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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
STIFEL FINANCIAL CORP.
FSFC ACQUISITION CO.
AND
FIRST SERVICE FINANCIAL COMPANY
NOVEMBER 20, 2006
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TABLE OF CONTENTS
Section Page
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ARTICLE I DEFINITIONS, CONSTRUCTION...................................... 1
Section 1.01. Definitions............................................. 1
ARTICLE II MERGER, EFFECTS OF MERGER..................................... 8
Section 2.01. Merger.................................................. 8
Section 2.02. Closing, Effective Date and Effective Time.............. 8
Section 2.03. Effects of Merger....................................... 8
Section 2.04. Certificate of Incorporation and By-Laws................ 9
Section 2.05. Directors and Officers.................................. 9
ARTICLE III MERGER CONSIDERATION, EXCHANGE PROCEDURES.................... 9
Section 3.01. Effect on Common Stock.................................. 9
Section 3.02. Adjustment Amount; Additional Escrow Amount............. 10
Section 3.03. Exchange Fund........................................... 11
Section 3.04. Exchange Procedures..................................... 11
Section 3.05. No Further Rights in Seller Common Stock................ 12
Section 3.06. Termination of Exchange Fund............................ 12
Section 3.07. No Liability............................................ 12
Section 3.08. Investment of Exchange Fund............................. 12
Section 3.09. Lost Certificates....................................... 12
Section 3.10. Withholding Rights...................................... 13
Section 3.11. Further Assurances...................................... 13
Section 3.12. Stock Transfer Books.................................... 13
Section 3.13. Seller Stock Options.................................... 13
Section 3.14. Shareholders Committee.................................. 13
ARTICLE IV ACTIONS PENDING MERGER........................................ 14
Section 4.01. Forbearance of Seller................................... 14
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ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 16
Section 5.01. Disclosure Schedule..................................... 16
Section 5.02. Representations and Warranties of Seller................ 16
Section 5.03. Representations and Warranties of Company and
AcquisitionCo........................................... 29
ARTICLE VI COVENANTS..................................................... 30
Section 6.01. Reasonable Efforts...................................... 30
Section 6.02. Regulatory Applications; Other Approvals................ 30
Section 6.03. Press Release........................................... 30
Section 6.04. Access, Information..................................... 30
Section 6.05. No Solicitation of Transactions......................... 31
Section 6.06. Shareholder Approval.................................... 33
Section 6.07. Takeover Laws........................................... 33
Section 6.08. Delivery of Shareholder List............................ 33
Section 6.09. Indemnification, Directors' and Officers' Insurance..... 33
Section 6.10. Benefit Plans........................................... 35
Section 6.11. Notification of Certain Matters......................... 35
Section 6.12. Escrow Agreement........................................ 35
Section 6.13. Employee Stock Purchase Plan............................ 35
ARTICLE VII CONDITIONS TO CONSUMMATION OF MERGER......................... 36
Section 7.01. Conditions to Each Party's Obligations to
Effect Merger........................................... 36
Section 7.02. Conditions to Obligations of Seller to Effect Merger.... 36
Section 7.03. Conditions to Obligations of Company and
AcquisitionCo to Effect Merger.......................... 36
ARTICLE VIII TERMINATION................................................. 38
Section 8.01. Termination............................................. 38
Section 8.02. Effect of Termination................................... 39
Section 8.03. Termination Fee......................................... 39
ARTICLE IX MISCELLANEOUS................................................. 40
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Section 9.01. Survival................................................ 40
Section 9.02. Waiver, Amendment....................................... 40
Section 9.03. Counterparts............................................ 41
Section 9.04. Governing Law, Waiver of Jury Trial..................... 41
Section 9.05. Expenses................................................ 41
Section 9.06. Notices................................................. 41
Section 9.07. Entire Understanding, No Third Party Beneficiaries...... 41
Section 9.08. Interpretation.......................................... 41
Section 9.09. Assignment.............................................. 41
EXHIBITS:
A -- FORM OF ESCROW AGREEMENT
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 20, 2006 (this
"Agreement"), by and among STIFEL FINANCIAL CORP., a Delaware corporation (the
"Company"), FSFC ACQUISITION CO., a Missouri corporation (the "AcquisitionCo"),
and FIRST SERVICE FINANCIAL COMPANY, a Missouri corporation (the "Seller").
RECITALS
A. Company and AcquisitionCo. The Company is a holding company, having its
principal place of business in St. Louis, Missouri. AcquisitionCo is a
wholly-owned subsidiary of the Company recently organized in order to facilitate
the transactions contemplated by this Agreement.
B. Seller. The Seller is registered as a bank holding company, having its
principal place of business in St Louis County, Missouri. The Seller owns one
hundred percent (100%) of FirstService Bank (the "Bank").
C. Merger. The respective Boards of Directors of each of the Company,
AcquisitionCo and the Seller have determined that it is advisable and in the
best interests of their respective organizations and their shareholders for
AcquisitionCo to merge with and into the Seller (the "Merger"), upon the terms
and subject to the conditions set forth herein and in accordance with The
General and Business Corporation Law of Missouri (the "MGBCL").
D. Board Approval. The respective Boards of Directors of each of
AcquisitionCo and the Seller have approved the Merger, upon the terms and
subject to the conditions set forth herein, and approved and adopted this
Agreement as required under the MGBCL.
E. Voting Agreements. Subsequent to the Seller's approval of this Agreement
and concurrently with the execution of this Agreement and as a condition and an
inducement to the willingness of the Company and AcquisitionCo to enter into
this Agreement, AcquisitionCo has entered into a Shareholder Voting Agreement
(the "Voting Agreement") pursuant to which each Affiliate Shareholder (as
defined in Section 1.01) has agreed to vote the shares of the Seller Common
Stock beneficially owned by such shareholder in favor of the Merger.
F. Non-Compete Agreements. Concurrently with the execution of this
Agreement and as a condition and an inducement to the willingness of the Company
and AcquisitionCo to enter into this Agreement, the Company and the Seller have
entered into Non-Compete Agreements (each, a "Non-Compete Agreement") with each
Affiliate Shareholder and certain other employees of the Company or the Bank
which contain non-competition and non-solicitation terms and conditions,
effective as of the date hereof but subject to termination if the Closing (as
defined in Section 2.02) shall not occur.
AGREEMENT
In consideration of the foregoing, the mutual covenants herein contained
and other good and valuable consideration (the receipt, adequacy and sufficiency
of which are hereby acknowledged by the Parties by their execution hereof), the
Parties agree as follows.
ARTICLE I
DEFINITIONS, CONSTRUCTION
SECTION 1.01. DEFINITIONS. For purposes of this Agreement, the following
capitalized terms have the following meanings.
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"AcquisitionCo" has the meaning set forth in the preamble to this
Agreement.
"Acquisition Proposal" means any offer or proposal (other than an
offer or proposal by the Company) relating to any Acquisition Transaction.
"Acquisition Transaction" means any transaction or series of related
transactions (other than the transactions contemplated by this Agreement)
involving: (i) any acquisition or purchase from the Seller by any Person of more
than a 15% interest in the total outstanding voting securities of the Seller or
any of the Seller Subsidiaries or any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 15% or more of the
total outstanding voting securities of the Seller or any of the Seller
Subsidiaries, or any merger, consolidation, business combination or similar
transaction involving the Seller or any of the Seller Subsidiaries, (ii) any
sale, lease, exchange, transfer, license, acquisition or other disposition of
more than 15% of the assets of the Seller or any of the Seller Subsidiaries, or
(iii) any liquidation or dissolution of the Seller or any of the Seller
Subsidiaries.
"Additional Escrow Amount" has the meaning set forth in Section
3.02(b)(iii).
"Adjustment Amount" has the meaning set forth in Section 3.02(a).
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person including, without limitation, any partnership
or joint venture in which any Person (either alone, or through or together with
any other Person) has, directly or indirectly, an interest of 5% or more. For
purposes of this definition, "control" means the possession, direct or indirect,
of the power to direct or cause the direction of management and policies of a
Person, whether through the ownership of voting securities, by Contract or
otherwise.
"Affiliate Shareholders" means each of the following Persons: Allen R.
Vogel, John G. Martens, James C. Jacobsmeyer, R. Dale Arn, Jr., Thomas Cummings,
Thomas W. Hagar, Karen A. Hopper, Ted C. Matulewic, Clyde Sansone, Stephen D.
Schaefer, Charles F. Stone and John C. Vatterott.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Bank" has the meaning set forth in the Recitals.
"Bank Secrecy Act" has the meaning set forth in Section 5.02(h)(iv).
"Basket Amount" has the meaning set forth in Section 3.02(a).
"BHCA" has the meaning set forth in Section 5.02(a)(i).
"Blue Sky Laws" has the meaning set forth in Section 5.02(e)(ii).
"Business Day" means any day on which banks are not required or
authorized to close in the State of Missouri.
"Certificate(s)" has the meaning set forth in Section 3.01(f).
"Change of Recommendation" has the meaning set forth in Section
6.05(d).
"Closing" has the meaning set forth in Section 2.02.
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"Closing Date" has the meaning set forth in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Employee Plans" has the meaning set forth in Section 6.10.
"Consent" means any consent, approval, authorization, clearance,
exemption, waiver, permit, franchise, charter, license, easement, grant or
similar affirmation by any Person pursuant to any Contract, Law or Order.
"Contract" means, whether written or unwritten, any legally binding
agreement, arrangement, authorization, commitment, indenture, instrument,
license, lease, obligation, plan, practice, restriction, understanding or
undertaking to which any Person is a party or that is binding on any Person or
its capital stock, assets or business, including, any binding letter of intent
or memorandum of understanding.
"Continued Employee" has the meaning set forth in Section 6.10.
"Costs" has the meaning set forth in Section 6.09(a).
"Dissenting Shares" has the meaning set forth in Section 3.01(e).
"Effect" means any effect, change, event, fact, condition, occurrence,
circumstance or development.
"Effective Date" has the meaning set forth in Section 2.02.
"Effective Time" means the effective time of the Merger, as provided
for in Section 2.02.
"Environmental Claims" has the meaning set forth in Section 5.02(l).
"Environmental Laws" has the meaning set forth in Section 5.02(l).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means the escrow agreement in the form attached
hereto as Exhibit A to be entered into by the Parties and the Shareholders
Committee on or before the Closing Date.
"Escrow Agent" means the escrow agent named in the Escrow Agreement.
"Escrow Amount" means $1,091,651.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.01(f).
"Exchange Fund" has the meaning set forth in Section 3.03.
"FDIC" has the meaning set forth in Section 5.02(a)(ii).
"Federal Reserve Board" has the meaning set forth in Section
5.02(a)(i).
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"GAAP" has the meaning set forth in Section 5.02(g)(ii).
"GLB Act" has the meaning set forth in Section 5.02(h)(iv).
"Governmental Authority" has the meaning set forth in Section 3.06.
"Hazardous Materials" has the meaning set forth in Section 5.02(r).
"Indemnified Party(ies)" has the meaning set forth in Section 6.09(a).
"IRS" has the meaning set forth in Section 5.02(i)(i).
"Knowledge" means those facts that are actually known by any of the
executive officers of the Seller or the Bank, and those facts that would
reasonably be expected to have come to the attention of one or more of the
officers referred to above had such officer conducted a reasonable due diligence
review of the Seller's operations and business.
"Law" means any federal, state, local, municipal, foreign,
international, multinational, territorial or other administrative order,
constitution, law, ordinance, rule, regulation, statute or treaty and any
guidance issued thereunder, including any transitional relief or rules provided
in connection therewith.
"Liability", as to any Person, means (i) any obligation of such Person
for borrowed money, (ii) any obligation of such Person evidenced by bonds,
debentures, notes or other instruments, (iii) any obligation of such Person to
pay the deferred purchase price of property or services, (iv) any capitalized
lease obligation of such Person, (v) any obligation or liabilities of others
secured by a Lien on any asset owned by such Person, whether or not such
obligation or liability is assumed by such Person, (vi) any contingent
obligation of such Person, and (vii) any other liability of such Person, whether
known or unknown, unasserted or asserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated or due or to become due.
"Liens" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge or claim
of any nature whatsoever of, on or with respect to any property (real or
personal) or property (real or personal) interest, other than (i) Liens for
current Taxes upon the assets or property of a Person or its subsidiaries which
are not yet due and payable provided appropriate reserves have been established
therefor on the financial statements of such Person, (ii) for depository
institution subsidiaries of a Person, pledges to secure deposits and Liens
incurred in the ordinary course of the banking business, and (iii) zoning
restrictions, easements, licenses and other restrictions on the use of real
property, or minor irregularities in title thereto, that do not materially
impair the use of such property in the operation of the business of such Person
as such is now presently being conducted.
"Loan Classification Policy" has the meaning set forth in Section
5.02(g)(iv).
"Loan Property" has the meaning set forth in Section 5.02(l).
"Loss" of a Person means any and all loss, Liability, damage, award,
judgment, deficiency, diminution in value (including any loan charge-off, net of
any recoveries), action, order, decree, penalty, fine, amount paid in
settlement, cost or expense (including reasonable attorney's fees) suffered or
incurred by such Person.
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"Material Contract" has the meaning set forth in Section 5.02(r).
"Maximum Amount" has the meaning set forth in Section 6.09(c).
"MDF" means the Missouri Division of Finance.
"Merger" has the meaning set forth in the Recitals.
"MGBCL" has the meaning set forth in the Recitals.
"Non-Compete Agreements" has the meaning set forth in the Recitals.
"Order" means any award, decision, decree, injunction, judgment,
order, ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency or any other Governmental Authority.
"Participation Facility" has the meaning set forth in Section 5.02(l).
"Party" means the Company, AcquisitionCo or the Seller, as applicable,
and "Parties" means the Company, AcquisitionCo and the Seller.
"Patriot Act" has the meaning set forth in Section 5.02(h)(iv).
"Per Share Closing Amount" has the meaning set forth in Section
3.01(b).
"Per Share Escrow Amount" means an amount equal to the quotient of "A"
divided by "B", where "A" equals the sum of the Escrow Amount and the Additional
Escrow Amount, if any, and where "B" equals the difference between (1) sum of
(i) the number of shares of Seller Common Stock presented for exchange pursuant
to Article III or otherwise issued and outstanding at the Effective Time, and
(ii) the number of shares of Seller Common Stock issuable upon the exercise of
Seller Stock Options or other Rights (whether pursuant to Seller Stock Options
or otherwise) as of the Effective Time, and (2) the aggregate number of Seller
Treasury Shares, Dissenting Shares and shares of Seller Common Stock owned by
the Company.
"Per Share Merger Consideration" has the meaning set forth in Section
3.01(b).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated organization.
"Previously Disclosed" means information set forth in the Seller
Disclosure Schedule.
"Proceeding" means any lawsuit, action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, formal inquiry, administrative or other
proceeding, or written notice by any Person alleging potential Liability of
another Person, or invoking or seeking to invoke legal process to obtain
information relating to or affecting another Person, which affects such other
Person's business, assets (including Contracts related to it), or obligations
under the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities in the ordinary course consistent with past practice.
"Proxy Statement" has the meaning set forth in Section 5.02(j).
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"Regulatory Authority" means the Federal Trade Commission, the United
States Department of Justice, the Federal Reserve Board, the FDIC, the OCC, the
MDF, the SEC, and all other federal and state regulatory agencies and public
authorities having jurisdiction over the Parties and their respective
subsidiaries.
