AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST FEDERAL FINANCIAL SERVICES, MHC,
FIRST FEDERAL FINANCIAL SERVICES, INC.,
FIRST CLOVER LEAF FINANCIAL CORP.,
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF EDWARDSVILLE
AND
CLOVER LEAF FINANCIAL CORP. AND
CLOVER LEAF BANK
FEBRUARY 3, 2006
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS.................................................1
1.1. Certain Definitions.........................................1
ARTICLE II THE MERGER.........................................................9
2.1. Merger......................................................9
2.2. Effective Time.............................................9
2.3. Articles of Incorporation and Bylaws........................9
2.4. Directors and Officers of Surviving Corporation............10
2.5. Additional Directors of First Clover Leaf Financial and
First Federal..............................................10
2.6. Effects of the Merger......................................10
2.7. Tax Consequences...........................................10
2.8. Possible Alternative Structures............................11
2.9. The Conversion.............................................11
2.10. Additional Actions.........................................11
ARTICLE III CONVERSION OF SHARES.............................................12
3.1. Conversion of CLFC Common Stock; Merger Consideration......12
3.2. Election Procedures........................................13
3.3. Procedures for Exchange of CLFC Common Stock...............16
3.4. Reservation of Shares......................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CLFC............................19
4.1. Organization...............................................19
4.2. Capitalization.............................................20
4.3. Authority; No Violation....................................20
4.4. Consents...................................................21
4.5. Financial Statements and Regulatory Reports................21
4.6. Taxes......................................................22
4.7. No Material Adverse Effect.................................23
4.8. Material Contracts; Leases; Defaults.......................23
4.9. Ownership of Property; Insurance Coverage..................24
4.10. Legal Proceedings..........................................25
4.11. Compliance With Applicable Law.............................25
4.12. Employee Benefit Plans.....................................26
4.13. Brokers, Finders and Financial Advisors....................29
4.14. Environmental Matters......................................29
4.15. Loan Portfolio.............................................30
4.16. Related Party Transactions.................................32
4.17. Schedule of Termination Benefits...........................32
4.18. Deposits...................................................32
4.19. Antitakeover Provisions Inapplicable; Required Vote of
Shareholders...............................................32
4.20. Registration Obligations...................................33
4.21. Risk Management Instruments................................33
4.22. Fairness Opinion...........................................33
4.23. Trust Accounts.............................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FIRST
FEDERAL FINANCIAL..................................................33
5.1. Organization...............................................34
(i)
5.2. Capitalization.............................................34
5.3. Authority; No Violation....................................35
5.4. Consents...................................................36
5.5. Financial Statements and Regulatory Reports................36
5.6. Taxes......................................................37
5.7. No Material Adverse Effect.................................38
5.8. Ownership of Property; Insurance Coverage..................38
5.9. Legal Proceedings..........................................39
5.10. Compliance With Applicable Law.............................39
5.11. Employee Benefit Plans.....................................40
5.12. Environmental Matters......................................42
5.13. Loan Portfolio.............................................44
5.14. Securities Documents.......................................44
5.15. Deposits...................................................45
5.16. Risk Management Instruments................................45
5.17. Brokers, Finders and Financial Advisors....................45
5.18. Required Vote of Shareholders..............................45
5.19. Related Party Transaction..................................45
ARTICLE VI COVENANTS OF CLFC.................................................46
6.1. Conduct of Business........................................46
6.2. Current Information........................................49
6.3. Access to Properties and Records...........................49
6.4. Financial and Other Statements.............................50
6.5. Maintenance of Insurance...................................51
6.6. Disclosure Supplements.....................................51
6.7. Consents and Approvals of Third Parties....................51
6.8. All Reasonable Efforts.....................................51
6.9. Failure to Fulfill Conditions..............................51
6.10. No Solicitation............................................51
6.11. Reserves and Merger-Related Costs..........................52
6.12. Board of Directors and Committee Meetings..................53
6.13. Prohibition on Solicitation of Employees...................53
ARTICLE VII COVENANTS OF FIRST FEDERAL FINANCIAL.............................53
7.1. Conduct of Business........................................53
7.2. Current Information........................................54
7.3. Financial and Other Statements.............................55
7.4. Disclosure Supplements.....................................55
7.5. Consents and Approvals of Third Parties....................55
7.6. All Reasonable Efforts.....................................55
7.7. Failure to Fulfill Conditions..............................56
7.8. Employee Benefits..........................................56
7.9. Directors and Officers Indemnification and Insurance.......57
7.10. Stock Listing..............................................59
7.11. Maintenance of Insurance...................................59
7.12. Access to Properties and Records...........................59
7.13. Prohibition on Solicitation of Employees...................60
(ii)
ARTICLE VIII REGULATORY AND OTHER MATTERS....................................60
8.1. CLFC and First Federal Financial Shareholder Meetings......60
8.2. Proxy Statement-Prospectus.................................61
8.3. The Mutual Holding Company Conversion from Mutual to
Stock Form.................................................62
8.4. Regulatory Approvals.......................................64
8.5. Affiliates.................................................64
ARTICLE IX CLOSING CONDITIONS................................................65
9.1. Conditions to Each Party's Obligations under this
Agreement..................................................65
9.2. Conditions to the Obligations of First Federal Financial
under this Agreement. 66
9.3. Conditions to the Obligations of CLFC under this
Agreement..................................................68
ARTICLE X THE CLOSING........................................................69
10.1. Time and Place.............................................69
10.2. Deliveries at the Pre-Closing and the Closing..............69
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.................................69
11.1. Termination................................................69
11.2. Effect of Termination......................................71
11.3. Amendment, Extension and Waiver............................72
ARTICLE XII MISCELLANEOUS....................................................72
12.1. Confidentiality............................................72
12.2. Public Announcements.......................................73
12.3. Survival...................................................73
12.4. Notices....................................................73
12.5. Parties in Interest........................................74
12.6. Complete Agreement.........................................74
12.7. Counterparts...............................................75
12.8. Severability...............................................75
12.9. Governing Law..............................................75
12.10. Interpretation.............................................75
12.11. Specific Performance.......................................75
Exhibit A Form of Voting Agreement
Exhibit B Affiliates Agreement
Exhibit C Matters to be Covered in Opinion of Counsel to be Delivered to
First Clover Leaf Financial
Exhibit D Matters to be Covered in Opinion of Counsel to be Delivered to
CLFC
(iii)
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is dated as
of February 3, 2006, by and between FIRST FEDERAL FINANCIAL SERVICES, MHC, a
federal mutual holding company (the "Mutual Holding Company"), its
majority-owned subsidiary, FIRST FEDERAL FINANCIAL SERVICES, INC., a federal
corporation ("First Federal Financial"), FIRST FEDERAL SAVINGS & LOAN
ASSOCIATION OF EDWARDSVILLE, a stock savings association ("First Federal"),
FIRST CLOVER LEAF FINANCIAL CORP., a Maryland corporation in formation ("First
Clover Leaf Financial") and CLOVER LEAF FINANCIAL CORP., a Delaware corporation
("CLFC"), and its wholly owned subsidiary, CLOVER LEAF BANK, an Illinois state
bank ("CLB").
