, 1995 and ABN-AMRO
Holding N.V.'s Interim Report and related financial information for the six
months ended June 30, 1996.
3. Reviewed certain information, including financial forecasts, relating to the
business, earnings, assets and prospects of the Company furnished to us by
the Company;
4. Conducted limited discussions with members of senior management of the
Company concerning the business, earnings, assets and prospects and senior
management's views as to future financial performance of the Company;
5. Reviewed the historic market prices and trading activity for the Shares and
compared them with those of certain publicly traded companies which we deemed
to be relevant;
6. Compared the results of operations of the Company with those of certain
companies which we deemed to be relevant;
7. Compared the proposed financial terms of the Merger contemplated by the
Agreement with the financial terms of certain other mergers and acquisitions
which we deemed to be relevant;
C-1
87
8. Reviewed a draft of the Agreement and the Option Agreement;
9. Reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as we deemed
necessary.
For the purpose of this opinion, with your consent, we have excluded from our
analysis the value of the supervisory goodwill litigation claim (the "Claim")
held by the Company against the United States government given what we
understand to be the inability to value this litigation claim as of the date
hereof. In preparing our opinion, we have assumed and relied upon the accuracy
and completeness of all financial and other information supplied or otherwise
made available to us for purposes of this opinion, and we have not assumed any
responsibility for independently verifying such information or undertaking an
independent evaluation or appraisal of the assets or liabilities of the Company
or any of its subsidiaries (including, as noted above, the Claim), nor have we
been furnished any such evaluation or appraisal. We have also assumed and relied
upon the senior management of the Company referred to above as to the
reasonableness and achievability of the financial and operating forecasts (and
the assumptions and bases therefore) provided to us. In that regard, we have
assumed with your consent that such forecasts, including without limitation
financial forecasts and projections regarding underperforming and non-performing
assets, net charge-offs and the adequacy of reserves, reflect the best currently
available estimates and judgments of management as to the future financial
performance of the Company. We are not experts in the evaluation of allowances
for loan losses, and we have not made an independent evaluation of the adequacy
of the allowance for loan losses of the Company nor have we reviewed any
individual credit files, and we have assumed that the aggregate allowance for
loan losses of the Company is adequate to cover such losses. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
Our opinion has been rendered without regard to the necessity for, or level of,
any restrictions, obligations, undertakings or divestitures which may be imposed
or required in the course of obtaining regulatory approvals for the Merger.
We have been retained by the Board of Directors of the Company as an independent
contractor to act as financial advisor to the Company with respect to the Merger
and will receive a fee for our services. We have within the past two years
provided financial advisory, investment banking and other services to the
Company and the Acquiror and have received customary fees for the rendering of
such services. In addition, in the ordinary course of our securities business,
we may actively trade debt and/or equity securities of the Company and the
Acquiror and their respective affiliates for our own account and the accounts of
our customers, and we therefore may, from time to time, hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of the Company and does not
constitute a recommendation to the Board of Directors of the Company in
connection with any matter relating to the Merger. This letter does not
constitute a recommendation to any shareholders of the Company with respect to
any approval of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Proposed Consideration is fair to the holders of Shares
(other than the Acquiror or its affiliates) of the Company from a financial
point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ MICHAEL F. BARRY
--------------------------------------------------------
Director - Merrill Lynch & Co.
Investment Banking Group
C-2
88
PRELIMINARY COPY
CONFIDENTIAL FOR USE OF COMMISSION ONLY
REVOCABLE PROXY [LOGO]
- - - -------------------------------------- [X] PLEASE MARK VOTE
STANDARD FEDERAL BANCORPORATION, INC. AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF STANDARD FEDERAL BANCORPORATION, INC. 1. Proposal to approve the Agreement and Plan of Merger,
dated November 21, 1996, by and among Standard
The undersigned hereby appoints Thomas R. Ricketts, Garry Federal, ABN AMRO North America, Inc. and Heitritz Corp.
G. Carley and Ronald J. Palmer, or any of them, each with full and the related Merger between Standard Federal and
power of substitution, as the lawful attorneys, proxies and Heitritz Corp., pursuant to which each share of outstanding
agents of the undersigned at the Special Meeting of Common Stock of Standard Federal (other than shares
Shareholders of Standard Federal Bancorporation, Inc. owned by ABN AMRO North America, Inc. or its affiliates)
("Standard Federal"), to be held on __________, March __, 1997, will be converted into the right to receive $59.00 in cash.
at 2600 West Big Beaver Road, Troy, Michigan 48084 at 10:00
a.m., Detroit time, and at any adjournments thereof, for the
purpose of voting on the matters referred to herein, [ ] [ ] [ ]
representing the undersigned, and casting all votes which the For Against Abstain
undersigned would be entitled to cast if personally present,
upon the following matter. 2. In their discretion, upon the transaction of such other
business as may properly come before the meeting.
THE BOARD OF DIRECTORS OF STANDARD FEDERAL UNANIMOUSLY
RECOMMENDS A VOTE FOR THIS PROPOSAL. UNLESS VOTED
AGAINST OR ABSTAINED FROM, PROXIES WILL BE VOTED FOR
PROPOSAL 1. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS
TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
I (we) acknowledge receipt of the Notice of Special Meeting
and Proxy Statement, dated February __, 1997. The
undersigned ratifies all that the proxies, or any one of them,
Please sign this proxy card exactly as your name appears may lawfully do or cause to be done by virtue hereof, and
hereon, date it, and return it in the enclosed envelope. hereby revokes all previously dated proxies.
Joint owners should each sign. If you are signing as a
guardian, trustee, executor or administrator or attorney- If the undersigned is a participant in Standard Federal's
in-fact, please so indicate. Please also note any address Dividend Reinvestment/Cash Purchase Plan (the "Plan"), the
correction above. undersigned also directs Registrar and Transfer Company, as
administrator of the Plan, to vote the whole shares
__________________________________________________________ beneficially owned by the undersigned under the Plan in
Shareholder sign here Co-holder (if any) sign here accordance with the instructions set forth herein.
___________________________
Date
IMPORTANT: PLEASE VOTE, DATE, SIGN AND
RETURN THIS PROXY IN THE POSTAGE-PAID
RETURN ENVELOPE PROVIDED.