"Rights" means all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, warrants or other binding obligations of
any character whatsoever by which a Person is or may be bound to issue
additional shares of its capital stock or other Rights, or securities or Rights
convertible into or exchangeable for, shares of the capital stock of a Person.
"Scheduled Loans" has the meaning set forth in Section 3.02(b)(ii).
"SEC" means the Securities and Exchange Commission.
"Section 409A" has the meaning set forth in Section 5.02(i)(v).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller" has the meaning set forth in the preamble to this Agreement.
"Seller Approvals" has the meaning set forth in Section 5.02(a)(ii).
"Seller Benefit Plans" has the meaning set forth in Section
5.02(i)(i).
"Seller's Board of Directors Recommendation" has the meaning set forth
in Section 5.02(d).
"Seller By-Laws" has the meaning set forth in Section 5.02(b).
"Seller Articles" has the meaning set forth in Section 5.02(b).
"Seller Common Stock" means the common stock, par value $0.10 per
share, of the Seller.
"Seller Disclosure Schedule" has the meaning set forth in Section
5.01.
"Seller Financial Statements" has the meaning set forth in Section
5.02(g)(ii).
"Seller Material Adverse Effect" means, with respect to the Seller,
(i) any Effect, individually or taken together with any other Effects, that is,
or is reasonably expected to be, material and adverse to the financial position,
results of operations or business of the Seller and the Seller Subsidiaries
taken as a whole, including any Effect, individually or taken together with any
other Effects described in this definition of Seller Material Adverse Effect,
that has caused, or is reasonably likely to cause the Seller or the Surviving
Corporation to pay, suffer or incur, or to otherwise become liable for, any
Losses in excess of $1,200,000, (ii) any Effect that would materially impair the
ability of the Seller to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement, or (iii) any
Effect, individually or taken together with any other Effects, that causes or
otherwise results in any breach, untruth or inaccuracy of any one or more of the
representations or warranties made by the Seller in this Agreement and has
caused, or is reasonably likely to cause, the Seller or the Surviving
Corporation to pay, suffer or incur, or to otherwise become liable for, Losses
in excess of $1,200,000, whether individually or taken together with any other
Effects described in this definition of Seller Material Adverse Effect;
provided,
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however, that, for purposes of clause (i) hereof, Seller Material Adverse Effect
shall not be deemed to include the impact of (a) changes in banking and similar
Laws of general applicability or interpretations thereof by courts or
Governmental Authorities, (b) changes in GAAP or regulatory accounting
requirements applicable to banks and their holding companies generally, (c)
changes resulting from conditions generally affecting the banking industry, (d)
changes in general business or economic conditions, or (e) changes resulting
from compliance by the Seller with its obligations under this Agreement (except
to the extent that any of the changes described in clauses (a), (b), (c) or (d)
have a disproportionately adverse effect upon the Seller as compared to
comparable U.S. banking or financial services organizations).
"Seller Reports" has the meaning set forth in Section 5.02(g)(i).
"Seller Stock Options" has the meaning set forth in Section 3.13.
"Seller Stock Option Plan" means the Amended First Service Financial
Company 2001 Stock Option Plan.
"Seller Shareholders' Meeting" has the meaning set forth in Section
5.02(j).
"Seller Subsidiary(ies)" has the meaning set forth in Section
5.02(a)(i).
"Seller Treasury Shares" has the meaning set forth in Section 3.01(a).
"Shareholders Committee" has the meaning set forth in Section 3.14.
"Subsidiary Organizational Documents" has the meaning set forth in
Section 5.02(b).
"Superior Offer" means an unsolicited, bona fide written offer made by
a third Person to consummate any of the following transactions or in one or a
series of related transactions: (i) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Seller pursuant to which those shareholders of the Seller
immediately preceding such transaction will hold less than 50% of the equity
interest in the surviving or resulting entity of such transaction, (ii) a sale,
lease, exchange, transfer, license or other disposition by the Seller or the
Seller Subsidiaries of all or substantially all of their assets, as a
consolidated group, or (iii) the acquisition by any Person (including by way of
a tender offer, merger, consolidation, business combination, exchange offer or
similar transaction or issuance by the Seller), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding shares
of capital stock of the Seller; provided, however, that in each of clause (i),
(ii) or (iii) above, the Superior Offer shall be on terms that the Seller's
Board of Directors determines, in its good faith judgment, to be more favorable
to the Seller shareholders (taking into account all factors which the Seller's
Board of Directors may deem reasonably relevant, including the relative value
and form of the consideration offered, all other terms and conditions of the
respective offer, including the presence of a financial contingency, the
likelihood of obtaining financing on a timely basis if a financing contingency
is present, and the likelihood of obtaining any required Consents or Orders from
Governmental Authorities) than the terms of the Merger (after receipt and
consideration of the advice of a financial advisor of nationally recognized
reputation to the effect that the consideration offered in such offer is
superior, from a financial point of view, to the Merger Consideration).
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.02(e)(i).
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"Tax" and "Taxes" means any federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including all
net income, gross income, gains, gross receipts, profits, alternative or add-on
minimum, sales, use, ad valorem, goods and services, capital, capital stock,
production, transfer, registration, franchise, windfall profits, license,
withholding, payroll, social security (or similar) employment, disability,
employer health, excise, estimated, severance, stamp, occupation, premium,
property, environmental (including taxes under Code Section 59A), unemployment
or other taxes, custom duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate or consolidated, unitary or combined
basis or in any other manner, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Authority,
whether disputed or not, and including any obligation to indemnify or otherwise
assume or succeed to the tax Liability of any other Person, whether arising
before, on or after the Effective Date.
"Tax Returns" means any return, amended return, claim for refund or
information return or other report (including elections, declarations,
disclosures, schedules and estimates) required to be filed with respect to any
Tax, including any amendment thereof.
"Termination Fee" has the meaning set forth in Section 8.03(a).
"Title IV Plan" has the meaning set forth in Section 5.02(i)(ii).
"Voting Agreement" has the meaning set forth in the Recitals.
ARTICLE II
MERGER, EFFECTS OF MERGER
SECTION 2.01. MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the MGBCL, at the Effective Time
AcquisitionCo shall be merged with and into the Seller. As a result of the
Merger, the separate corporate existence of AcquisitionCo shall cease and the
Seller shall continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 2.02. CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME. At the Company's
election, the closing of the Merger (the "Closing") shall take place on (i) the
last business day of, or (ii) the first business day of the month following, or
(iii) the first business day of the month which is the first month of the
earliest calendar quarter following, in each case, the month during which all
applicable waiting periods in connection with approvals of Governmental
Authorities and the receipt of all approvals of Governmental Authorities and all
conditions to the consummation of the Merger set forth in Article VII are
satisfied or waived as provided in Article VII (other than those conditions that
by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of such conditions), or on such other date after such
satisfaction or waiver as the Company and the Seller may agree (the "Closing
Date"). Contemporaneous with the Closing, the Parties shall cause the Merger to
be consummated by filing articles of merger, as necessary, and any other
required documents, with the Secretary of State of the State of Missouri, in
such form as required by, and executed in accordance with the relevant
provisions of, the MGBCL (the effective time that the Secretary of State of the
State of Missouri issues a certificate of merger is referred to herein as the
"Effective Time"; the date on which the Effective Time shall occur is referred
to herein as the "Effective Date").
SECTION 2.03. EFFECTS OF MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the MGBCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all of the
property, rights, privileges, powers and franchises of AcquisitionCo and the
Seller shall vest in the
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Surviving Corporation, and all debts, liabilities and duties of AcquisitionCo
and the Seller shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.04. CERTIFICATE OF INCORPORATION AND BY-LAWS. At the Effective
Time, the Seller Articles and the Seller By Laws, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation and the By-Laws of
the Surviving Corporation.
SECTION 2.05. DIRECTORS AND OFFICERS. At the Effective Time, (i) the
directors of AcquisitionCo immediately prior to the Effective Time shall become
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By Laws of the Surviving
Corporation, and (ii) the officers of AcquisitionCo immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed.
ARTICLE III
MERGER CONSIDERATION, EXCHANGE PROCEDURES
SECTION 3.01. EFFECT ON COMMON STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Seller Common Stock or any other Person:
(A) SELLER TREASURY SHARES. All shares of Seller Common Stock that are
owned by the Seller other than in a fiduciary capacity as treasury stock or
otherwise (the "Seller Treasury Shares") or by the Company shall be canceled and
retired and shall cease to exist and no cash or other consideration shall be
delivered in exchange therefor.
(B) OTHER SELLER COMMON STOCK. Each share of Seller Common Stock
issued and outstanding immediately prior to the Effective Time (other than the
Seller Treasury Shares, the Dissenting Shares and shares of Seller Common Stock
owned by the Company) shall be converted at the Effective Time into the right to
receive an amount of cash equal to the quotient of "A" divided by "B", where "A"
shall equal $37,896,765 (which figure is subject to possible reduction as
provided in Section 3.02(a)), and where "B" shall equal the sum of (i) the
number of shares of Seller Common Stock presented for exchange pursuant to this
Article III or otherwise issued and outstanding at the Effective Time, and (ii)
the number of shares of Seller Common Stock issuable upon the exercise of Seller
Stock Options or other Rights (whether pursuant to Seller Stock Options or
otherwise) as of the Effective Time (the per share amount as so calculated is
referred to herein as the "Per Share Merger Consideration"); provided, however,
that a portion of the aggregate Per Share Merger Consideration equal to the
aggregate Per Share Escrow Amount shall be deposited by the Company with the
Escrow Agent pursuant to the Escrow Agreement (rather than delivered to the
shareholders of the Seller) and shall be held and distributed by the Escrow
Agent in accordance with the Escrow Agreement (the amount of the Per Share
Merger Consideration less the amount of the Per Share Escrow Amount is referred
to herein as the "Per Share Closing Amount"). Upon such conversion, all such
shares of Seller Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Certificate shall thereafter represent the right to receive the Merger
consideration in accordance with this Article III upon the surrender of the
Certificate in accordance with the terms of this Agreement. The Escrow Amount
and the Additional Escrow Amount, if any, shall be held and distributed by the
Escrow Agent as provided in the Escrow Agreement and the amount of the Escrow
Amount and the Additional Escrow Amount, if any, that may ultimately be
distributed to the shareholders of the Seller shall depend upon the outcome of
the contingencies described in the Escrow Agreement.
(C) ACQUISITIONCO COMMON STOCK. Each share of common stock of
AcquisitionCo outstanding immediately prior to the Effective Time shall be
converted into one share of Seller Common
9
Stock.
(D) COMPANY COMMON STOCK. Each share of common stock of the Company
outstanding immediately prior to the Effective Time shall remain outstanding and
unchanged following the Effective Time.
(E) DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, shares of Seller Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are owned by shareholders that
have properly perfected their rights of dissent within the meaning of Section
351.455 of the MGBCL (the "Dissenting Shares") shall not be converted into the
right to receive the Merger consideration in accordance with this Article III,
unless and until such shareholders shall have failed to perfect any available
right of dissent under applicable Law, but, instead, the holders thereof shall
be entitled to payment of the appraised value of such Dissenting Shares in
accordance with Section 351.455 of the MGBCL. If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such right of
dissent, the shares of Seller Common Stock held by such shareholder shall not be
deemed Dissenting Shares for purposes of this Agreement and shall thereupon be
deemed to have been converted into the Merger consideration in accordance with
this Article III at the Effective Time in accordance with Section 3.01(b). The
Seller shall give the Company (A) prompt notice of any demands for dissent filed
pursuant to Section 351.455 of the MGBCL received by the Seller, withdrawals of
such demands and any other instruments served or delivered in connection with
such demands pursuant to the MGBCL and received by the Seller, and (B) the
opportunity to participate in all negotiations and proceedings with respect to
demands made pursuant to Section 351.455 of the MGBCL. The Seller shall not,
except with the prior written consent of the Company, (x) make any payment with
respect to any such demand, (y) offer to settle or settle any such demand, or
(z) waive any failure to timely deliver a written demand for appraisal or timely
take any other action to perfect dissenters' rights in accordance with the
MGBCL.
(F) EXCHANGE AGENT. Prior to the Effective Time, the Company shall
appoint, subject to the approval of the Seller (which approval shall not be
unreasonably withheld or delayed), an exchange agent (the "Exchange Agent") for
the purpose of exchanging certificates which immediately prior to the Effective
Time evidenced shares of Seller Common Stock (the "Certificates") for the Merger
consideration in accordance with this Article III.
SECTION 3.02. ADJUSTMENT AMOUNT; ADDITIONAL ESCROW AMOUNT.
(A) ADJUSTMENT AMOUNT. In the event that, prior to the Effective Time,
there shall be discovered any inaccuracy, breach or untruth of any one or more
of the representations or warranties made by the Seller in this Agreement (other
than any additional Scheduled Loans which shall be the subject of the Additional
Escrow Amount as provided in Section 3.02(b)) and it is reasonably likely that
the Seller or the Surviving Corporation has or will, incur, suffer, pay or
otherwise sustain Losses, individually or in the aggregate, in excess of
$200,000 (the "Basket Amount") as a result of, in connection with, arising out
of, or based upon such inaccuracy(ies), breach(es) or untruth(s) of any one or
more of the representations or warranties made by the Seller in this Agreement,
then, in such event, the $37, 896,765 figure used in Section 3.01(b) shall be
reduced by the amount by which such Losses exceed, or are reasonably likely to
exceed, the Basket Amount (such amount is referred to herein as the "Adjustment
Amount").
(B) ADDITIONAL ESCROW AMOUNT.
(I) In the event that the Parties cannot agree upon the amount of
the Adjustment Amount in accordance with Section 3.02(a), then the amount in
dispute, as reasonably
10
determined by the Company, shall be deposited by the Company in escrow pursuant
to the Escrow Agreement and held and distributed by the Escrow Agent as provided
therein.
(II) Between the date hereof and the Closing Date, the Seller
shall, or shall cause the Bank to, monitor and review the Bank's loan portfolio
in accordance with past practice and applicable Law and shall classify the
Bank's loans in accordance with the Loan Classification Policy. The Seller shall
promptly advise the Company of the amount and other terms and specifics of each
new Scheduled Loan (as defined below in this Section 3.02(b)(ii)). On the date
five (5) days prior to the contemplated Closing Date (as determined by the
Company pursuant to Section 2.02), the Seller shall deliver to the Company a
list, certified as to its accuracy by the Chief Executive Officer of the Seller,
of each of the loans or other lending relationships, if any, classified by the
Seller or the Bank as of such date as a "4" or higher (e.g., "5" or "6") in
accordance with the Loan Classification Policy (collectively, the "Scheduled
Loans"). The Company and its advisors or representatives shall have the right to
review the analyses and underlying loan documents and records related to the
Scheduled Loans so identified by the Seller and any other loan documents or
other information related to the Bank's loan portfolio deemed necessary by the
Company, and the Seller and the Bank shall answer any questions of the Company
and provide any additional information reasonably requested by the Company
related to the classifications and quality of the Bank's loan portfolio
generally. If the Company shall, prior to the Closing Date, notify the Seller
that, in its reasonable opinion, the list of Scheduled Loans provided by the
Seller should include any additional loan(s), then the Parties shall promptly
attempt to resolve their disagreement and the Company shall provide to the
Seller its rationale for the inclusion of any such additional loan(s) as a
Scheduled Loan(s) pursuant to the Loan Classification Policy; provided, however,
that the Closing shall not occur until such time as the Company shall agree to
use the Seller's list of Scheduled Loans as provided by the Seller to the
Company pursuant to the third sentence of this Section 3.02(b)(ii) or the Seller
shall agree to use the Company's list of Scheduled Loans as provided by the
Company to the Seller pursuant to this sentence, or the Parties shall otherwise
agree upon a modified list of Scheduled Loans for purposes of this Section
3.02(b)(ii). An amount equal to the aggregate principal balances of the
Scheduled Loans (as agreed upon as provided above in this Section 3.02(b)(ii),
but excluding any Scheduled Loans identified on Section 5.02(g)(iv) of the
Seller Disclosure Schedule as of the date hereof), plus the amount of any
accrued and unpaid interest thereon (but less the amount of any theretofore
unused Basket Amount after taking into consideration the matters described in
Section 3.02(a) and Section 3.02(b)(i)), shall be deposited by the Company in
escrow pursuant to the Escrow Agreement and held and distributed by the Escrow
Agent as provided therein.