WHEREAS, the Board of Directors of each of the parties has approved this
Agreement and (i) has determined that this Agreement and the business
combination and related transactions contemplated hereby are in the best
interests of the respective parties, and (ii) has determined that this Agreement
and the transactions contemplated hereby are consistent with their respective
business strategies;
WHEREAS, in connection with the transactions described in this Agreement,
it is intended that the Mutual Holding Company will convert from the mutual form
of organization to the capital stock form of organization, and that in
connection with such Conversion First Clover Leaf Financial will conduct a
subscription offering of its common stock, and if necessary a community and/or
syndicated community offering, and an exchange offering to the existing public
shareholders of First Federal Financial; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms have the following meanings
(unless the context otherwise requires, both here and throughout this Agreement,
references to Articles and Sections refer to Articles and Sections of this
Agreement).
"Adjusted Maximum of the Appraised Value Range" means a consolidated pro
forma market value of First Clover Leaf Financial upon consummation of the
Conversion but prior to consummation of the Merger that is 15% higher than the
maximum of the Appraised Value Range.
"Affiliate" means, with respect to any Person, any Person who directly, or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of such
Person and any Affiliate of such executive officer or director.
"Agreement" means this agreement, and any amendment or supplement hereto.
"Applications" means the applications for regulatory approval that are
required by the transactions contemplated hereby.
"Appraised Value Range" means the range of the estimated consolidated pro
forma market value of First Clover Leaf Financial upon consummation of the
Conversion but prior to consummation of the Merger, which pro forma market value
shall also be equal to the estimated pro forma market value of the shares of
First Clover Leaf Financial Common Stock to be issued in the Exchange Offering
and to be sold to eligible participants in the Conversion, as determined by the
Independent Valuation.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank Merger" shall mean the merger of CLB with and into First Federal,
with First Federal as the surviving institution, which merger shall occur
following the Merger.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the FDIC, the OTS, the DFPR, and the FRB, which
regulates First Federal or CLB, or any of their respective holding companies or
subsidiaries, as the case may be.
"BIF" shall mean the Bank Insurance Fund as administered by the FDIC.
"CLB" shall mean Clover Leaf Bank, an Illinois state bank, with its
principal offices located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
which is a wholly owned subsidiary of CLFC.
"CLFC" shall mean Clover Leaf Financial Corp., a Delaware corporation, with
its principal offices located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"CLFC Common Stock" shall mean the common stock, par value $0.10 per share,
of CLFC.
"CLFC Compensation and Benefit Plans" shall have the meaning set forth in
Section 4.12.1.
"CLFC DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by CLFC to First Federal Financial specifically referring to the
appropriate section of this Agreement and describing in reasonable detail the
matters described therein.
"CLFC Employee Plan(s)" shall mean all stock option, employee stock
purchase, stock bonus and any other stock-based plans, qualified pension or
profit-sharing plans, any deferred compensation, non-qualified plan or
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arrangement, supplemental retirement, consultant, bonus or group insurance
contract or any other incentive, health and welfare or employee benefit plan or
agreement maintained for the benefit of any of the employees or former employees
or directors of CLFC or any CLFC Subsidiary, whether written or oral.
"CLFC Financial Statements" shall mean (i) the audited consolidated
statements of financial condition (including related notes and schedules, if
any) of CLFC as of December 31, 2004 and 2003 and the consolidated statements of
income, changes in stockholders' equity and cash flows (including related notes
and schedules, if any) of CLFC for each of the three years ended December 31,
2004, 2003 and 2002, and (ii) the unaudited interim consolidated financial
statements of CLFC as of the end of each calendar quarter following December 31,
2004 and for the periods then ended.
"CLFC Regulatory Reports" means the Call Reports of CLB and accompanying
schedules, as filed with the FDIC and DFPR, for each calendar quarter beginning
with the quarter ended March 31, 2004, through the Closing Date, and all Reports
filed with the FRB by CLFC from December 31, 2004 through the Closing Date.
"CLFC Shareholders Meeting" means the meeting of shareholders of CLFC to be
held for the purpose of considering and approving this Agreement and the Merger.
"CLFC Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by CLFC or CLB, except any
corporation the stock of which is held in the ordinary course of the lending
activities of CLB.
"Certificate" shall mean certificates evidencing shares of CLFC Common
Stock.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" shall mean the confidentiality agreements
referred to in Section 12.1.
"Conversion" shall mean the conversion from mutual to stock form of the
Mutual Holding Company, pursuant to the Plan of Conversion adopted by the Mutual
Holding Company.
"Conversion Offering" shall mean the offering, in connection with the
Conversion, of shares of First Clover Leaf Financial Common Stock in a
subscription offering and, if necessary, a community offering and/or a
syndicated community offering.
"Conversion Price Per Share" shall have the meaning set forth in Section
2.9.
"Conversion Prospectus" shall mean a prospectus issued by First Clover Leaf
Financial in connection with the Offering, that meets all of the requirements of
the Securities Act, applicable state securities laws and banking laws and
regulations. The Conversion Prospectus may be combined with (i) the Proxy
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Statement-Prospectus delivered to shareholders of CLFC in connection with the
solicitation of their approval of this Agreement and the transactions
contemplated hereby and the offering of the First Clover Leaf Financial Common
Stock to them as Merger Consideration, and (ii) the proxy statement delivered to
First Federal Financial shareholders in connection with the solicitation of
their approval of the Conversion and the Plan of Conversion.
"Conversion Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of First Clover Leaf Financial Common Stock to
be offered and issued in connection with the Offering. The Merger Registration
Statement and the Conversion Registration Statement may be separate registration
statements or may be combined in one registration statement that shall register
shares of First Clover Leaf Financial Common Stock to be offered and issued in
connection with the Offering and to be offered to holders of CLFC Common Stock
in connection with the Merger.
"DFPR" shall mean the Illinois Department of Financial and Professional
Regulation.
"DGCL" shall mean the Delaware General Corporation Law.
"Depositor(s)" shall mean a former or current depositor of First Federal
that under the Plan of Conversion is given, as indicated by the context, the
opportunity to purchase First Clover Leaf Financial Common Stock in the
Conversion or the opportunity to vote on the Plan of Conversion.
"Dissenting Shares" shall have the meaning set forth in Section 3.1.4.
"Dissenting Shareholder" shall have the meaning set forth in Section 3.1.4.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 as the effective time of the Merger.
"Environmental Laws" means any Federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
4
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall mean a bank or trust company or other agent
designated by First Federal Financial, and reasonably acceptable to CLFC, which
shall act as agent for First Clover Leaf Financial in connection with the
exchange procedures for converting Certificates into the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.3.1.
"Exchange Offering" shall mean the offer and issuance of First Clover Leaf
Financial Common Stock, in connection with the Conversion, to the existing
public shareholders of First Federal Financial.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of Chicago.
"FRB" shall mean the Board of Governors of the Federal Reserve System or
any successor thereto.
"First Clover Leaf Financial" shall mean First Clover Leaf Financial Corp.,
a Maryland corporation with its principal executive offices located at ▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which was organized in connection
with the Conversion and which will be the successor to First Federal Financial.
"First Clover Leaf Financial Common Stock" shall mean the common stock, par
value $.10 per share, of First Clover Leaf Financial that will be issued in the
Offering and the Merger.
"First Federal" shall mean First Federal Savings & Loan Association of
Edwardsville, a Federally chartered stock savings association, with its
principal offices located at ▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
which is a wholly owned subsidiary of First Federal Financial.
"First Federal Financial" shall mean First Federal Financial Services,
Inc., a federal corporation, with its principal executive offices located at ▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"First Federal Financial Common Stock" shall mean the common stock, par
value $.10 per share, of First Federal Financial.
"First Federal Financial Disclosure Schedule" shall mean a written
disclosure schedule delivered by First Federal Financial to CLFC specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein.
5
"First Federal Financial Statements" shall mean the (i) the audited
consolidated statements of financial condition (including related notes and
schedules) of First Federal Financial as of December 31, 2004 and 2003 and the
consolidated statements of income, changes in stockholders' equity and cash
flows (including related notes and schedules, if any) of First Federal Financial
for each of the three years ended December 31, 2004, 2003 and 2002, as set forth
in First Federal Financial's annual report for the year ended December 31, 2004,
and (ii) the unaudited interim consolidated financial statements of First
Federal Financial as of the end of each quarter following December 31, 2004, and
for the periods then ended, as filed by First Federal Financial in its
Securities Documents.
"First Federal Financial Subsidiary" means any corporation, 50% or more of
the capital stock of which is owned, either directly or indirectly, by First
Federal Financial, First Federal or any Affiliate, except any corporation the
stock of which is held in the ordinary course of the lending activities of First
Federal.
"First Federal Financial Regulatory Reports" means the Call Reports of
First Federal and accompanying schedules, as filed with the FDIC and OTS, for
each calendar quarter beginning with the quarter ended March 31, 2004, through
the Closing Date, and all Reports filed with the OTS by First Federal Financial
from December 31, 2004 through the Closing Date.
"GAAP" shall mean Generally Accepted Accounting Principles, consistently
applied and as in effect from time to time in the United States of America.
"Governmental Entity" shall mean any Federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Independent Valuation" shall mean the appraised pro forma market value of
the First Clover Leaf Financial Common Stock issued in the Conversion, and any
updates, as determined by an independent valuation.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) means those facts that are known, or
should have been known after inquiry reasonable in the circumstances, by the
executive officers and directors of such Person, and includes any facts, matters
or circumstances set forth in any written notice from any Bank Regulator or any
other material written notice received by that Person.
"MGCL" shall mean the Maryland General Corporation Law.
"Material Adverse Effect" shall mean, with respect to First Federal
Financial or CLFC, respectively, any effect that (i) is material and adverse to
the financial condition, results of operations or business of First Federal
Financial and its Subsidiaries taken as a whole, or CLFC and its Subsidiaries
taken as a whole, respectively, or (ii) would materially impair the ability of
either CLFC, on the one hand, or First Federal Financial, on the other hand, to
6
perform its obligations under this Agreement or otherwise materially threaten or
materially impede the consummation of the transactions contemplated by this
Agreement; provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in laws and regulations affecting banks or
thrift institutions generally, (b) changes in GAAP or regulatory accounting
principles generally applicable to financial institutions and their holding
companies, (c) actions and omissions of a party hereto (or any of its
Subsidiaries) taken with the prior written consent of the other party, (d) the
direct effects of compliance with this Agreement on the operating performance of
the parties including the expenses incurred by the parties hereto in
consummating the transactions contemplated by this Agreement and (e) any change
in the value of the securities portfolio of First Federal Financial or CLFC,
whether held as available for sale or held to maturity, resulting from a change
in interest rates generally.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Member" shall mean a member of the Mutual Holding Company pursuant to its
Charter or bylaws.
"Merger" shall mean the merger of CLFC with and into First Clover Leaf
Financial (or a subsidiary thereof) pursuant to the terms hereof.