(III) Any additional amounts deposited in escrow by the Company
pursuant to Section 3.02(b) are referred to herein as the "Additional Escrow
Amount".
SECTION 3.03. EXCHANGE FUND. On or before the Effective Time, (i) the
Company shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of Seller Common Stock, cash sufficient to pay the aggregate
Per Share Closing Payments (the cash deposited with the Exchange Agent shall
hereinafter be referred to as the "Exchange Fund"), and (ii) the Company shall
deposit with the Escrow Agent an amount of cash equal to the Escrow Amount and,
if applicable, any Additional Escrow Amount.
SECTION 3.04. EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, but in no event later than five (5) Business Days after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of a Certificate (i) a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent, and
which letter shall be in customary form and have such other provisions as the
Company may reasonably specify, and (ii) instructions for effecting the
surrender of such Certificates in exchange for the aggregate Merger
consideration payable in accordance with this
11
Article III represented by such Certificate. Upon surrender of a Certificate to
the Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a check for the
aggregate Per Share Closing Amount represented by such Certificate. No interest
shall be paid or shall accrue on any cash payable for the Merger consideration
payable in accordance with this Article III. In the event of a transfer of
ownership of Seller Common Stock which is not registered in the transfer records
of the Seller, a check for the aggregate Per Share Closing Amount may be issued
with respect to such Seller Common Stock to such a transferee if the Certificate
representing such shares of Seller Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
SECTION 3.05. NO FURTHER RIGHTS IN SELLER COMMON STOCK. All cash paid upon
conversion of shares of Seller Common Stock in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Seller Common Stock. Until surrendered as
contemplated by this Article III, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger consideration payable in accordance with this Article III.
SECTION 3.06. TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for six (6)
months after the Effective Time shall be delivered to the Company or otherwise
on the instruction of the Company and any holders of the Certificates who have
not theretofore complied with this Article III shall thereafter look only to the
Surviving Corporation for the Merger consideration with respect to the shares of
Seller Common Stock formerly represented thereby to which such holders are
entitled pursuant to Section 3.01. Any portion of the Exchange Fund remaining
unclaimed by holders of Shares as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become property of any United
States federal, state or local or any foreign government, or political
subdivision thereof, or any multinational organization or authority or any
authority, agency or commission entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory (including any Regulatory
Authority) or taxing authority or power, any court or tribunal (or any
department, bureau or division thereof), or any arbitrator or arbitral body
(each a "Governmental Authority"), shall, to the extent permitted by applicable
Law, become the property of the Surviving Corporation free and clear of any
claims or interest of any Person previously entitled thereto.
SECTION 3.07. NO LIABILITY. None of the Company, AcquisitionCo, the Seller,
the Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
SECTION 3.08. INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by the Company. Any interest
and other income resulting from such investments shall promptly be paid to the
Company.
SECTION 3.09. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger consideration with respect to the shares of
Seller Common Stock formerly represented thereby.
12
SECTION 3.10. WITHHOLDING RIGHTS. The Surviving Corporation and/or the
Company shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Seller
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax Law. To
the extent that amounts are so withheld by the Surviving Corporation and/or the
Company, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Seller Common Stock
in respect of which such deduction and withholding was made by the Surviving
Corporation, and such amounts shall be delivered by the Surviving Corporation to
the applicable Taxing authority.
SECTION 3.11. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Seller or AcquisitionCo,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Seller or AcquisitionCo, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
SECTION 3.12. STOCK TRANSFER BOOKS. The stock transfer books of the Seller
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Seller Common Stock thereafter on
the records of the Seller. On or after the Effective Time, any Certificates
presented to the Exchange Agent or the Surviving Corporation for any reason
shall be converted into the Merger consideration in accordance with this Article
III with respect to the shares of Seller Common Stock formerly represented
thereby.
SECTION 3.13. SELLER STOCK OPTIONS. The Seller shall take all action
reasonably necessary so that, on or before the Closing Date, each holder of a
stock option (the "Seller Stock Options") heretofore granted under the Seller
Stock Option Plan or pursuant to any employment or other agreement shall
exercise such Seller Stock Option in accordance with its terms; provided,
however, that in the event that any such Seller Stock Options shall remain
outstanding immediately prior to the Effective Time, then each such Seller Stock
Option shall be exchanged for an amount of cash equal to $0.01 and at the
Effective Time each such Seller Stock Option shall become null and void and of
no further force or effect.
SECTION 3.14. SHAREHOLDERS COMMITTEE. There is hereby irrevocably
constituted a committee (the "Shareholders Committee") on behalf of the holders
of the shares of Seller Common Stock entitled to payment pursuant to Section
3.01(b) to act as such shareholders' respective agent, representative and
attorney-in-fact for all purposes and with respect to all matters arising under
the Escrow Agreement. The powers and authority of the Shareholders Committee
shall include the power and authority to amend and vary the Escrow Agreement as
permitted therein, to give and accept notices thereunder, to provide for, manage
and administer the defense or resolution of any claims or contingencies
described therein, to enter into one or more agreements or other instruments in
furtherance of their duties under the Escrow Agreement, and to otherwise
exercise all rights and privileges necessary and appropriate to carry out the
purposes and intent of the Escrow Agreement. The initial members of the
Shareholders Committee shall be Allen R. Vogel, John G. Martens and James C.
Jacobsmeyer. In the event that any member of the Shareholders Committee becomes
unable or unwilling to serve for any reason, then the remaining members of the
Shareholders Committee shall appoint a successor. All decisions of the
Shareholders Committee shall be made by majority vote. No bond shall be required
of the Shareholders Committee, and the Shareholders Committee shall receive no
compensation for its services, provided that they shall be reimbursed for their
expenses as provided in this Section 3.14. The Shareholders Committee shall have
the right to retain counsel, financial advisors and other professionals
necessary in its discretion for the administration of its duties. The
Shareholders Committee shall not be liable to any of the
13
shareholders for any act done or omitted as provided hereunder and under the
Escrow Agreement, except in the case of gross negligence, bad faith, or willful
misconduct. The Shareholders Committee shall be entitled to recover, solely from
that portion of the Escrow Amount or the Additional Escrow Amount, if any, that
is payable to the shareholders of the Seller in accordance with the terms of the
Escrow Agreement, all of its out-of-pocket expenses incurred by the Shareholders
Committee in fulfilling its duties hereunder and under the Escrow Agreement,
including travel, legal and accounting fees.
ARTICLE IV
ACTIONS PENDING MERGER
SECTION 4.01. FORBEARANCE OF SELLER. From the date hereof until the earlier
to occur of the Effective Time or the termination of this Agreement pursuant to
Article VIII, except as expressly contemplated by this Agreement, without the
prior written consent of the Company (which consent shall not be unreasonably
withheld or delayed), the Seller shall not, and shall cause each of the Seller
Subsidiaries not to:
(A) ORDINARY COURSE. Conduct the business of the Seller and the Seller
Subsidiaries other than in the ordinary and usual course in compliance in all
material respects with all applicable Laws, or fail to use reasonable efforts to
preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or take any action that would adversely affect or delay
the ability of the Seller, the Company or any of their Subsidiaries to perform
any of their obligations on a timely basis under this Agreement, or take any
action that would have a Seller Material Adverse Effect.
(B) CAPITAL STOCK. (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Seller
Common Stock (except as a result of the exercise of Seller Stock Options for up
to 46,367 shares of Seller Common Stock granted as of the date hereof and rights
to purchase up to 616 shares of Seller Common Stock under the Amended First
Service Financial Company Employee Stock Purchase Plan for the 2006 Plan Year),
or any Rights, or any securities or other Rights of any of the Seller
Subsidiaries, (ii) enter into any agreement with respect to the foregoing, or
(iii) permit any additional shares of Seller Common Stock to become subject to
new grants of employee or director stock options, other Rights or similar
stock-based employee rights.
(C) DIVIDENDS AND DISTRIBUTIONS. (i) directly or indirectly adjust,
split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock, or (ii) make, declare, pay or set aside for payment any
dividend or other distribution on any shares of Seller Common Stock.
(D) COMPENSATION, EMPLOYMENT AGREEMENTS. Enter into or amend or renew
any employment, consulting, severance or similar agreements or arrangements with
any director, officer or employee of the Seller or the Seller Subsidiaries, or
grant any salary or wage increase or increase any employee benefit (including
incentive or bonus payments), except (i) for changes that are required by
applicable Law, (ii) to satisfy Previously Disclosed contractual obligations
existing as of the date hereof, (iii) normal increases in compensation to
employees in the ordinary course of business, consistent with past practice, or
(iv) for newly hired non-officer employees, consistent with past practices,
hired to replace any employee who may leave the employ of the Company or its
Subsidiaries after the date hereof.
(E) SELLER BENEFIT PLANS. Enter into, establish, adopt or amend
(except (i) as may be required by applicable Law, or (ii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof) Seller Benefit
Plans (including any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement (or similar arrangement) related thereto), in respect of any
director, officer or employee of the Seller or any Seller
14
Subsidiaries, or take any action to accelerate the vesting or exercisability of
stock options, restricted stock or other compensation or benefits payable
thereunder.
(F) DISPOSITIONS. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its assets,
deposits, business or properties, except in the ordinary course of business
consistent with past practice and in a transaction that is not material to the
Seller and the Seller Subsidiaries taken as a whole.
(G) ACQUISITIONS. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, deposits or properties of
any other Person, except in the ordinary course of business consistent with past
practice and in a transaction that is not material to the Seller and the Seller
Subsidiaries taken as a whole.
(H) CAPITAL EXPENDITURES. Except as Previously Disclosed, make any
capital expenditures that, individually or in the aggregate, exceed $50,000.
(I) GOVERNING DOCUMENTS. Amend the Seller Articles, the Seller By-Laws
or the Subsidiary Organizational Documents of any of the Seller Subsidiaries.
(J) ACCOUNTING METHODS. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
GAAP.
(K) CONTRACTS. Except in the ordinary course of business consistent
with past practice, enter into or terminate any Material Contract or amend or
modify in any material respect any of its existing Material Contracts.
(L) NON-COMPETE AGREEMENTS. Amend, modify or terminate any of the
Non-Compete Agreements.
(M) CLAIMS. Except in the ordinary course of business consistent with
past practice, settle any claim, action or Proceeding, except for any claim,
action or Proceeding involving solely money damages, in an amount, individually
or in the aggregate for all such settlements, that is not material to the Seller
and the Seller Subsidiaries taken as a whole.
(N) ADVERSE ACTIONS. Knowingly take any action that is intended or is
reasonably likely to result in (1) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (2) any of the conditions to the Merger
set forth in Article VII not being satisfied, or (3) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable Law.
(O) RISK MANAGEMENT. Except as required by applicable Law, (i)
implement or adopt any material change in its interest rate and other risk
management policies, procedures or practices, or (ii) fail to follow its
existing policies or practices with respect to managing its exposure to interest
rate and other risk.
(P) INDEBTEDNESS. Incur any indebtedness for borrowed money other than
in the ordinary course of business consistent with past practice.
(Q) LOANS. Make or commit to make any new loan or letter of credit or
any new or additional discretionary advance under any existing line of credit
not in accordance with the Seller's loan
15
policy and authority in existence as of the date of this Agreement; provided,
however, that, in addition to the foregoing, the Seller shall not make or commit
to make or otherwise incur aggregate credit exposure to any one borrower (or
group of affiliated borrowers) in principal amounts in excess of $1,000,000
without the prior written consent of the Company, acting through its Chief
Executive Officer or such other designee as the Company may give notice of to
the Seller (except that, notwithstanding the foregoing proviso, the Seller may
increase the amount of the aggregate credit exposure to any one borrower and its
affiliated borrowers by up to an additional $250,000 even if doing so would
increase the aggregate credit exposure to such borrower and its affiliates to an
amount in excess of $1,000,000); provided further, however, that the Seller or
any Seller Subsidiary may make any loan, notwithstanding the amount of the loan,
in the event that (A) there has been delivered to the Company a notice of its
intention to make such loan, and (B) the Company shall not have reasonably
objected to such loan by delivering a written notice of such objection within
two (2) Business Days following receipt of the notice described in clause (A).
(R) FORECLOSURES. Foreclose upon or otherwise take title to or
possession or control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials, provided,
however, that the Seller shall not be required to obtain such a report with
respect to single family, non-agricultural residential property of one acre or
less to be foreclosed upon unless it has or should have had reason to believe
that such property might contain any such waste materials or otherwise might be
contaminated.
(S) COMMITMENTS. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. DISCLOSURE SCHEDULE. On or prior to the date hereof, the
Seller has delivered to the Company a schedule (the "Seller Disclosure
Schedule") setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more
representations or warranties contained in Section 5.02. The Seller Disclosure
Schedule shall be arranged in paragraphs corresponding to the Section numbers
contained in Section 5.02. Nothing in the Seller Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the Seller Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
SECTION 5.02. REPRESENTATIONS AND WARRANTIES OF SELLER. Subject to Section
5.01 and except as Previously Disclosed in a section of the Seller Disclosure
Schedule corresponding to the relevant section below, the Seller hereby
represents and warrants to the Company:
(A) ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(I) The Seller is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Missouri and a registered
bank holding company under the Bank Holding Company Act of 1956 and the
regulations promulgated thereunder, as amended (the "BHCA"). The Seller is also
subject to regulation by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). Each subsidiary of the Seller (a "Seller
Subsidiary," or collectively, the "Seller Subsidiaries") is a state banking
association, corporation, limited liability company, limited partnership or
trust duly organized, validly existing and in good standing under the Laws of
the state of its incorporation or organization. Each of the Seller and the
Seller Subsidiaries has the requisite power and authority to own, lease and
operate the properties it now owns or holds under lease and to carry on its
16
business as it is now being conducted, is duly qualified or licensed as a
foreign business entity to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary.
(II) Each of the Seller and the Seller Subsidiaries has all
Consents and Orders (the "Seller Approvals") necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted,
including all required authorizations from the Federal Reserve Board, the
Federal Deposit Insurance Corporation (the "FDIC") and the MDF, and neither the
Seller nor any Seller Subsidiary has received any notice of any Proceedings
relating to the revocation or modification of any Seller Approvals.
(III) A true and complete list of the Seller Subsidiaries,
together with (i) the Seller's percentage ownership of each Seller Subsidiary,
and (ii) Laws under which the Seller Subsidiary is incorporated or organized, is
set forth in the Seller Disclosure Schedule. The Seller or one or more of the
Seller Subsidiaries owns beneficially and of record all of the outstanding
shares of capital stock of each of the Seller Subsidiaries. Except for the
Seller Subsidiaries, the Seller does not directly or indirectly own any capital
stock or equity interest in, or any interests convertible into or exchangeable
or exercisable for any capital stock or equity interest in, any corporation,
partnership, joint venture or other business association or other Person, other
than in the ordinary course of business and in no event in excess of 5% of the
outstanding equity securities of such Person.