"Merger Consideration" shall mean the cash or First Clover Leaf Financial
Common Stock, or combination thereof, to be paid by First Clover Leaf Financial
for each share of CLFC Common Stock, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of First Clover Leaf Financial Common Stock to
be offered to holders of CLFC Common Stock in connection with the Merger. The
Merger Registration Statement and the Conversion Registration Statement may be
separate registration statements or may be combined in one registration
statement that shall register shares of First Clover Leaf Financial Common Stock
to be offered and sold in connection with the Offering and to be offered to
holders of CLFC Common Stock in connection with the Merger.
"Mixed Election" shall have the meaning set forth in Section 3.2.2.
"Mutual Holding Company" shall mean First Federal Financial Services, MHC,
a Federally chartered mutual holding company that owns a majority of the First
Federal Financial Common Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Non-Election Shares" shall have the meaning set forth in Section 3.2.1.
"Offering" shall mean the Conversion Offering and the Exchange Offering.
"OTS" shall mean the Office of Thrift Supervision or any successor thereto.
7
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall have the meaning set forth in Section 4.12.2.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Plan of Conversion" shall mean the Plan of Conversion and Reorganization
pursuant to which the Mutual Holding Company will convert from the mutual form
of organization to the capital stock form of organization.
"Pre-Closing" shall have the meaning set forth in Section 10.1.
"Pre-Closing Date" shall be the date on which the Pre-Closing occurs.
"Proxy Statement-Prospectus" shall mean the proxy statement/prospectus, as
amended or supplemented, to be delivered to shareholders of CLFC in connection
with the solicitation of their approval of this Agreement and the transactions
contemplated hereby and the offering of the First Clover Leaf Financial Common
Stock to them as Merger Consideration. The Proxy Statement-Prospectus may be
combined with (i) the Conversion Prospectus delivered to offerees in the
Conversion Offering and Exchange Offering, and (ii) the proxy statement
delivered to First Federal Financial shareholders in connection with the
solicitation of their approval of the Conversion and the Plan of Conversion.
"Regulatory Agreement" shall have the meaning set forth in Section 4.11.3.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments that obligate an
entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Stock Exchange" shall mean the Nasdaq Capital Market.
8
"Subsidiary" shall have the meanings set forth in Rule 1-02 of Regulation
S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Termination Date" shall mean January 31, 2007.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1. Merger.
As promptly as practicable following the satisfaction or waiver of the
conditions to each party's respective obligations hereunder, and subject to the
terms and conditions of this Agreement, at the Effective Time: (a) CLFC shall
merge with and into First Clover Leaf Financial, or a to-be-formed subsidiary of
First Clover Leaf Financial, with First Clover Leaf Financial (or the
subsidiary) as the resulting or surviving corporation (the "Surviving
Corporation"); and (b) the separate existence of CLFC shall cease and all of the
rights, privileges, powers, franchises, properties, assets, liabilities and
obligations of CLFC shall be vested in and assumed by First Clover Leaf
Financial. As part of the Merger, each share of CLFC Common Stock will be
converted into the right to receive the Merger Consideration pursuant to the
terms of Article III. Immediately after the Merger, CLB shall merge with and
into First Federal, with First Federal as the resulting institution under the
name "First Clover Leaf Bank," which name shall be effective at the time of the
consummation of the Bank Merger.
2.2. Effective Time.
The Merger shall be effected by the filing of a certificate of merger with
the Delaware Office of the Secretary of State in accordance with Section 252 of
the DGCL, and the filing of articles of merger with the Maryland Department of
Assessments and Taxation in accordance with Section 3-107 of the MGCL, on the
day of the closing (the "Closing Date") provided for in Article X (the
"Closing"). The "Effective Time" means the date and time upon which the
certificate of merger is filed with the Delaware Office of the Secretary of
State and the articles of merger are accepted for record by the Maryland
Department of Assessments and Taxation, or such later time as may be set forth
in the certificate of merger and the articles of merger, not to exceed 30 days
after the articles of merger are accepted for record by the Maryland Department
of Assessments and Taxation. The Closing of the Merger shall immediately follow
the closing of the Offering.
2.3. Articles of Incorporation and Bylaws.
The Articles of Incorporation and Bylaws of First Clover Leaf Financial as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation until thereafter amended
as provided therein and by applicable law.
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2.4. Directors and Officers of Surviving Corporation.
Except as provided in Section 2.5, the directors of First Clover Leaf
Financial immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation. The officers
of First Clover Leaf Financial 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 and qualified.
2.5. Additional Directors of First Clover Leaf Financial and First Federal.
Each of the eight (8) directors of First Federal Financial and First
Federal immediately prior to the Effective Time shall continue as directors of
First Clover Leaf Financial and First Federal immediately after the Effective
Time. Prior to or at the Effective Time, the Boards of Directors of First Clover
Leaf Financial and First Federal shall increase the number of their directors by
three (3) and seven (7) directors, respectively, such that the total number of
directors on the board of First Clover Leaf Financial shall be eleven (11) and
the total number of directors on the board of First Federal shall be fifteen
(15). At least thirty (30) days prior to the Effective Time, CLB shall identify
three (3) of its current board members to fill the newly created positions on
the board of First Clover Leaf Financial and at the Effective Time, the board of
First Clover Leaf Financial shall elect such persons to fill the vacancies
created by the increase in the number of directors on its Board of Directors.
Additionally, at the Effective Time, the board of First Federal shall elect each
of the seven (7) persons who are directors of CLB on the date hereof and thereof
to serve on the Board of First Federal. After the Effective Time, as First
Clover Leaf Financial directors retire, CLB's four (4) directors who are not
initially on the Board of Directors of First Clover Leaf Financial shall be
considered along with other outside candidates, as candidates for membership on
the Board of Directors of First Clover Leaf Financial.
2.6. Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects as set
forth in the DGCL and MGCL.
2.7. Tax Consequences.
It is intended that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement shall constitute
a "plan of reorganization" as that term is used in Sections 354 and 361 of the
Code. From and after the date of this Agreement and until the Closing, each
party hereto shall use its reasonable best efforts to cause the Merger to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken which action or
failure to act could prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code. Following the Closing, neither First Clover
Leaf Financial, CLFC, nor any of their affiliates shall knowingly take any
action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken, which action or failure to act could cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
First Clover Leaf Financial and CLFC each hereby agrees to deliver certificates
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substantially in compliance with IRS published advance ruling guidelines, with
customary exceptions and modifications thereto, to enable counsel to deliver the
legal opinion contemplated by Section 9.1.6, which certificates shall be
effective as of the date of such opinion.
2.8. Possible Alternative Structures.
Notwithstanding anything to the contrary contained in this Agreement, prior
to the Effective Time, First Federal Financial or First Clover Leaf Financial
shall be entitled to revise the structure of the Merger described in Section
2.1, provided that (i) there are no adverse Federal or state income tax
consequences to CLFC shareholders as a result of the modification; (ii) the
consideration to be paid to the holders of CLFC Common Stock under this
Agreement is not thereby changed in kind or value or reduced in amount; and
(iii) such modification will not delay materially or jeopardize receipt of any
required regulatory approvals or other consents and approvals relating to the
consummation of the Merger. The Mutual Holding Company, First Federal Financial,
First Clover Leaf Financial, First Federal, CLFC and CLB agree to appropriately
amend this Agreement and any related documents in order to reflect any such
revised structure.
2.9. The Conversion.
Contemporaneous with the adoption of this Agreement, the Boards of
Directors of the Mutual Holding Company, First Federal Financial and First
Federal are adopting a Plan of Conversion for the Mutual Holding Company to
convert into the capital stock form of organization. First Clover Leaf Financial
is being organized to succeed to the rights and obligations of the Mutual
Holding Company and First Federal Financial, and to offer for sale shares of
common stock to Depositors in the Conversion, based on the Independent
Valuation. The price per share of the shares of First Clover Leaf Financial
Common Stock to be issued in the Conversion is referred to as the "Conversion
Price Per Share." The Conversion Price Per Share is expected to be $10.00. The
shares of First Clover Leaf Financial Common Stock to be issued in connection
with the Merger may be either shares unsubscribed for in the Conversion
Offering, or if such shares are unavailable, authorized but unissued shares of
First Clover Leaf Financial Common Stock, which shares shall be issued
immediately following completion of the Conversion.
2.10. Additional Actions.
If, at any time after the Effective Time, First Clover Leaf Financial shall
consider or be advised that any further deeds, assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in First Clover Leaf Financial or First Clover Leaf Bank
its right, title or interest in, to or under any of the rights, properties or
assets of CLFC or CLB, or (ii) otherwise carry out the purposes of this
Agreement, CLFC and its officers and directors shall be deemed to have granted
to First Clover Leaf Financial an irrevocable power of attorney to execute and
deliver, in such official corporate capacities, all such deeds, assignments or
assurances in law or any other acts as are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in First Clover Leaf Financial its
right, title or interest in, to or under any of the rights, properties or assets
of CLFC or (b) otherwise carry out the purposes of this Agreement, and the
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officers and directors of First Clover Leaf Financial are authorized in the name
of CLFC or CLB or otherwise to take any and all such action.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of CLFC Common Stock; Merger Consideration.
At the Effective Time, by virtue of the Merger and without any action on
the part of First Clover Leaf Financial, CLFC or the holders of any of the
shares of CLFC Common Stock, the Merger shall be effected in accordance with the
following terms:
3.1.1. All shares of CLFC Common Stock held in the treasury of CLFC
and each share of CLFC Common Stock owned by First Clover Leaf Financial, First
Federal Financial or any direct or indirect wholly owned subsidiary of First
Federal Financial or of CLFC immediately prior to the Effective Time (other than
shares held in a fiduciary capacity or in connection with debts previously
contracted) shall, at the Effective Time, cease to exist, and the Certificates
for such shares shall be canceled as promptly as practicable thereafter, and no
payment or distribution shall be made in consideration therefor. Each share of
First Clover Leaf Financial Common Stock and First Federal common stock that is
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding following the Effective Time and shall be unchanged by
the Merger.
3.1.2. Each outstanding share of CLFC Common Stock that under the
terms of Section 3.2 is to be converted into the right to receive shares of
First Clover Leaf Financial Common Stock shall, subject to Section 3.3, be
converted into and become the right to receive that number of shares of First
Clover Leaf Financial Common Stock (the "Exchange Ratio") as determined in this
Section 3.1.2 (the "Stock Consideration"). Each outstanding share of CLFC Common
Stock that under the terms of Section 3.2 is to be converted into the right to
receive cash shall be converted into the right to receive a cash payment as
determined in this Section 3.1.2 (the "Cash Consideration"). At the minimum of
the Appraised Value Range, each outstanding share of CLFC Common Stock shall be
converted into and become the right to receive $40.00 in cash or that number of
shares of First Clover Leaf Financial Common Stock equal to $40.00 divided by
the Conversion Price Per Share. At the maximum of the Appraised Value Range,
each outstanding share of CLFC Common Stock shall be converted into and become
the right to receive $42.00 in cash or that number of shares of First Clover
Leaf Financial Common Stock equal to $42.00 divided by the Conversion Price Per
Share. For any value between the minimum and the maximum of the Appraised Value
Range, each outstanding share of CLFC Common Stock shall be converted into and
become the right to receive a prorated cash payment between $40.00 and $42.00 or
that prorated number of shares of First Clover Leaf Financial Common Stock
between $40.00 and $42.00 divided by the Conversion Price Per Share. At the
Adjusted Maximum of the Appraised Value Range, each outstanding share of CLFC
Common Stock shall be converted into and become the right to receive $43.00 in
cash or that number of shares of First Clover Leaf Financial Common Stock equal
to $43.00 divided by the Conversion Price Per Share. For any value between the
maximum of the Appraised Value Range and the Adjusted Maximum of the Appraised
Value Range, each outstanding share of CLFC Common Stock shall be converted into
and become the right to receive a prorated cash payment between $42.00 and
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$43.00 or that prorated number of shares of First Clover Leaf Financial Common
Stock between $42.00 and $43.00 divided by the Conversion Price Per Share.