(IV) The minute books of the Seller and each of the Seller
Subsidiaries contain true, complete and accurate records in all material
respects of all meetings and other corporate actions held or taken since June
30, 2001, of their respective shareholders and Boards of Directors (including
committees of their respective Boards of Directors).
(B) ARTICLES OF INCORPORATION AND BY-LAWS. The Seller has heretofore
furnished or made available to the Company a complete and correct copy of the
Seller's Articles of Incorporation and the Seller's By-Laws, each as amended or
restated (the "Seller Articles" and the "Seller By-Laws", respectively), and the
Articles or Certificate of Incorporation and the By-Laws, or other
organizational documents, as the case may be, of each Seller Subsidiary, each as
amended or restated (the "Subsidiary Organizational Documents"). The Seller
Articles, the Seller By-Laws and the Subsidiary Organizational Documents are in
full force and effect. Neither the Seller nor any Seller Subsidiary is in breach
or violation of any of the provisions of the Seller Articles, the Seller By-Laws
or the Subsidiary Organizational Documents.
(C) CAPITALIZATION. The authorized capital stock of the Seller
consists of 2,000,000 shares of Seller Common Stock, $0.10 par value per share.
As of the date of this Agreement, (i) 475,731 shares of Seller Common Stock were
issued and outstanding, all of which were duly authorized, validly issued, fully
paid and non-assessable, and not issued in violation of any preemptive right of
any Seller shareholder, (ii) no shares of Seller Common Stock were held as
treasury shares by the Seller, and (iii) 46,367 shares of Seller Common Stock
were subject to outstanding Seller Stock Options issued pursuant to the Seller
Stock Option Plan or subject to purchase pursuant to the Amended First Service
Financial Company Employee Stock Purchase Plan. All Seller Stock Options shall
vest and become exercisable in accordance with their terms prior to the
Effective Time. Attached to the Seller Disclosure Schedule is a true and
complete list of the holders of record of the Seller Common Stock and the number
of shares of Seller Common Stock held by each such holder of record. The
authorized capital stock of Bank consists of 10,000 shares of common stock, par
value $100.00 per share. All of such issued and outstanding shares of common
stock are duly authorized, validly issued, fully paid and non assessable and
owned beneficially and of record by the Seller. Except as set forth above in
this Section 5.02(c), there are no securities of the Seller or any Seller
Subsidiary (debt, equity or otherwise) authorized, issued or
17
outstanding. All of the issued and outstanding shares of capital stock of the
Seller and the Seller Subsidiaries have been issued in compliance with all
applicable federal and state securities Laws or in accordance with exemptions
therefrom. Except as set forth in clause (iii) above, there are no outstanding
Rights relating to the issued or unissued capital stock of the Seller or any
Seller Subsidiary or obligating the Seller or any Seller Subsidiary to issue or
sell any shares of capital stock or other securities of or in the Seller or any
Seller Subsidiary. There are no obligations, contingent or otherwise, of the
Seller or any Seller Subsidiary to repurchase, redeem or otherwise acquire any
shares of Seller Common Stock or the capital stock of any Seller Subsidiary or
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Seller Subsidiary or any other Person, except
for loan commitments and other funding obligations entered into in the ordinary
course of business. Except as described in Section 5.02(c) of the Seller
Disclosure Schedule, neither the Seller nor any Seller Subsidiary has
repurchased, redeemed or otherwise acquired any of its shares of capital stock
since December 31, 2004. Each of the outstanding shares of capital stock of each
Seller Subsidiary is not issued in violation of any preemptive rights of any
Seller Subsidiary shareholder or other equity holder, and such shares owned by
the Seller are owned free and clear of all limitations of the Seller's voting
rights and Liens whatsoever.
(D) AUTHORITY. The Seller has the requisite corporate power and
authority to execute and deliver this Agreement and the Escrow Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated by this Agreement (other than, with respect to the
Merger, (x) the approval and adoption of this Agreement by the Seller's
shareholders in accordance with the MGBCL, the Seller Articles and the Seller
By-Laws, (y) approvals described in Section 6.02, and (z) the filing and
recordation of the appropriate merger documents as required by the MGBCL) and
the Escrow Agreement. The execution and delivery of this Agreement and the
Escrow Agreement by the Seller and the consummation by the Seller of the
transactions contemplated by this Agreement and the Escrow Agreement have been
duly and validly authorized by all necessary corporate action on the part of the
Seller, including the Seller's Board of Directors and shareholders (other than,
with respect to the Merger, the approval and adoption of this Agreement by the
Seller's shareholders in accordance with the MGBCL, the Seller Articles and the
Seller By-Laws). The Seller's Board of Directors, at a meeting duly called,
constituted and held in accordance with the MGBCL and the provisions of the
Seller Articles and the Seller By-Laws, has by the unanimous vote of all of the
members of the Seller's Board of Directors in attendance at such meeting
determined (i) that this Agreement and the transactions contemplated by this
Agreement, including the Merger, are advisable to, fair to and in the best
interests of the Seller and its shareholders, (ii) to submit this Agreement for
approval and adoption by the shareholders of the Seller and to declare the
advisability of this Agreement, and (iii) to recommend that the shareholders of
the Seller adopt and approve this Agreement and the transactions contemplated by
this Agreement, including the Merger, and direct that this Agreement and the
Merger be submitted for consideration by the shareholders of the Seller at the
Seller Shareholders' Meeting (collectively, the "Seller's Board of Directors
Recommendation"). No other corporate proceedings on the part of the Seller are
necessary to authorize this Agreement or the Escrow Agreement or to consummate
the transactions contemplated by this Agreement or the Escrow Agreement (other
than, with respect to the Merger, the approval and adoption of this Agreement by
the Seller's shareholders in accordance with the MGBCL, the Seller Articles and
the Seller By-Laws). Each of this Agreement and the Escrow Agreement has been
duly and validly executed and delivered by the Seller and, assuming the due
authorization, execution and delivery of this Agreement by the Company and
AcquisitionCo, constitutes a valid and binding obligation of the Seller and is
enforceable against the Seller in accordance with its terms, except as
enforcement may be limited by general principles of equity, whether applied in a
court of law or a court of equity, and by bankruptcy, insolvency and similar
Laws affecting creditors' rights and remedies generally.
(E) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
18
(I) The execution and delivery of this Agreement and the Escrow
Agreement by the Seller do not, and the performance of this Agreement and the
Escrow Agreement and the consummation of the transactions contemplated by this
Agreement and the Escrow Agreement by the Seller will not, (i) conflict with or
violate the Seller Articles, the Seller By-Laws or the Subsidiary Organizational
Documents, (ii) conflict with or violate any Laws or Orders applicable to the
Seller or any Seller Subsidiary or by which its or any of their respective
properties is bound or affected (assuming the approvals described in Section
5.02(e)(ii) are obtained), or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of the Seller or any Seller Subsidiary pursuant to, any
note, bond, mortgage, indenture, lease, license, permit, franchise or other
Contract to which the Seller or any Seller Subsidiary is a party or by which the
Seller or any Seller Subsidiary or its or any of their respective properties is
bound or affected. No "business combination," "control share acquisition," "fair
price" or other anti-takeover Laws enacted under Missouri state law
(collectively, the "Takeover Laws") applies to the execution, delivery or
performance of this Agreement or any of the transactions contemplated by this
Agreement, including the Merger.
(II) The execution and delivery of this Agreement and the Escrow
Agreement by the Seller do not, and the performance of this Agreement and the
Escrow Agreement and the consummation of the transactions contemplated by this
Agreement and the Escrow Agreement by the Seller will not, require any Consent
from, or filing with or notification to, any Governmental Authority, except for
applicable requirements, if any, required by the BHCA, the FDIC, the banking
laws of the State of Missouri and the regulations promulgated thereunder, as
amended, and the filing and recordation of appropriate merger or other documents
as required by the MGBCL. Neither the Seller nor any Seller Subsidiary is
subject to any foreign Governmental Authority or foreign Law.
(F) COMPLIANCE AND PERMITS. Neither the Seller nor any Seller
Subsidiary is in conflict with, or in default under or violation of, as
applicable, (i) any Law applicable to the Seller or any Seller Subsidiary or by
which its or any of their respective properties is bound or affected, or (ii)
any note, bond, mortgage, indenture, lease, license, permit, franchise or other
Contract to which the Seller or any Seller Subsidiary is a party or by which the
Seller or any Seller Subsidiary or its or any of their respective properties is
bound or affected.
(G) REPORTS; FINANCIAL STATEMENTS.
(I) The Seller and each Seller Subsidiary have filed all forms,
reports and documents required to be filed with the Federal Reserve Board, the
FDIC, the MDF and any other applicable federal or state securities or banking
authorities (all such reports and statements are collectively referred to as the
"Seller Reports"). The Seller Reports (i) were prepared in accordance with the
requirements of applicable Law, and (ii) did not at the time they were filed,
after giving effect to any amendment thereto filed prior to the date hereof,
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
therein, in the light of the circumstances under which they were made, not
misleading, except that information as of a later date (but before the date of
this Agreement) shall be deemed to modify information as of an earlier date.
(II) Each of the Seller Financial Statements (including, if
applicable, any related notes thereto) has been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or required by reason of a concurrent change to GAAP) and each fairly presents
in all material respects the consolidated financial position of the Seller and
the Seller Subsidiaries as of the
19
respective dates thereof and the consolidated results of their operations and
cash flows for the periods indicated, except that any unaudited interim
financial statements, which have been prepared in conformity with Accounting
Principles Board Opinion No. 28 and subsequent amendments thereto, do not
contain all of the disclosures required by GAAP and were or are subject to
normal and recurring year end adjustments, which were not or are not expected to
be material in amount, either individually or in the aggregate. The Seller has
not had any material dispute with any of its auditors regarding accounting
matters or policies during any of its past three (3) full fiscal years that were
unresolved or during the current fiscal year-to-date. As used in this Agreement,
"Seller Financial Statements" means (i) the unaudited consolidated balance
sheets as of March 31, 2006, and June 30, 2006 and the audited consolidated
balance sheets as of December 31, 2003, 2004 and 2005, respectively (including
related notes and schedules, if any), of the Seller, (ii) the unaudited
consolidated statement of income for the periods ended March 31, 2006, June 30,
2006 and September 30, 2006 and the audited consolidated statements of income
for the years ended December 31, 2003, 2004 and 2005, respectively (including
related notes and schedules, if any), of the Seller, (iii) the unaudited
consolidated statements of cash flows and shareholders' equity for the periods
ended March 31, 2006, June 30, 2006 and September 30, 2006 and the audited
consolidated statements of cash flows and shareholders' equity for the years
ended December 31, 2003, 2004 and 2005, respectively (including related notes
and schedules, if any), of the Seller, and (iv) all bank financial reports,
including any amendments thereto, filed with any Governmental Authorities by
Bank for the years ended December 31, 2004 and 2005 and the three (3), six (6)
and nine (9) month periods ended March 31, 2006, June 30, 2006, and September
30, 2006 and all bank financial reports to be filed after the date hereof until
the Closing. The Seller has made available to the Company copies of all
correspondence between the Seller or each Seller Subsidiary and any Governmental
Authority concerning any of the foregoing financial statements or the financial
position of the Seller or any Seller Subsidiary since January 1, 2003.
(III) The Seller has in place a process designed by, or under the
supervision of, the Seller's Chief Executive Officer or Chief Financial Officer,
or individuals performing similar functions, and effected by the Seller's Board
of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that: (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Seller, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Seller are being made only in accordance with authorizations of management of
the Seller, and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Seller's
assets that could have a material effect on the financial statements.
(IV) There are no outstanding loans made by the Seller or any
Seller Subsidiary to any executive officer or director of the Seller, other than
loans that are subject to and in compliance with Regulation O under the Federal
Reserve Act. The Bank's loan classification policy is attached as an exhibit to
Section 5.02(g)(iv) of the Seller Disclosure Schedule (the "Loan Classification
Policy"). The Loan Classification Policy complies with the FDIC's Financial
Institution Letter issued on June 15, 2004 (FIL-70-204) captioned "Uniform
Agreement on the Classification of Assets and Appraisal of Securities Held by
Banks and Thrifts." The Company and the Bank classify the loans in the Bank's
loan portfolio in accordance with the Loan Classification Policy and applicable
Law. Section 5.02(g)(iv) of the Seller Disclosure Schedule identifies each of
the Bank's loans that has been or should be classified as a "4" or higher (e.g.,
"5" or "6") under the Loan Classification Policy.
(V) Except (i) for those Liabilities that are reflected or fully
accrued on the consolidated balance sheet of the Seller as of June 30, 2006;
(ii) for Liabilities incurred in the ordinary
20
course of business consistent with past practice since June 30, 2006, or under
any Material Contracts or under any other Contract entered into in the ordinary
course of business which obligates the Seller or any Seller Subsidiary for
payments or other consideration with a value in excess of $25,000 in the
aggregate over the term of such Contract (none of which Liabilities described in
this clause (ii) result from, arise out of, relate to, are in the nature of or
are caused by any breach of contract, breach of warranty, tort, infringement or
violation of Laws); and (iii) incurred in connection with this Agreement and the
transactions contemplated hereby, neither the Seller nor any Seller Subsidiary
has incurred any Liability of any nature whatsoever.
(VI) The Seller has not been notified by its independent public
accounting firm that such accounting firm is of the view that any of the Seller
Financial Statements should be restated which has not been restated in
subsequent Seller Financial Statements or that the Seller should modify its
accounting in future periods.
(VII) Since December 31, 2004, none of the Seller or the Seller
Subsidiaries or, to the Seller's Knowledge, any director, officer or employee of
the Seller or the Seller Subsidiaries or any auditor, accountant or
representative of the Seller or the Seller Subsidiaries, has received any
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Seller or the Seller Subsidiaries or their respective internal accounting
controls, including any complaint, allegation, assertion or claim that the
Seller or any Seller Subsidiary has engaged in questionable accounting or
auditing practices. No attorney representing the Seller or the Seller
Subsidiaries, whether or not employed by the Seller or the Seller Subsidiaries,
has reported evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Seller, any Seller Subsidiary or any
of their officers, directors, employees or agents to the Seller's or any Seller
Subsidiary's Board of Directors or any committee thereof or to any director or
officer of the Seller or any Seller Subsidiary. Since December 31, 2004, there
have been no internal investigations regarding accounting or revenue recognition
discussed with, reviewed by or initiated at the direction of the Chief Executive
Officer, Chief Financial Officer, individuals performing similar functions, the
Seller's or any Seller Subsidiary's Board of Directors or any committee thereof.
(VIII) Since December 31, 2005, the Seller and the Seller
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since December 31, 2005, there has
not been (i) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Seller or any of the Seller
Subsidiaries, ordinary wear and tear excepted, (ii) any change by the Seller in
its accounting methods, principles or practices, (iii) any revaluation by the
Seller of any of its assets in any material respect, (iv) any declaration,
setting aside or payment of any dividends or distributions in respect of shares
of Seller Common Stock or any redemption, repurchase or other acquisition of any
of its securities or any of the securities of any Seller Subsidiary, (v) any
increase in the wages, salaries, bonuses, compensation, pension or other fringe
benefits or perquisites payable to any executive officer, employee or director
of the Seller or any Seller Subsidiary or any grant of any severance or
termination pay, except in the ordinary course of business consistent with past
practices, (vi) any strike, work stoppage, slow down or other labor disturbance,
(vii) the execution of any collective bargaining agreement or other Contract
with a labor union or organization, or (viii) any union organizing activities.