3.1.3. In the event First Federal Financial changes (or establishes a
record date for changing) the number of, or provides for the exchange of, shares
of First Federal Financial Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
reclassification, or similar transaction with respect to the outstanding First
Federal Financial Common Stock and the record date therefor shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately and
appropriately adjusted.
3.1.4. Each outstanding share of CLFC Common Stock the holder of which
has perfected his right to dissent under the DGCL and has not effectively
withdrawn or lost such right as of the Effective Time (the "Dissenting Shares")
shall not be converted into or represent a right to receive shares of First
Clover Leaf Financial Common Stock or cash hereunder, and the holder thereof
shall be entitled only to such rights as are granted by the DGCL. CLFC shall
give First Clover Leaf Financial prompt notice upon receipt by CLFC of any such
demands for payment of the fair value of such shares of CLFC Common Stock and of
withdrawals of such notice and any other instruments provided pursuant to
applicable law (any shareholder duly making such demand being hereinafter called
a "Dissenting Shareholder"), and First Clover Leaf Financial shall have the
right to participate in all negotiations and proceedings with respect to any
such demands. CLFC shall not, except with the prior written consent of First
Clover Leaf Financial, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment, or waive any failure to timely
deliver a written demand for appraisal or the taking of any other action by such
Dissenting Shareholder as may be necessary to perfect appraisal rights under the
DGCL. Any payments made in respect of Dissenting Shares shall be made by the
Surviving Corporation.
3.1.5. If any Dissenting Shareholder shall effectively withdraw or
lose (through failure to perfect or otherwise) his right to such payment at or
prior to the Effective Time, such holder's shares of CLFC Common Stock shall be
converted into a right to receive cash or First Clover Leaf Financial Common
Stock in accordance with the applicable provisions of this Agreement. If such
holder shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to such payment after the Effective Time (or the Election
Deadline, as defined herein), each share of CLFC Common Stock of such holder
shall be treated as a Non-Election Share.
3.1.6. After the Effective Time, shares of CLFC Common Stock shall be
no longer outstanding and shall be canceled automatically and shall cease to
exist, and shall thereafter by operation of this Section 3.1 be the right to
receive the Merger Consideration.
3.2. Election Procedures.
3.2.1. Holders of CLFC Common Stock may elect to receive shares of
First Clover Leaf Financial Common Stock or cash, or a combination thereof (in
all cases without interest) in exchange for their shares of CLFC Common Stock in
accordance with the following procedures, provided that, in the aggregate, and
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subject to the provisions of Section 3.2.6, 70% of the total number of shares of
CLFC Common Stock issued and outstanding at the Effective Time, including any
Dissenting Shares but excluding any Treasury Stock (the "Stock Conversion
Number"), shall be converted into the Stock Consideration and the remaining
outstanding shares of CLFC Common Stock shall be converted into the Cash
Consideration. Shares of CLFC Common Stock as to which a Cash Election
(including, pursuant to a Mixed Election) has been made are referred to herein
as "Cash Election Shares." Shares of CLFC Common Stock as to which a Stock
Election has been made (including, pursuant to a Mixed Election) are referred to
herein as "Stock Election Shares." Shares of CLFC Common Stock as to which no
election has been made (or as to which an Election Form is not returned properly
completed) are referred to herein as "Non-Election Shares." The aggregate number
of shares of CLFC Common Stock with respect to which a Stock Election has been
made is referred to herein as the "Stock Election Number."
3.2.2. An election form and other appropriate and customary
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of such Certificates to the Exchange Agent), in such form as CLFC and First
Federal Financial shall mutually agree (the "Election Form"), shall be mailed no
more than 40 business days and no less than 20 business days prior to the
anticipated Effective Time or on such earlier date as CLFC and First Federal
Financial shall mutually agree (the "Mailing Date") to each holder of record of
CLFC Common Stock as of five business days prior to the Mailing Date (the
"Election Form Record Date"). Each Election Form shall permit such holder,
subject to the allocation and election procedures set forth in this Section 3.2,
(i) to elect to receive the Cash Consideration for all of the shares of CLFC
Common Stock held by such holder (a "Cash Election"), in accordance with Section
3.1.2, (ii) to elect to receive the Stock Consideration for all of such shares
(a "Stock Election"), in accordance with Section 3.1.2, (iii) to elect to
receive the Stock Consideration for a part of such holder's CLFC Common Stock
and the Cash Consideration for the remaining part of such holder's CLFC Common
Stock (a "Mixed Election"), or (iv) to indicate that such record holder has no
preference as to the receipt of cash or First Clover Leaf Financial Common Stock
for such shares (a "Non-Election"). A holder of record of shares of CLFC Common
Stock who holds such shares as nominee, trustee or in another representative
capacity (a "Representative") may submit multiple Election Forms, provided that
each such Election Form covers all the shares of CLFC Common Stock held by such
Representative for a particular beneficial owner. Any shares of CLFC Common
Stock with respect to which the holder thereof shall not, as of the Election
Deadline, have made an election by submission to the Exchange Agent of an
effective, properly completed Election Form shall be deemed Non-Election Shares.
All Dissenting Shares shall be deemed Cash Election Shares, and with respect to
such shares the holders thereof shall in no event receive consideration
comprised of First Clover Leaf Financial Common Stock, subject to Section 3.1.5;
provided, however, that for purposes of making the proration calculations
provided for in this Section 3.2, only Dissenting Shares as existing at the
Effective Time shall be deemed Cash Election Shares.
3.2.3. To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m., Edwardsville, Illinois
time, on the 25th day following the Mailing Date (or such other time and date as
First Federal Financial and CLFC may mutually agree) (the "Election Deadline");
provided, however, that the Election Deadline may not occur on or after the
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Closing Date. First Federal shall use all reasonable efforts to make available
as promptly as possible an Election Form to any holder of record of CLFC Common
Stock who requests such Election Form following the initial mailing of the
Election Forms and prior to the Election Deadline. CLFC shall provide to the
Exchange Agent all information reasonably necessary for it to perform as
specified herein. An election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more Certificates (or customary affidavits and
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of CLFC Common
Stock covered by such Election Form, together with duly executed transmittal
materials included with the Election Form. If a CLFC stockholder either (i) does
not submit a properly completed Election Form in a timely fashion or (ii)
revokes its Election Form prior to the Election Deadline (without later
submitting a properly completed Election Form prior to the Election Deadline),
the shares of CLFC Common Stock held by such stockholder shall be designated as
Non-Election Shares. Any Election Form may be revoked or changed by the person
submitting such Election Form to the Exchange Agent by written notice to the
Exchange Agent only if such notice of revocation or change is actually received
by the Exchange Agent at or prior to the Election Deadline. First Federal
Financial shall cause the Certificate or Certificates relating to any revoked
Election Form to be promptly returned without charge to the person submitting
the Election Form to the Exchange Agent. Subject to the terms of this Agreement
and of the Election Form, the Exchange Agent shall have discretion to determine
when any election, modification or revocation is received and whether any such
election, modification or revocation has been properly made.
3.2.4. If the Stock Election Number exceeds the Stock Conversion
Number, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Consideration, and each holder of
Stock Election Shares will be entitled to receive the Stock Consideration only
with respect to that number of Stock Election Shares held by such holder
(rounded to the nearest whole share) equal to the product obtained by
multiplying (x) the number of Stock Election Shares held by such holder by (y) a
fraction, the numerator of which is the Stock Conversion Number and the
denominator of which is the Stock Election Number, with the remaining number of
such holder's Stock Election Shares being converted into the right to receive
the Cash Consideration.
3.2.5. If the Stock Election Number is less than the Stock Conversion
Number (the amount by which the Stock Conversion Number exceeds the Stock
Election Number being referred to herein as the "Shortfall Number"), then all
Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A) if the Shortfall Number is less than or equal to the number
of Non-Election Shares, then all Cash Election Shares shall be
converted into the right to receive the Cash Consideration and each
holder of Non-Election Shares shall receive the Stock Consideration in
respect of that number of Non-Election Shares held by such holder
(rounded to the nearest whole share) equal to the product obtained by
multiplying (x) the number of Non-Election Shares held by such holder
by (y) a fraction, the numerator of which is the Shortfall Number and
the denominator of which is the total number of Non-Election Shares,
15
with the remaining number of such holder's Non-Election Shares being
converted into the right to receive the Cash Consideration; or
(B) if the Shortfall Number exceeds the number of Non-Election
Shares, then all Non-Election Shares shall be converted into the right
to receive the Stock Consideration, and each holder of Cash Election
Shares shall receive the Stock Consideration in respect of that number
of Cash Election Shares held by such holder (rounded to the nearest
whole share) equal to the product obtained by multiplying (x) the
number of Cash Election Shares held by such holder by (y) a fraction,
the numerator of which is the amount by which (1) the Shortfall Number
exceeds (2) the total number of Non-Election Shares and the
denominator of which is the total number of Cash Election Shares, with
the remaining number of such holder's Cash Election Shares being
converted into the right to receive the Cash Consideration.
3.2.6. No Fractional Shares. Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares of
First Clover Leaf Financial Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to First
Clover Leaf Financial Common Stock shall be payable on or with respect to any
fractional share interest, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a stockholder of First
Clover Leaf Financial. In lieu of the issuance of any such fractional share,
First Clover Leaf Financial shall pay to each former holder of CLFC Common Stock
who otherwise would be entitled to receive a fractional share of First Clover
Leaf Financial Common Stock, an amount in cash determined by multiplying the
Conversion Price Per Share by the fraction of a share of First Clover Leaf
Financial Common Stock which such holder would otherwise be entitled to receive
pursuant to Section 3.1.2. No interest will be paid on the cash that holders of
such fractional shares shall be entitled to receive upon such delivery. For
purposes of determining any fractional share interest, all shares of CLFC Common
Stock owned by a CLFC stockholder shall be combined so as to calculate the
maximum number of whole shares of First Clover Leaf Financial Common Stock
issuable to such CLFC stockholder.
3.3. Procedures for Exchange of CLFC Common Stock.
3.3.1. First Clover Leaf Financial to Make Merger Consideration
Available. After the Election Deadline and no later than the Closing Date, First
Clover Leaf Financial shall deposit, or shall cause to be deposited, with the
Exchange Agent for the benefit of the holders of CLFC Common Stock, for exchange
in accordance with this Section 3.3, certificates representing the shares of
First Clover Leaf Financial Common Stock and an estimated amount of cash
sufficient to pay the aggregate amount of cash payable pursuant to this Article
III (including the estimated amount of cash to be paid in lieu of fractional
shares of First Clover Leaf Financial Common Stock)(such cash and certificates
for shares of First Clover Leaf Financial Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund").
3.3.2. Exchange of Certificates. Within five (5) business days after
the Effective Time, First Clover Leaf Financial shall take all steps necessary
to cause the Exchange Agent to mail to each holder of a Certificate or
Certificates, a form letter of transmittal for return
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to the Exchange Agent and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration and cash in lieu of
fractional shares into which the CLFC Common Stock represented by such
Certificates shall have been converted as a result of the Merger. The letter of
transmittal (which shall be subject to the reasonable approval of CLFC) 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. Promptly upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with a properly completed letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor, as applicable, (i) a certificate representing that
number of shares of First Clover Leaf Financial Common Stock (if any) to which
such former holder of CLFC Common Stock shall have become entitled pursuant to
the provisions of Section 3.1.2, (ii) a check representing that amount of cash
(if any) to which such former holder of CLFC Common Stock shall have become
entitled pursuant to the provisions of Section 3.1.2, and (iii) a check
representing the amount of cash (if any) payable in lieu of fractional shares of
First Clover Leaf Financial Common Stock, which such former holder has the right
to receive in respect of the Certificate surrendered pursuant to the provisions
of this Section 3.3.2, and the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash payable in lieu of
fractional shares. Certificates surrendered for exchange by any person who is an
"affiliate" of CLFC for purposes of Rule 145(c) under the Securities Act shall
not be exchanged for certificates representing shares of First Clover Leaf
Financial Common Stock until First Clover Leaf Financial or First Federal
Financial has received the written agreement of such person contemplated by
Section 8.5.