(IX) To the Seller's Knowledge, no third Person has used, with or
without permission, the corporate name, trademarks, trade names, service marks,
logos, symbols or similar intellectual property of the Seller or any Seller
Subsidiary in connection with the marketing, advertising, promotion or sale of
such third Person's products or services. Neither the Seller nor any Seller
Subsidiary is a party to any joint marketing or other affinity marketing program
with any third Person.
21
(H) ABSENCE OF PROCEEDINGS AND ORDERS.
(I) There is no Proceeding pending or, to the Seller's Knowledge,
threatened against the Seller or any Seller Subsidiary or any of their
properties or assets or challenging the validity or propriety of the
transactions contemplated by this Agreement.
(II) There is no Order imposed upon the Seller, any of the Seller
Subsidiaries or the assets of the Seller or any of the Seller Subsidiaries,
including any Order relating to any of the transactions contemplated by this
Agreement.
(III) Neither the Seller nor any of the Seller Subsidiaries is
subject to, and to the Seller's Knowledge, there are no facts or circumstances
in existence that would be likely to result in the Seller or any of the Seller
Subsidiaries becoming subject to, any written Order, agreement (including an
agreement under Section 4(m) of the BHCA), memorandum of understanding or
similar arrangement with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from, or has adopted any extraordinary board
resolutions at the request of, any Governmental Authority charged with the
supervision or regulation of financial institutions or issuers of securities or
engaged in the insurance of deposits or the supervision or regulation of it or
any of the Seller Subsidiaries, nor has any Governmental Authority advised it in
writing or, to the Seller's Knowledge, otherwise advised that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such Order, agreement, memorandum of understanding or
extraordinary supervisory letter or any such board resolutions, nor, to the
Seller's Knowledge, has any Governmental Authority commenced an investigation in
connection therewith.
(IV) No facts or circumstances exist which would cause the Seller
or any of the Seller Subsidiaries to be deemed to be (i) operating in violation
of The Currency and Foreign Transactions Reporting Act and the regulations
promulgated thereunder, as amended (the "Bank Secrecy Act"), the USA Patriot Act
of 2001 and the regulations promulgated thereunder, as amended (the "Patriot
Act"), any Order issued with respect to anti-money laundering by the United
States Department of the Treasury's Office of Foreign Assets Control, or any
other applicable anti-money laundering Laws; or (ii) not in satisfactory
compliance with the applicable privacy and customer information requirements
contained in any privacy Laws, including Title V of the Graham Leach Bliley Act
of 1999 and the regulations promulgated thereunder, as amended (the "GLB Act"),
and the provisions of the information security program adopted pursuant to 12
C.F.R. Part 40. The Seller (or where appropriate the Seller Subsidiary) has
adopted and implemented an anti-money laundering program that contains customer
identification verification procedures that comply with Section 326 of the
Patriot Act and such anti-money laundering program meets the requirements of
Section 352 of the Patriot Act and it (or such other of the Seller Subsidiaries)
has complied with any requirements to file reports and other necessary documents
as required by the Patriot Act.
(I) EMPLOYEE BENEFIT PLANS.
(I) The Seller Disclosure Schedule lists all employee benefit
plans (as defined in ERISA), and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance and other benefit plans, programs
or arrangements, and all employment, termination, severance and other employment
Contracts or employment arrangements, with respect to which the Seller or any
Seller Subsidiary has any obligation, whether absolute, accrued, contingent or
otherwise due or to become due (collectively, the "Seller Benefit Plans").
Except as set forth in Section 5.02(i)(i) of the Seller Disclosure Schedule, the
Seller has furnished or made available to the Company a complete and accurate
copy of each Plan (or a description of the Seller Benefit Plans, if the Seller
Benefit Plans are not in writing) and a complete and
22
accurate copy of each material document prepared in connection with each such
Seller Benefit Plan, including, and where applicable, a copy of (i) each trust
or other funding arrangement, (ii) each summary plan description and summary of
material modifications, (iii) the three (3) most recently filed United States
Internal Revenue Service (the "IRS") Forms 5500 and related schedules, (iv) the
most recently issued determination letter from the IRS for each such Seller
Benefit Plan and the materials submitted to obtain that letter (or, if such Plan
is documented as a prototype, such Plan is currently approved by the IRS), and
(v) the three (3) most recently prepared actuarial and financial statements with
respect to each such Seller Benefit Plan.
(II) No member of the Seller's "controlled group," within the
meaning of Section 4001(a)(14) of ERISA, maintains or contributes to, or within
the five (5) years preceding the Effective Time has maintained or contributed
to, an employee pension benefit plan subject to Title IV of ERISA (a "Title IV
Plan"), including any "multiemployer pension plan" as defined in Section 3(37)
of ERISA. Except as provided in the employment Contracts or arrangements
identified in Section 5.02(i)(i) of the Seller Disclosure Schedule, none of the
Seller Benefit Plans obligates the Seller or any of the Seller Subsidiaries to
pay separation, severance, termination or similar type benefits solely as a
result of any transaction contemplated by this Agreement or as a result of a
"change in control," within the meaning of such term under Section 280G of the
Code. Except as provided in the employment Contracts or arrangements identified
in Section 5.02(i)(i) of the Seller Disclosure Schedule, or as required by the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended, none of the
Seller Benefit Plans provides for or promises retiree medical, disability or
life insurance benefits to any current or former employee, officer or director
of the Seller or any of the Seller Subsidiaries. Each of the Seller Benefit
Plans is subject only to the Laws of the United States or a political
subdivision thereof.
(III) Each Seller Benefit Plan has been operated in all respects
in accordance with the requirements of all applicable Law and all Persons who
participate in the operation of such Seller Benefit Plans and all Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in
accordance with the provisions of all applicable Law. The Seller and the Seller
Subsidiaries have performed all obligations required to be performed by any of
them under, are not in any respect in default under or in violation of, and the
Seller and the Seller Subsidiaries have no Knowledge of any default or violation
by any party to, any Seller Benefit Plan. No legal action, suit or claim is
pending or, to the Seller's Knowledge, threatened with respect to any Seller
Benefit Plan (other than claims for benefits in the ordinary course) and, except
as disclosed in Section 5.02(i)(iii) of the Seller Disclosure Schedule, to the
Seller's Knowledge, no fact or event exists that could give rise to any such
action, suit or claim. Except as disclosed in Section 5.02(i)(iii) of the Seller
Disclosure Schedule, neither the Seller nor any Seller Subsidiary has incurred
any Liability under Section 302 of ERISA or Section 412 of the Code that has not
been satisfied in full, and no condition exists that presents a risk of
incurring any such Liability.
(IV) Except as disclosed in Section 5.02(i)(iv) of the Seller
Disclosure Schedule, each Seller Benefit Plan that is intended to be qualified
under Section 401(a) of the Code or Section 401(k) of the Code (including each
trust established in connection with such a Seller Benefit Plan that is intended
to be exempt from federal income taxation under Section 501(a) of the Code) has
received a favorable determination letter from the IRS to the effect that it is
so qualified or is entitled to rely on a favorable opinion or advisory letter
issued to the sponsor of a master and prototype plan pursuant to IRS
Announcement 2001-77, and, to the Seller's Knowledge, there is no fact or event
that could adversely affect the qualified status of any such Seller Benefit
Plan. No trust maintained or contributed to by the Seller or any of the Seller
Subsidiaries is intended to be qualified as a voluntary employees' beneficiary
association or is intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code.
(V) Except as disclosed in Section 5.02(i)(v) of the Seller
Disclosure Schedule or otherwise provided in this Agreement, no Seller Benefit
Plan that is a non-qualified deferred
23
compensation plan subject to Section 409A of the Code and the related guidance
issued thereunder, as amended ("Section 409A"), has been modified (as defined
under Section 409A) on or after October 3, 2004 and all such non-qualified
deferred compensation plans have been operated and administered by Seller and
the Seller Subsidiaries in good faith compliance with Section 409A from the
period beginning January 1, 2005 through the date hereof.
(VI) There has been no non-exempt prohibited transaction (within
the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any Seller Benefit Plan. Neither the Seller nor any Seller Subsidiary has
incurred any Liability for any excise tax arising under Sections 4971 through
4980G of the Code and, to the Seller's Knowledge, no fact or event exists that
could give rise to any such Liability.
(VII) All contributions, premiums or payments required to be made
with respect to any Seller Benefit Plan by the Seller and the Seller
Subsidiaries have been made on or before their due dates or within the
applicable grace period for payment without default.
(VIII) Neither the Seller nor any Seller Subsidiary is a party to
any Contract for employment, severance, consulting or other similar agreement
with any employees, consultants, officers or directors of the Seller or any of
the Seller Subsidiaries except as set forth in Section 5.02(i)(viii) of the
Seller Disclosure Schedule. Neither the Seller nor any Seller Subsidiary is a
party to any collective bargaining agreement.
(IX) Except as disclosed in Section 5.02(i)(ix) of the Seller
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not, either alone or in conjunction with another event, entitle
any current or former employee of the Seller or any Seller Subsidiary to
severance pay, unemployment compensation or any other payment, including
payments constituting "excess parachute payments" within the meaning of Section
280G of the Code, or accelerate the time of payment or vesting or increase the
compensation due any such employee or former employee.
(J) PROXY STATEMENT. The information supplied by the Seller for
inclusion in the proxy statement to be sent to the shareholders of the Seller in
connection with the meeting of the Seller's shareholders to consider the Merger
(the "Seller Shareholders' Meeting") (such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement") will not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to shareholders, at the time of the Seller Shareholders' Meeting
and at the Effective Time, be false or misleading with respect to any material
fact required to be stated therein, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event relating to the Seller, the
Seller Subsidiaries or any of its or their Affiliates, officers or directors is
discovered by the Seller which should be set forth in an amendment or supplement
to the Proxy Statement, the Seller shall promptly inform the Company. The Proxy
Statement will comply in all material respects as to form with the requirements
of applicable Law.
(K) TITLE TO PROPERTY. The Seller and each of the Seller Subsidiaries
has good and marketable title to all of their respective properties and assets,
real and personal, free and clear of all Liens, except for such minor
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby; and all
leases and licenses pursuant to which the Seller or any of the Seller
Subsidiaries lease or license from other Persons material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, under any of such leases and licenses,
any existing material default or event of default by the Seller or any Seller
Subsidiary or, to the Seller's Knowledge, any counter-party thereto (or
24
event which with notice or lapse of time, or both, would constitute a material
default by the Seller or any Seller Subsidiary and in respect of which the
Seller or such Seller Subsidiary has not taken adequate steps to prevent such a
default from occurring). All of the Seller's and each of the Seller
Subsidiaries' buildings and material items of equipment in regular use have been
reasonably maintained and are in good and serviceable condition, reasonable wear
and tear excepted.
(L) ENVIRONMENTAL MATTERS. (i) Each of the Seller, the Seller
Subsidiaries, properties owned or operated by the Seller or the Seller
Subsidiaries, the Participation Facilities and the Loan Properties are and at
all times since they became properties owned or operated by the Seller or the
Seller Subsidiaries or, in the case of Participation Facilities or Loan
Properties, since they became Participation Facilities or Loan Properties, as
the case may be, have been in compliance with all applicable Laws, Orders and
Contractual obligations relating to the environment, health, safety, natural
resources, wildlife or "Hazardous Materials" which are defined herein as
chemicals, pollutants, contaminants, wastes, toxic substances, compounds,
products, solid, liquid, gas, petroleum or other regulated substances or
materials which are hazardous, toxic or otherwise harmful to health, safety,
natural resources or the environment (the "Environmental Laws"), (ii) during and
prior to the period of (1) the Seller's or any of the Seller Subsidiaries'
ownership or operation of any of their respective current properties, (2) the
Seller's or any of the Seller Subsidiaries' participation in the management of
any Participation Facility, or (3) the Seller's or any of the Seller
Subsidiaries' holding of a security interest in a Loan Property, Hazardous
Materials have not been generated, treated, stored, transported, released or
disposed of in, on, under, above, from or affecting any such property, (iii)
there is no asbestos or any material amount of ureaformaldehyde materials in or
on any property owned or operated by the Seller or any Seller Subsidiaries or
any Loan Property or Participation Facility and no electrical transformers or
capacitors, other than those owned by public utility companies, on any such
properties contain any polychlorinated biphenyls, (iv) there are no underground
or aboveground storage tanks and there have never been any underground or
aboveground storage tanks located on, in or under any properties currently or
formerly owned or operated by the Seller or any Seller Subsidiaries or any Loan
Property or Participation Facility, (v) neither the Seller nor any Seller
Subsidiaries has received any notice from any Governmental Authority or third
Person notifying the Seller or any Seller Subsidiaries of any Environmental
Claim, and (vi) there are no circumstances with respect to any properties
currently owned or operated by the Seller or any Seller Subsidiaries or any Loan
Property or Participation Facility that could reasonably be anticipated (1) to
form the basis for an Environmental Claim against the Seller or any Seller
Subsidiaries or any properties currently or formerly owned or operated by the
Seller or any Seller Subsidiaries or any Loan Property or Participation
Facility, or (2) to cause any properties currently owned or operated by the
Seller or any Seller Subsidiaries or any Loan Property or Participation Facility
to be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law or require notification
to or Consent of any Governmental Authority or third Person pursuant to any
Environmental Law. The following definitions apply for purposes of this Section
5.02(l): (1) "Loan Property" means any real property in which the Seller or any
Seller Subsidiary holds a Lien and, where required by the context, said term
means the owner or operator of such property, (2) "Participation Facility" means
any facility in which the Seller or any Seller Subsidiary participates in the
management and, where required by the context, said term means the owner or
operator of such property, and (3) "Environmental Claims" means any and all
administrative, regulatory, judicial or private Proceedings relating in any way
to (x) any Environmental Law, (y) any Hazardous Material including any
abatements, removal, remedial, corrective or other response action in connection
with any Hazardous Material, Environmental Law or Order of a Governmental
Authority, or (z) any actual or alleged damage, injury, threat or harm to
health, safety, natural resources, wildlife or the environment.
(M) ABSENCE OF AGREEMENTS. Neither the Seller nor any Seller
Subsidiary is a party to any Contract or Order which restricts the conduct of
its business (including any Contract containing covenants which limit the
ability of the Seller or of any Seller Subsidiary to compete in any line of
25
business or with any Person or which involve any restriction of the geographical
area in which, or method by which, the Seller or any Seller Subsidiary may carry
on its business (other than as may be required by applicable Law or Governmental
Authorities)), or in any manner relates to its capital adequacy, credit policies
or management, nor has the Seller been advised or have Knowledge that any
Governmental Authority is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such Contract or Order.
(N) TAX MATTERS.
(I) Each of the Seller and the Seller Subsidiaries has timely
filed all Tax Returns that it was required to file. All such Tax Returns were
true, correct, complete and accurate and were prepared in compliance with all
applicable Laws. All Taxes owed by the Seller or any of the Seller Subsidiaries
(whether or not shown or required to be shown on any Tax Return) have been paid.
Neither the Seller nor any of the Seller Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return.
Neither the Seller nor any of the Seller Subsidiaries has an obligation to file
Tax Returns in a jurisdiction where the Seller or any of the Seller Subsidiaries
has not filed or has ceased filing Tax Returns. No claim has ever been made by a
Governmental Authority in a jurisdiction where the Seller or any of the Seller
Subsidiaries does not file Tax Returns that the Seller or any of the Seller
Subsidiaries is or may be subject to taxation by that jurisdiction. There are no
Liens on any of the assets of the Seller or any of the Seller Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax.
(II) Each of the Seller and the Seller Subsidiaries has complied
with all applicable Laws relating to payment and withholding of Taxes and has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third-party, and all Forms W-2 and
1099 required with respect thereto have been properly completed and timely
filed. No Tax is required to be withheld pursuant to Section 1445 of the Code as
a result of the transaction contemplated by this Agreement.
(III) Neither the Seller nor any of the Seller Subsidiaries
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed, nor have any accruals been established for possible
future liabilities resulting from Internal Revenue Service examinations. There
is no audit, examination, deficiency or refund Proceeding pending with respect
to any Taxes for which the Seller or any of the Seller Subsidiaries is or might
otherwise be liable and no Governmental Authority has given written notice of
the commencement of any audit examination or refund Proceeding with respect to
any Taxes. There is no dispute or claim concerning any Tax Liability of the
Seller or any of the Seller Subsidiaries either (A) claimed or raised by any
authority, or (B) as to which the Seller or the Seller Subsidiaries has
Knowledge, and no basis exists therefor. Section 5.02(n)(iii) of the Seller
Disclosure Schedule lists all federal, state local and foreign income Tax
Returns filed with respect to the Seller and any of the Seller Subsidiaries for
taxable periods ended on or after December 31, 2002, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that are currently the
subject of audit. The Seller has delivered to the Company correct and complete
copies of all income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Seller and any of the Seller
Subsidiaries for each of the taxable periods ended on or after December 31,
2002.
(IV) Neither the Seller nor any of the Seller Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax Assessment or deficiency.
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(V) The unpaid Taxes of the Seller and the Seller Subsidiaries
(A) did not, as of the most recent fiscal month end included in the Seller
Financial Statements, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect temporary differences between
book and Tax income) set forth on the face of the most recent balance sheet
included in the Seller Financial Statements (rather than any notes thereto), and
(B) do not exceed such reserves as adjusted for the passage of time through the
Effective Date in accordance with the past practice and custom of the Seller and
the Seller Subsidiaries in filing their Tax Returns.
(VI) Neither the Seller nor any of the Seller Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that are not deductible under Section 280G of the Code. Each of the
Seller and the Seller Subsidiaries has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code. Neither the Seller nor any of the Seller Subsidiaries is a party to any
Tax allocation or sharing agreement. Neither the Seller nor any of the Seller
Subsidiaries (A) has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Seller), or (B) has any Liability for the Taxes of any Person (other than the
Seller or any of the Seller 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.
(VII) Section 5.02(n)(vii) of the Seller Disclosure Schedule sets
forth the following information with respect to the Seller and each of the
Seller's Subsidiaries as of the most recent practicable date (as set forth
therein): (A) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax or excess charitable contribution
and the year or years in which incurred, (B) the amount of any deferred gain or
loss allocable arising out of any "intercompany transactions" as that term is
defined in Treasury regulation Section 1.1502-13 and (C) the amount of any
"excess loss account" as that term is defined in Treasury regulation Section
1.1502-19.
(VIII) None of the Seller or the Seller Subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or any portion thereof) ending
after the Closing Date as a result of (A) a change in method of accounting for a
taxable period (or portion thereof) ending on or prior to the Effective Date,
(B) any "closing agreement," as that term is described in Section 7121 of the
Code (or any corresponding provision of state, local or foreign income Tax law),
(C) any installment sale or open transaction made on or prior to the Effective
Date, or (D) or as a result of any prepaid amount received on or prior to the
Effective Date. There are no private letter rulings or requests for rulings
relating to the Seller or any of the Seller Subsidiaries that could affect the
Seller's or any of the Seller Subsidiaries' Liability for Taxes for any period.
(IX) In the past five (5) fiscal years, neither the Seller nor
any of the Seller Subsidiaries has distributed stock of another Person, or has
had its stock distributed by another Person, in a transaction that was purported
or intended to be governed in whole or in part by Sections 355 or 361 of the
Code.
(X) Neither the Seller nor any of the Seller Subsidiaries has
been subject to any disallowance of a deduction under Section 162(m) of the Code
nor will such a disallowance occur with respect to any period prior to the
Effective Date.
(O) INSURANCE. Section 5.02(o) of the Seller Disclosure Schedule lists
all policies of insurance of the Seller and the Seller Subsidiaries currently in
effect (with the exception of any Seller Benefit Plans which are listed in
Section 5.02(i)(i) of the Seller Disclosure Schedule). Neither the Seller
27
nor any of the Seller Subsidiaries has any Liability for unpaid premiums or
premium adjustments not properly reflected on the unaudited balance sheet of the
Seller as of June 30, 2006.
(P) BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Seller.
(Q) SELLER MATERIAL ADVERSE EFFECT. Since December 31, 2005, there has
not been a Seller Material Adverse Effect.
(R) MATERIAL CONTRACTS. Except for loan or credit agreements entered
into by the Seller or any Seller Subsidiary as lender in the ordinary course of
business consistent with past practice or any Seller Benefit Plans which are
listed in Section 5.02(i)(i) of the Seller Disclosure Schedule or as disclosed
in Section 5.02(r) of the Seller Disclosure Schedule, neither the Seller nor any
Seller Subsidiary is a party to or obligated under any Contract which is not
terminable by the Seller or the Seller Subsidiary without the Seller or any
Seller Subsidiary becoming subject to a payment or financial penalty in excess
of $50,000 or which obligates the Seller or any Seller Subsidiary for payments
or other consideration with a value in excess of $50,000 in the aggregate over
the term of such Contract (each, a "Material Contract").
(S) VOTE REQUIRED. The affirmative vote of at least two-thirds (2/3)
of the votes that holders of the outstanding shares of Seller Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Seller's capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement, including the Merger.
(T) INTERIM EVENTS. Since December 31, 2005, neither the Seller nor
any of the Seller Subsidiaries has paid or declared any dividend or made any
other distribution to shareholders or taken any action which, if taken after the
date hereof, would require the prior written consent of the Company pursuant to
Section 4.01 (other than with respect to the matters described in Section
4.01(q)).
(U) RISK MANAGEMENT INSTRUMENTS. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for the Seller's own account, or
for the account of one or more of the Seller Subsidiaries or their customers
(all of which are listed in Section 5.02(u) of the Seller Disclosure Schedule),
if any, were entered into (i) in accordance with prudent business practices and
all applicable Laws and regulatory policies, and (ii) with counterparties
believed to be financially responsible at the time, and each of them constitutes
the valid and legally binding obligation of the Seller or one of the Seller
Subsidiaries, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and are in full
force and effect. Neither the Seller nor any of the Seller Subsidiaries, nor to
the Seller's Knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(V) TRUST ADMINISTRATION. During the applicable statute of limitations
period, (i) the Seller and the Seller Subsidiaries have properly administered
all accounts for which any of them act as a fiduciary or agent, including but
not limited to accounts for which any of them serve as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable Laws, and
(ii) neither the Seller, any Seller Subsidiary, nor any director, officer or
employee of the Seller or any of the Seller Subsidiaries acting on behalf of the
Seller or any of the Seller Subsidiaries, has committed any breach of trust with
respect to any such fiduciary or agency account, and the accountings for each
such fiduciary or agency account are true and correct and accurately reflect the
assets of such fiduciary or agency account. There is no
28
investigation or inquiry by any Regulatory Authority pending, or to the Seller's
Knowledge, threatened, against or affecting the Seller or any of the Seller
Subsidiaries relating to the compliance by the Seller or any such Seller
Subsidiary with sound fiduciary principles and applicable regulations.
SECTION 5.03. REPRESENTATIONS AND WARRANTIES OF COMPANY AND ACQUISITIONCO.
The Company and AcquisitionCo hereby represent and warrant to the Seller:
(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. AcquisitionCo is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Missouri. Each of the Company and
AcquisitionCo is duly qualified or licensed as a foreign business entity to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary.
(B) AUTHORITY. Each of the Company and AcquisitionCo has the requisite
corporate power and authority to execute and deliver this Agreement and the
Escrow Agreement, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated by this Agreement and the Escrow
Agreement (other than, with respect to the Merger, (z) approvals described in
Section 6.02, and (z) the filing and recordation of the appropriate merger
documents as required by the MGBCL). The execution and delivery of this
Agreement and the Escrow Agreement by the Company and AcquisitionCo and the
consummation by the Company and AcquisitionCo of the transactions contemplated
by this Agreement and the Escrow Agreement have been duly and validly authorized
by all necessary corporate action on the part of the Company and AcquisitionCo,
including the Company's and AcquisitionCo's Board of Directors, and no other
corporate proceedings on the part of the Company or AcquisitionCo are necessary
to authorize this Agreement or the Escrow Agreement or to consummate the
transactions contemplated by this Agreement and the Escrow Agreement. Each of
this Agreement and the Escrow Agreement has been duly and validly executed and
delivered by the Company and AcquisitionCo and, assuming the due authorization,
execution and delivery of this Agreement by the Seller, constitutes a valid and
binding obligation of the Company and AcquisitionCo and is enforceable against
the Company and AcquisitionCo in accordance with its terms, except as
enforcement may be limited by general principles of equity, whether applied in a
court of law or a court of equity, and by bankruptcy, insolvency and similar
Laws affecting creditors' rights and remedies generally.
(C) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(I) The execution and delivery of this Agreement and the Escrow
Agreement by the Company and AcquisitionCo do not, and the performance of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated by this Agreement and the Escrow Agreement by the Company and
AcquisitionCo will not, (i) conflict with or violate the Company's Certificate
of Incorporation or By-Laws or the Articles of Incorporation or By-Laws of
AcquisitionCo, or (ii) conflict with or violate any Laws or Orders applicable to
the Company or AcquisitionCo or by which any of their respective properties is
bound or affected (assuming the approvals described in Section 5.03(c)(ii) are
obtained).
(II) The execution and delivery of this Agreement by the Company
and AcquisitionCo does not, and the performance of this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company
and AcquisitionCo will not, require any Consent from, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the BHCA,
applicable state banking Laws, the Federal Reserve Board, the filing and
recordation of appropriate merger or other documents as required by the
29
MGBCL and (ii) where the failure to obtain such Consents, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise would not prevent or delay consummation of the Merger, or otherwise
prevent the Company or AcquisitionCo from performing its obligations under this
Agreement.
(D) FUNDS AVAILABILITY. Company and AcquisitionCo shall have
sufficient shall have sufficient cash as of the Closing Date to pay the Merger
consideration and to satisfy their other obligations under this Agreement.
ARTICLE VI
COVENANTS
SECTION 6.01. REASONABLE EFFORTS. Subject to the terms and conditions of
this Agreement, each of the Seller, the Company and AcquisitionCo shall use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable Laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated by this Agreement, and shall cooperate fully with
the other Party to that end.
SECTION 6.02. REGULATORY APPLICATIONS; OTHER APPROVALS. The Company and the
Seller shall, and each shall cause their subsidiaries to, cooperate and use
their respective reasonable best efforts to prepare all documentation, and to
obtain all Consents and Orders of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement. The
Seller shall provide to the Company all information necessary or otherwise
reasonably requested by the Company in connection with the filings referred to
in the preceding sentence not later than thirty (30) days after the date hereof.
Each of the Company and the Seller shall have the right to review in advance,
and to the extent practicable each shall consult with the other, in each case
subject to applicable Laws relating to the exchange of information, with respect
to all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each Party shall act reasonably
and as promptly as practicable. Each Party shall consult with the other Party
with respect to the obtaining of all material Consents and Orders of all third
parties and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement, and each Party shall keep the other
Party apprised of the status of material matters relating to completion of the
transactions contemplated by this Agreement. Each Party shall, upon request,
furnish the other Party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with any filing, notice or
application made by or on behalf of such other Party or any of its Subsidiaries
to any third party or Governmental Authority. The Seller shall use its best
efforts to obtain all necessary Consents with respect to all interests of the
Seller and the Seller Subsidiaries in any material leases, licenses, Contracts,
instruments and rights which require the consent of another Person for their
transfer or assumption pursuant to the Merger, if any.
SECTION 6.03. PRESS RELEASE. Neither the Seller, AcquisitionCo nor the
Company shall, without the prior approval of the other Party, issue any press
release or written statement for general circulation relating to the
transactions contemplated by this Agreement, except as otherwise required by
applicable Law or rules of The New York Stock Exchange (provided that the
issuing Party shall nevertheless provide the other Party with notice of, and the
opportunity to review, any such press release or written statement).
SECTION 6.04. ACCESS, INFORMATION. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, the Seller shall afford
the Company and the Company's officers,
30
employees, counsel, accountants and other authorized representatives, such
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including Tax Returns and work papers of independent
auditors), properties, personnel and to such other information as the Company
may reasonably request and, during such period, the Seller shall furnish
promptly to the Company (i) a copy of each material report, schedule and other
document filed by it pursuant to the requirements of federal or state securities
or banking Laws, and (ii) all other information concerning the business,
properties and personnel of it as the Company may reasonably request, including
any information necessary for the Company to confirm the accuracy and amount of
the Scheduled Loans. No investigation by any Party of the business and affairs
of any other Party shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to any Party's obligation to consummate the transactions contemplated
by this Agreement.
SECTION 6.05. NO SOLICITATION OF TRANSACTIONS.
(A) GENERAL. From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VIII, the
Seller and the Seller Subsidiaries shall not, nor shall they authorize or permit
any of their respective officers, directors, Affiliates or employees or
authorize any investment banker, attorney or other advisor or representative
retained by any of them to, and shall take commercially reasonable efforts to
cause them not to: (i) knowingly solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal, (ii) participate
in any discussions or negotiations regarding, or furnish to any Person any
material nonpublic information with respect to, or take any other action to
facilitate any inquiry or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, or (iii) enter into
any Contract relating to any Acquisition Transaction; provided, however, this
Section 6.05(a) shall not prohibit the Seller or the Seller's Board of Directors
from: (1) furnishing material nonpublic information (other than information
regarding the Company supplied to the Seller by the Company) regarding the
Seller or the Seller Subsidiaries to, or entering into a customary
confidentiality agreement with or entering or re-entering into discussions with,
any Person in response to an Acquisition Proposal submitted by such Person (and
not withdrawn) if (x) the Seller's Board of Directors reasonably determines in
good faith, after taking into consideration the advice of and consultation with
an investment banking firm of regional or national reputation, that such
Acquisition Proposal constitutes or is reasonably likely to result in a Superior
Offer, and (y) the Seller's Board of Directors concludes in good faith, after
consultation with its outside legal counsel, that failure to take such action is
reasonably likely to result in a breach by the Seller's Board of Directors of
its fiduciary obligations to the Seller's shareholders under applicable Laws,
provided that in any such case neither the Seller nor any representative of the
Seller or the Seller Subsidiaries shall have violated any of the restrictions
set forth in this Section 6.05(a), or (2) taking the actions described in the
proviso of Section 6.05(d), as permitted thereby, provided that none of the
Seller, the Seller Subsidiaries or any representatives of the Seller or the
Seller Subsidiaries shall have violated any of the restrictions set forth in
this Section 6.05(a). At least five (5) Business Days prior to furnishing any
material nonpublic information to, or entering into discussions or negotiations
with, any Person, the Seller shall: (i) give the Company written notice of the
identity of such Person and of the Seller's intention to furnish material
nonpublic information to, or enter into discussions or negotiations with, such
Person, and (ii) receive from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all written and
oral nonpublic information furnished to such Person by or on behalf of the
Seller, and contemporaneously with furnishing any such information to such
Person, the Seller shall furnish such information to the Company (to the extent
such information has not been previously furnished by the Seller to the
Company).
(B) CESSATION OF ACTIVITIES. The Seller and the Seller Subsidiaries
shall immediately cease, and shall cause each of their executive officers,
directors, employees, Affiliates, investment bankers, attorneys, and other
advisors or representatives to immediately cease, as of the date hereof, any
31
and all existing activities, discussions or negotiations with any other Persons
conducted heretofore with respect to any Acquisition Proposal, subject to the
right to renew such activities, discussions or negotiations in accordance with
this Section 6.05.
(C) LIABILITY FOR OTHERS. Without limiting the generality of the
foregoing, it is understood that any violation of the restrictions set forth in
this Section 6.05 by any executive officer, director, employee or Affiliate of
the Seller or any of the Seller Subsidiaries or any investment banker, attorney
or other advisor or representative retained by any of them and, in the case of
any non-executive officers or other employees, acting on behalf of the Seller or
any such other Person, shall be deemed to be a breach of this Section 6.05 by
the Seller.
(D) EXCEPTIONS. Except as provided below in this Section 6.05(d): (i)
the Seller's Board of Directors shall recommend that the Seller's shareholders
vote in favor of and to adopt and approve this Agreement and the Merger at the
Seller Shareholders' Meeting, (ii) the Proxy Statement shall include a statement
of the Seller's Board of Directors Recommendation, and (iii) neither the
Seller's Board of Directors nor any committee thereof shall withhold, withdraw,
amend or modify, or propose or resolve to withhold, withdraw, amend or modify,
in a manner adverse to the Company (in either event, a "Change of
Recommendation"), the Seller's Board of Directors Recommendation; provided,
however, that nothing in this Agreement shall prevent the Seller's Board of
Directors from (1) withholding, withdrawing, amending or modifying the Seller's
Board of Directors Recommendation, or (2) not including in the Proxy Statement
the Seller's Board of Directors Recommendation if, in either case, the Seller's
Board of Directors reasonably determines in good faith, after consultation with
its outside legal counsel, that, due to facts or circumstances coming to the
attention of the Seller's Board of Directors after the date of this Agreement,
the failure to take such action is reasonably likely to result in a breach by
the Seller's Board of Directors of its fiduciary obligations to Seller's
shareholders under applicable Law; and provided further, however, that neither
the Seller nor the Seller's Board of Directors may take any of the actions
described in clauses (1) and (2) of the immediately preceding proviso unless the
Seller shall have received an Acquisition Proposal that has not been withdrawn
as of the time of such action of the Seller's Board of Directors and the
Seller's Board of Directors shall have reasonably determined in good faith,
after taking into consideration the advice of and consultation with an
investment banking firm of national or regional reputation, that such
Acquisition Proposal constitutes or is reasonably likely to result in a Superior
Offer.
(E) TERMINATION OF AGREEMENT. Notwithstanding anything to the contrary
contained in this Section 6.05, in the event that the Seller's Board of
Directors determines in good faith, after consultation with outside counsel,
that in light of a Superior Offer it is necessary to do so in order to comply
with its fiduciary duties to the Seller or the Seller's shareholders under
applicable Law, the Seller's Board of Directors may terminate this Agreement in
the manner contemplated by Section 8.01(f) solely in order to concurrently enter
into a definitive agreement with respect to a Superior Offer, but only after the
tenth (10th) day following the Company's receipt of written notice advising the
Company that the Seller's Board of Directors is prepared to accept a Superior
Offer, and only if, during such ten (10) day period, if the Company so elects,
the Seller and its advisors shall have negotiated in good faith with the Company
to make such adjustments in the terms and conditions of this Agreement as would
enable the Seller to proceed with the transactions contemplated herein on such
adjusted terms.
(F) INFORMATION CONCERNING ACQUISITION PROPOSAL. In addition to the
obligations of the Seller set forth in Section 6.05(a), the Seller as promptly
as practicable shall advise the Company orally and in writing of any inquiry or
request received by the Seller, any Seller Subsidiary or any of their officers,
directors, employees, Affiliates, investment bankers, attorneys, and other
advisors or representatives after the date hereof for information which the
Seller reasonably believes would lead to an Acquisition Proposal or of any
Acquisition Proposal, or any inquiry or request received by the Seller, any
32
Seller Subsidiary or any of their officers, directors, employees, Affiliates,
investment bankers, attorneys, and other advisors or representatives after the
date hereof with respect to, or which the Seller reasonably believes would lead
to, any Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the Person making any such
request, Acquisition Proposal or inquiry. The Seller shall keep the Company
informed in all material respects of the status and details (including material
amendments or proposed amendments) of any such request, Acquisition Proposal or
inquiry.
(G) TAKEOVER LAWS. The approval of the Board of Directors of the
Seller for purposes of causing any Takeover Law to be inapplicable to the Merger
shall not be deemed to be changed or otherwise revoked or invalidated as a
result of any Change of Recommendation pursuant to this Section 6.05.
SECTION 6.06. SHAREHOLDER APPROVAL. The Seller shall take, in accordance
with applicable Law and the Seller Articles and Seller By-Laws, all action
necessary to prepare the Proxy Statement and mail it to its shareholders and to
convene the Seller Shareholders' Meeting to consider and vote upon the approval
and adoption of this Agreement and any other matters required to be approved by
the Seller's shareholders for consummation of the Merger, as promptly as
practicable after the date of this Agreement. The Seller agrees that if it
becomes aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, it shall
promptly inform the Company thereof and take the necessary steps to correct the
Proxy Statement.
SECTION 6.07. TAKEOVER LAWS. No Party hereto shall take any action that
would cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
SECTION 6.08. DELIVERY OF SHAREHOLDER LIST. The Seller shall arrange to
have its transfer agent deliver to the Company or its designee, from time to
time prior to the Effective Time, a true and complete list setting forth the
names and addresses of the Seller shareholders, their holdings of stock as of
the latest practicable date, and such other shareholder information as the
Company may reasonably request.
SECTION 6.09. INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE.
(A) INDEMNIFICATION. By virtue of the occurrence of the Merger, the
Surviving Corporation shall, from and after the Effective Time succeed to the
Seller's obligation to, and the Company shall cause the Surviving Corporation
to, indemnify and hold harmless each present and former director and officer of
the Seller or any Seller Subsidiary determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted, claimed or arising prior to, at or after the
Effective Time, to the extent to which such Indemnified Parties were entitled
under the MGBCL, the Seller Articles or the Seller By-Laws in effect on the date
hereof, and the Company shall also cause the Surviving Corporation to advance
expenses as incurred to the extent permitted under the MGBCL, the Seller
Articles or the Seller By-Laws; provided however, that the obligations of the
Surviving Corporation and the Company hereunder shall be subject to, and limited
by, applicable federal
33
Law, including Section 18(k) of the Federal Deposit Insurance Act and SR letter
02-17 issued by the Federal Reserve Board on July 8, 2002.
(B) CLAIMS. Any Indemnified Party wishing to claim indemnification
under Section 6.09(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall as promptly as possible notify the Company thereof, but
the failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice the Surviving Corporation. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall have the right to assume
the defense thereof and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Surviving Corporation shall elect not to
assume such defense, or counsel for the Indemnified Parties advises in writing
that there are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Company shall cause the Surviving
Corporation to pay the reasonable fees and expenses of one such counsel for the
Indemnified Parties in any jurisdiction promptly as statements thereof are
received, (ii) the Indemnified Parties shall cooperate in the defense of any
such matter, and (iii) the Surviving Corporation shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld), and provided, further, that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated by this
Agreement is not permitted or is prohibited by applicable Law.
(C) INSURANCE. For a period of six (6) years after the Effective Time,
the Company shall use its reasonable best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Seller (provided that the Company may substitute therefor
policies of comparable coverage with respect to claims arising from facts or
events which occurred before the Effective Time), provided, however, that in no
event shall the Company be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this Section 6.09(c), any aggregate amount in
excess of 200% of the amount of the most recent annual premium paid as of the
date hereof by the Seller for such insurance on an annual basis (the "Maximum
Amount"). If the amount of the annual premiums necessary to maintain or procure
such insurance coverage exceeds the Maximum Amount, the Company shall use all
reasonable efforts to maintain the most advantageous policies of directors' and
officers' insurance obtainable for an aggregate premium equal to the Maximum
Amount. Notwithstanding the foregoing, prior to the Effective Time, the Company
may request the Seller to, and the Seller shall if so requested, purchase
insurance coverage, on such terms and conditions as shall be acceptable to the
Company, extending for a period of three (3) years the Seller's directors' and
officers' liability insurance coverage in effect as of the date hereof (covering
past or future claims with respect to periods before the Effective Time) and
such coverage shall satisfy the Company's obligations under this Section
6.09(c).
(D) SUCCESSORS. If the Surviving Corporation or the Company, as
applicable, or any of their respective successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) shall transfer all or substantially all of its properties and
assets to any Person, then and in each such case, proper provision shall be made
so that the successors and assigns of the Company or the Surviving Corporation,
as applicable, shall assume the obligations set forth in this Section 6.09.
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SECTION 6.10. BENEFIT PLANS. The Company shall, with respect to each
employee of the Seller and the Seller Subsidiaries at the Effective Time who
shall continue in employment with the Company or a Company Subsidiary after the
Merger (each a "Continued Employee"), provide the benefits described in this
Section 6.10. Each Continued Employee shall be entitled, as an employee of the
Company or a Company Subsidiary, to participate in such employee benefit plans,
as defined in Section 3(3) of ERISA, or any non-qualified employee benefit plans
or deferred compensation, stock option, bonus or incentive plans, or other
employee benefit or fringe benefit programs that may be in effect generally for
employees of the Company and the Company Subsidiaries (the "Company Employee
Plans"), subject to the Company's right, in its sole discretion, to subsequently
amend, modify or terminate any such Company Employee Plans, if as a Continued
Employee he or she shall be eligible and, if required, selected for
participation therein under the terms thereof and otherwise shall not be
participating in a similar Seller Benefit Plan maintained by the Company after
the Effective Time. Continued Employees shall be eligible to participate on the
same basis as similarly situated employees of the Company and the Company
Subsidiaries. Except as otherwise provided herein, all such participation shall
be subject to such terms of such Company Employee Plans as may be in effect from
time to time, and this Section 6.10 is not intended to, and shall not, give
Continued Employees any rights or privileges superior to those of other
employees of the Company or the Company Subsidiaries. The Company may terminate
or modify all Seller Benefit Plans except insofar as benefits thereunder shall
have vested at the Effective Time and cannot be modified, and the Company's
obligation under this Section 6.10 shall not be deemed or construed so as to
provide duplication of similar benefits but, subject to that qualification, the
Company shall, for purposes of vesting and any age or period of service
requirements for commencement of participation with respect to any Company
Employee Plans in which Continued Employees may participate (but not for benefit
accruals under any defined benefit plan), credit each Continued Employee with
his or her term of service with the Seller and the Seller Subsidiaries; and
provided that a Continued Employee shall not be subject to any waiting periods
or preexisting condition exclusions under a Company Employee Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA, other than
waiting periods and exclusions that are already in effect with respect to such
Continued Employee and that have not been satisfied as of the Effective Time
under any Seller Benefit Plan of a similar type in which the Continued Employee
participated in immediately prior to the Effective Time; provided, further, that
to the extent that the initial period of coverage for Continued Employees under
any Company Employee Plan that is an "employee welfare benefit plan" as defined
in Section 3(1) of ERISA is not a full twelve (12) month period of coverage,
Continued Employees shall be given credit under the applicable Company Employee
Plan for any deductibles and co-insurance payments made by such Continued
Employees under the Seller's benefit plans during the balance of such twelve
(12) month period of coverage. In connection with the transition of the
Continued Employees to the Company Employee Plans, Seller and the Seller
Subsidiaries shall take such actions as the Company may request to terminate,
freeze or amend all or certain of the Seller Benefit Plans in the manner
requested by the Company, effective immediately prior to the Effective Time or
such other time requested by the Company.
SECTION 6.11. NOTIFICATION OF CERTAIN MATTERS. Each Party shall give prompt
notice to the others of any fact, event or circumstance known to it that would
cause or constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
SECTION 6.12. ESCROW AGREEMENT. Each Party shall, on or before the Closing
Date, execute the Escrow Agreement in the form of Exhibit A, with such
modifications thereto as shall be reasonably necessary to reflect any additional
claims, contingencies or other matters to be addressed therein as contemplated
by Section 3.02 and as reasonably requested by the Escrow Agent.
SECTION 6.13. EMPLOYEE STOCK PURCHASE PLAN. On or before January 1, 2007,
the Seller shall terminate the Amended First Service Financial Company Employee
Stock Purchase Plan and shall not
35
permit any purchases of Seller Common Stock thereunder other than shares
purchasable with respect to Plan Year 2006 as described in Section 5.02(c) of
the Seller Disclosure Schedule.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT MERGER. The
respective obligation of each Party to consummate the Merger is subject to the
fulfillment or written waiver by the Party prior to the Effective Time of each
of the following conditions:
(A) SHAREHOLDER APPROVALS. This Agreement and the Merger shall have
been duly adopted by the requisite vote of the shareholders of the Seller.
(B) REGULATORY APPROVALS. All regulatory approvals required to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect, all conditions required to
be satisfied prior to the Effective Time imposed by the terms of such approvals
shall have been satisfied and all statutory waiting periods in respect thereof
shall have expired.
(C) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement.
(D) EMPLOYMENT MATTERS. That certain letter agreement, of even date
herewith, between the Company and Thomas W. Hagar setting forth the terms of Mr.
Hagar's employment with the Bank after the Closing Date shall be in full force
and effect as of the Effective Time enforceable by the parties thereto in
accordance with its terms.
(E) SCHEDULED LOANS. The Seller and the Company shall have agreed upon
the list of Scheduled Loans pursuant to Section 3.02(b)(ii).
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF SELLER TO EFFECT MERGER. The
obligation of the Seller to consummate the Merger is also subject to the
fulfillment or written waiver by the Seller prior to the Effective Time of each
of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and AcquisitionCo set forth in this Agreement (without giving
effect to any notice by the Company to the Seller under Section 6.11) shall be
true and correct as of the date of this Agreement and as of the Effective Date
as though made on and as of the Effective Date (except that representations and
warranties that by their terms speak only as of the date of this Agreement or
some other date shall be true and correct as of such date), and the Seller shall
have received a certificate, dated the Effective Date, signed on behalf of the
Company to such effect by an executive officer of the Company.
(B) PERFORMANCE OF OBLIGATIONS OF COMPANY AND ACQUISITIONCO. The
Company and AcquisitionCo shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Effective Time, and the Seller shall have received a certificate, dated the
Effective Date, signed on behalf of the Company to such effect by an executive
officer of the Company.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF COMPANY AND ACQUISITIONCO TO
EFFECT MERGER. The obligation of the Company and AcquisitionCo to consummate the
Merger is also subject to
36
the fulfillment or written waiver by the Company and AcquisitionCo prior to the
Effective Time of each of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Seller set forth in this Agreement (without giving effect to any update
to the Seller Disclosure Schedule after the date hereof or notice by the Seller
to the Company under Section 6.11, but except for any inaccuracy(ies),
breach(es) or untruth(s) of any of the representations and warranties of the
Seller set forth in this Agreement that (i) shall have been the subject of an
Adjustment Amount pursuant to Section 3.02(a) or the Additional Escrow Amount
pursuant to Section 3.02(b) or included in the Basket Amount pursuant to Section
3.02, or (ii) are solely non-monetary in nature and the effect of which,
individually and in the aggregate, is not material to the Seller and the Seller
Subsidiaries taken as a whole) shall be true and correct as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (except that representations and warranties that by their terms speak only
as of the date of this Agreement or some other date shall be true and correct as
of such date), and the Company shall have received a certificate, dated the
Effective Date, signed on behalf of the Seller to such effect by its Chief
Executive Officer and Chief Financial Officer.
(B) PERFORMANCE OF OBLIGATIONS OF SELLER. The Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and the Company shall
have received a certificate, dated the Effective Date, signed on behalf of the
Seller to such effect by its Chief Executive Officer and Chief Financial
Officer.
(C) BURDENSOME CONDITION. Between the date of this Agreement and the
Effective Time, there shall not be any action taken, or any statute, rule,
regulation or Order enacted, entered, enforced or deemed applicable to the
Merger, by any Governmental Authority which imposes any condition or restriction
upon the Company or the Seller or their respective subsidiaries (or the
Surviving Corporation or its subsidiaries after the Effective Time), which would
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement in such a manner as to render
inadvisable the consummation of the Merger.
(D) CONSENTS OBTAINED. (i) The Seller shall continue to possess all
Seller Approvals, and (ii) all material Consents and Orders required to be
obtained, and all filings and notifications required to be made, by the Seller
for the authorization, execution and delivery of this Agreement and the
consummation by the Seller of the transactions contemplated by this Agreement
shall have been obtained and made by the Seller.
(E) NO CHALLENGE. There shall not be pending any Proceeding before any
Governmental Authority or any other Person (i) challenging or seeking material
damages in connection with the Merger or the conversion of the Seller Common
Stock into cash pursuant to the Merger, or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by the Company or
its subsidiaries of all or any portion of the business or assets of the Seller
and the Seller Subsidiaries.
(F) NON-COMPETE AGREEMENTS. Each of the Non-Compete Agreements, of
even date herewith, shall be in full force and effect as of the Effective Time
enforceable by the Seller (and the Surviving Corporation after the Effective
Time) in accordance with its respective terms.
(G) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
there shall have been no Seller Material Adverse Effect and no Effect shall have
occurred that would have a Seller Material Adverse Effect. The Company shall
have received a certificate, dated the Effective Date, signed on behalf of the
Seller to such effect by its Chief Executive Officer and Chief Financial
Officer.
37
(H) SELLER STOCK OPTIONS. All Seller Stock Options shall have been
exercised as of the Effective Time.
(I) DISSENTING SELLER SHAREHOLDERS. The aggregate number of Dissenting
Shares shall not exceed a number equal to five percent (5%) of the number of
outstanding shares of Seller Common Stock as of the date hereof.
(J) FINANCIAL STATEMENTS. The Seller shall have delivered to the
Company (i) the audited consolidated balance sheet as of December 31, 2006
(including related notes and schedules, if any), of the Seller, (ii) the audited
consolidated statement of income for the year ended December 31, 2006 (including
related notes and schedules, if any), of the Seller, and (iii) the audited
consolidated statements of cash flows and stockholders' equity for the year
ended December 31, 2006 (including related notes and schedules, if any), of the
Seller, together with the unqualified audit opinion thereon as of and for the
year ended December 31, 2006 issued by the Seller's independent public
accounting firm, BKD, LLP.
ARTICLE VIII
TERMINATION
SECTION 8.01. TERMINATION. This Agreement may be terminated, and the Merger
may be abandoned:
(A) MUTUAL CONSENT. By the mutual written consent of the Parties.
(B) BREACH. By the Company or the Seller, at any time prior to the
Effective Time, if its Board of Directors so determines, in the event of either:
(i) a breach by the other Party of any representation or warranty contained
herein, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach, or (ii) a
material breach by the other Party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such breach.
(C) DELAY. By the Company or the Seller, at any time prior to the
Effective Time, if its Board of Directors so determines, in the event that the
Merger is not consummated by September 30, 2007, except to the extent that the
failure of the Merger then to be consummated arises out of or results from the
action or inaction of the Party seeking to terminate pursuant to this Section
8.01(c).
(D) NO REGULATORY APPROVAL. By the Company or the Seller, if its Board
of Directors so determines, in the event the approval of any Governmental
Authority required for consummation of the Merger and the other transactions
contemplated by this Agreement shall have been denied by final nonappealable
action of such Governmental Authority.
(E) CHANGE OF RECOMMENDATION. By the Company if there is a Change of
Recommendation or if the Seller's Board of Directors fails to include the
Seller's Board of Directors Recommendation in the Proxy Statement.
(F) SUPERIOR OFFER. By the Seller prior to the vote of the Seller
shareholders, without further action, if the Seller shall have entered into a
definitive agreement with respect to a Superior Offer pursuant to and in
accordance with Section 6.05(e); provided, however, that such determination and
the right to terminate under this Section 8.01(f) shall not be effective until
the Seller has made payment to the Company of the amounts required to be paid
pursuant to Section 8.03.
38
(G) FAILURE OF CONDITIONS. (i) By the Company if any of the conditions
to the obligation of the Company or AcquisitionCo to effect the Merger set forth
in Section 7.01 or Section 7.03 have not been satisfied or waived by the Company
at the Closing or the Company reasonably determines that the timely satisfaction
of any condition to the obligation of the Company and AcquisitionCo to effect
the Merger set forth in Section 7.01 or Section 7.03 has become impossible
(other than as a result of any failure on the part of the Company or
AcquisitionCo to comply with or perform any covenant or obligation of the
Company or AcquisitionCo set forth in this Agreement); or (ii) by the Seller if
any of the conditions to the obligation of the Seller to effect the Merger set
forth in Section 7.01 or Section 7.02 have not been satisfied or waived by the
Seller at the Closing or the Seller reasonably determines that the timely
satisfaction of any condition to the obligation of the Seller to effect the
Merger set forth in Section 7.01 or Section 7.02 has become impossible (other
than as a result of any failure on the part of the Seller to comply with or
perform any covenant or obligation of the Seller set forth in this Agreement).
(H) NO SHAREHOLDER APPROVAL. By either the Seller or the Company if:
(i) the Seller Shareholders' Meeting (including any adjournments thereof) shall
have been held and completed and the shareholders of the Seller shall have taken
a final vote on a proposal to adopt this Agreement, and (ii) the required
approval of the shareholders of the Seller contemplated by this Agreement shall
not have been obtained; provided, however, that the right to terminate this
Agreement under this Section 8.01(h) shall not be available to the Seller where
the failure to obtain approval by the Seller shareholders shall have been caused
by the action or failure to act of the Seller, and such action or failure to act
constitutes a breach by the Seller of any provision of this Agreement.
(I) ADJUSTMENT AND ADDITIONAL ESCROW AMOUNTS. Subject to the right of
the Company as provided below in this Section 8.01(i), by the Seller in the
event that the sum of the Adjustment Amount and the Additional Escrow Amount
exceeds $1,000,000; provided, however, that no such termination shall have an
effect on the right of the Company to pursue the remedies and seek appropriate
damages from the Seller under Section 8.02 in the event of such termination. In
the event that the Seller elects to terminate this Agreement as provided in this
Section 8.01(i), then the Seller shall provide written notice thereof to the
Company. The Company shall have the right, but not the obligation, upon written
notice to the Seller provided within three (3) Business Days of the Company's
receipt of the written notice from the Seller pursuant to the preceding
sentence, to nullify the Seller's termination of this Agreement by agreeing that
the sum of the Adjustment Amount and the Additional Escrow Amount shall equal
$1,000,000, whereupon this Agreement shall continue in full force and effect as
if the Seller had not provided the aforementioned termination notice; provided,
however, that, notwithstanding any such agreement of the Company to limit the
amount of the Adjustment Amount and the Additional Escrow Amount to $1,000,000,
the amounts deposited under the Escrow Agreement shall provide coverage for all
Scheduled Loans and other matters and contingencies described in Section 3.02(b)
or the Escrow Agreement.
SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement and the abandonment of the Merger pursuant to this Article VIII, no
Party to this Agreement shall have any liability or further obligation to the
other Party, except (i) as provided in Section 8.03 and Section 9.01, and (ii)
that termination shall not relieve a breaching Party from liability for any
knowing or willful breach of any of its representations or warranties set forth
in this Agreement or for any breach of any of its covenants or agreements set
forth in this Agreement giving rise to such termination.
SECTION 8.03. TERMINATION FEE. In each case provided that the Company is in
material compliance with its obligations under this Agreement:
(A) SUPERIOR OFFER. The Seller shall pay to the Company in immediately
available funds, within one (1) Business Day after demand by the Company,
liquidated damages in an amount
39
equal to $1,400,000 (the "Termination Fee") if this Agreement is terminated by
the Seller pursuant to Section 8.01(f).
(B) CHANGE OF RECOMMENDATION. If this Agreement is terminated by the
Company pursuant to Section 8.01(e), and within twelve (12) months following the
termination of this Agreement an Acquisition Proposal is consummated or the
Seller enters into a Contract providing for an Acquisition Proposal, then the
Seller shall pay or cause to be paid to the Company in immediately available
funds liquidated damages in an amount equal to the Termination Fee within one
(1) Business Day after the Seller enters into such Contract or such transaction
is consummated, whichever is earlier.
(C) DELAY; SHAREHOLDER APPROVAL. If (A) this Agreement is terminated
by the Company or the Seller, as applicable, pursuant to Section 8.01(c) (and
prior to such termination the Seller shall not have held a meeting of its
shareholders pursuant to Section 6.06) or Section 8.01(h), (B) prior to such
termination an Acquisition Proposal (other than by the Company) shall have been
received by the Seller and not withdrawn, and (C) within twelve (12) months
following the termination of this Agreement an Acquisition Proposal is
consummated or the Seller enters into a Contract providing for an Acquisition
Proposal, then the Seller shall pay or cause to be paid to the Company in
immediately available funds liquidated damages in an amount equal to the
Termination Fee within one (1) Business Day after the Seller enters into such
Contract or such transaction is consummated, whichever is earlier.
(D) TERMINATION FEE REASONABLE. The Seller acknowledges that the
agreements contained in this Section 8.03 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the Company would not have entered into this Agreement; accordingly, if the
Seller fails to pay in a timely manner the amounts due pursuant to this Section
8.03 and, in order to obtain such payment, the Company makes a claim that
results in a judgment against the Seller for the amounts set forth in this
Section 8.03, the Seller shall pay to the Company, in addition to the amount of
such judgment, the Company's reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 8.03 at The Wall Street
Journal prime rate in effect on the date such payment was required to be made.
Payment of the fees described in this Section 8.03 shall be the exclusive remedy
for a termination of this Agreement as specified in this Section 8.03, and shall
be in lieu of damages incurred in the event of any such termination of this
Agreement, and upon payment of such fees the Seller shall have no further
obligation to the Company except as described in Section 9.01.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SURVIVAL. Except as provided in this Section 9.01, no
representations, warranties, agreements or covenants contained in this Agreement
shall survive the Effective Time (other than Article III, Section 6.09, Section
6.10, and this Article IX which shall survive the Effective Time) or the
termination of this Agreement if this Agreement is terminated prior to the
Effective Time (other than Section 8.02, Section 8.03 and this Article IX which
shall survive such termination).
SECTION 9.02. WAIVER, AMENDMENT. Prior to the Effective Time, any provision
of this Agreement may be (i) waived by the Party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
Parties executed in the same manner as this Agreement, except that after the
Seller Shareholders' Meeting, this Agreement may not be amended or modified if
it would violate the MGBCL or reduce the consideration to be received by Seller
shareholders in the Merger or otherwise affect the rights of the Seller's
shareholders in any manner that is materially adverse to such shareholders.
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SECTION 9.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
SECTION 9.04. GOVERNING LAW, WAIVER OF JURY TRIAL. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Missouri applicable to contracts made and to be performed entirely within such
State. Each of the Parties hereby irrevocably waives any and all right to trial
by jury in any legal proceeding arising out of or related to this Agreement or
the transactions contemplated by this Agreement.
SECTION 9.05. EXPENSES. Except as set forth in Section 8.02, each Party
shall bear all expenses incurred by it in connection with this Agreement and the
transactions contemplated by this Agreement.
SECTION 9.06. NOTICES. All notices, requests and other communications
hereunder to a Party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation), or mailed by registered or certified
mail (return receipt requested) to such Party at its address set forth below or
such other address as such Party may specify by notice to the other Party: If to
the Seller, to: First Service Financial Company, 9895 Watson Road, St. Louis,
Missouri 63126, Attention: Thomas W. Hagar, President and Chief Executive
Officer, with a copy to: Armstrong Teasdale, LLP 1 Metropolitan Square, Suite
2600, St. Louis, Missouri 63102, Attention: Steven E. Pozaric, Esq; if to the
Company or AcquisitionCo, to: Stifel Financial Corp., 501 N. Broadway, St.
Louis, Missouri 63102, Attention: Ronald J. Kruszewski, Chairman, President and
Chief Executive Officer, with copies to: Stifel Financial Corp., 501 N.
Broadway, St. Louis, Missouri 63102, Attention: David M. Minnick, Esq, Senior
Vice President and General Counsel, and Lewis, Rice & Fingersh, L.C., 500 N.
Broadway, Suite 2000, St. Louis, Missouri 63102, Attention: Tom W. Zook, Esq.
SECTION 9.07. ENTIRE UNDERSTANDING, NO THIRD PARTY BENEFICIARIES. This
Agreement and the Escrow Agreement represent the entire understanding of the
Parties with reference to the transactions contemplated by this Agreement and
this Agreement and the Escrow Agreement supersede any and all other oral or
written agreements heretofore made. Nothing in this Agreement expressed or
implied, is intended to, nor shall it, confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 9.08. INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Whenever the word "or" is used in
this Agreement, it has the inclusive meaning represented by the phrase "and/or."
No provision of this Agreement shall be construed to require the Seller, the
Company, AcquisitionCo or any of their respective Subsidiaries, Affiliates,
officers or directors to take any action which would violate applicable Law.
SECTION 9.09. ASSIGNMENT. This Agreement, and the rights, interests and
obligations hereunder, shall not be assigned by any Party by operation of law or
otherwise without the express written consent of the other Party (which consent
may be granted or withheld in the sole and absolute discretion of such other
Party).
* * *
[Signatures appear on next page]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in counterparts by their duly authorized officers, all as of the day and year
first above written.
ATTEST: STIFEL FINANCIAL CORP.
By: /s/ David M. Minnick By: /s/ Ronald J. Kruszewski
--------------------------------- ------------------------------------
Name: David M. Minnick Name: Ronald J. Kruszewski
Title: Senior Vice President Title: Chairman, President and
and General Counsel Chief Executive Officer
ATTEST: FSFC ACQUISITION CO.
By: /s/ David M. Minnick By: /s/ Ronald J. Kruszewski
--------------------------------- ------------------------------------
Name: David M. Minnick Name: Ronald J. Kruszewski
Title: Secretary Title: President
ATTEST: FIRST SERVICE FINANCIAL COMPANY
By: /s/ Craig D. Wood By: /s/ Thomas W. Hagar
--------------------------------- ------------------------------------
Name: Craig D. Wood Name: Thomas W. Hagar
Title: Secretary Title: President
42