3.3.3. Rights of Certificate Holders after the Effective Time. The
holder of a Certificate that prior to the Merger represented issued and
outstanding CLFC Common Stock shall have no rights, after the Effective Time,
with respect to such CLFC Common Stock except to surrender the Certificate in
exchange for the Merger Consideration as provided in this Agreement. No
dividends or other distributions declared after the Effective Time with respect
to First Clover Leaf Financial Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Section 3.3. After the surrender of a
Certificate in accordance with this Section 3.3, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
First Clover Leaf Financial Common Stock represented by such Certificate.
3.3.4. Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the accompanying letter of transmittal is
not the record holder thereof, then it shall be a condition of the payment of
the Merger Consideration that: (i) such Certificate is properly endorsed to such
Person or is accompanied by appropriate stock powers, in either case signed
exactly as the name of the record holder appears on such Certificate, and is
otherwise in proper form for transfer, or is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and signing the
letter of transmittal to do so on behalf of the record holder; and (ii) the
person requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
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3.3.5. Closing of Transfer Books. From and after the Effective Time,
there shall be no transfers on the stock transfer books of CLFC of the CLFC
Common Stock that was outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be exchanged for the Merger
Consideration and canceled as provided in this Section 3.3.
3.3.6. Return of Exchange Fund. At any time following the six (6)
month period after the Effective Time, First Clover Leaf Financial shall be
entitled to require the Exchange Agent to deliver to it any portions of the
Exchange Fund which had been made available to the Exchange Agent and not
disbursed to holders of Certificates (including, without limitation, all
interest and other income received by the Exchange Agent in respect of all funds
made available to it), and thereafter such holders shall be entitled to look to
First Clover Leaf Financial (subject to abandoned property, escheat and other
similar laws) with respect to any Merger Consideration that may be payable upon
due surrender of the Certificates held by them. Notwithstanding the foregoing,
neither First Clover Leaf Financial nor the Exchange Agent shall be liable to
any holder of a Certificate for any Merger Consideration delivered in respect of
such Certificate to a public official pursuant to any abandoned property,
escheat or other similar law.
3.3.7. Lost, Stolen or Destroyed Certificates. In the event 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 First Clover Leaf Financial, the posting
by such person of a bond in such amount as First Clover Leaf Financial may
reasonably direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
in respect thereof.
3.3.8. Withholding. First Clover Leaf Financial or the Exchange Agent
will be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement or the transactions contemplated hereby to any holder
of CLFC Common Stock such amounts as First Clover Leaf Financial (or any
Affiliate thereof) or the Exchange Agent are required to deduct and withhold
with respect to the making of such payment under the Code, or any applicable
provision of U.S. federal, state, local or non-U.S. tax law. To the extent that
such amounts are properly withheld by First Clover Leaf Financial or the
Exchange Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the CLFC Common Stock in respect
of whom such deduction and withholding were made by First Clover Leaf Financial
or the Exchange Agent.
3.4. Reservation of Shares.
First Clover Leaf Financial shall reserve for issuance a sufficient number
of shares of the First Clover Leaf Financial Common Stock for the purpose of
issuing shares of First Clover Leaf Financial Common Stock to the CLFC
shareholders in accordance with this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CLFC
CLFC and CLB represent and warrant to the Mutual Holding Company, First
Federal Financial, First Clover Leaf Financial and First Federal that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV), except as set forth in the CLFC
DISCLOSURE SCHEDULE delivered by CLFC to First Federal Financial on the date
hereof, and except as to any representation or warranty which specifically
relates to an earlier date. CLFC and CLB have made a good faith effort to ensure
that the disclosure on each schedule of the CLFC DISCLOSURE SCHEDULE corresponds
to the section referenced herein. However, for purposes of the CLFC DISCLOSURE
SCHEDULE, any item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may be relevant
and to the extent that it is reasonably clear on the face of such schedule that
such item applies to such other schedule. References to the Knowledge of CLFC
shall include the Knowledge of CLB.
4.1. Organization.
4.1.1. CLFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly registered as
a bank holding company under the BHCA. CLFC has full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on CLFC. CLFC has no
direct subsidiaries other than CLB and Clover Leaf Statutory Trust I, a Delaware
statutory trust created in connection with a trust preferred financing by CLFC.
4.1.2. CLB is an Illinois state bank organized, validly existing and
in good standing under Illinois law. CLFC DISCLOSURE SCHEDULE 4.1.2 identifies
each CLFC Subsidiary and (other than as to CLB) describes the business conducted
by such entity. The deposits of CLB are insured by the FDIC through the BIF to
the fullest extent permitted by law, and all premiums and assessments required
to be paid in connection therewith have been paid by CLB when due. Each other
CLFC Subsidiary is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization.
4.1.3. The respective minute books of CLFC and each CLFC Subsidiary
accurately records, in all material respects, all material corporate actions of
their respective shareholders and boards of directors (including committees).
4.1.4. Prior to the date of this Agreement, CLFC has made available to
First Federal Financial true and correct copies of the certificate of
incorporation or articles of incorporation and bylaws of CLFC and CLB.
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4.2. Capitalization.
4.2.1. Except as disclosed on CLFC DISCLOSURE SCHEDULE 4.2.1, the
authorized capital stock of CLFC consists of 2,000,000 shares of common stock,
$0.10 par value per share, of which 510,381 shares are outstanding, validly
issued, fully paid and nonassessable and free of preemptive rights, and 250,000
shares of preferred stock, par value $0.10 per share, of which no shares are
issued and outstanding. There are 150,869 shares of CLFC Common Stock held by
CLFC as treasury stock. Neither CLFC nor any CLFC Subsidiary has or is bound by
any Rights of any character relating to the purchase, sale or issuance or voting
of, or right to receive dividends or other distributions on any shares of CLFC
Common Stock, or any other security of CLFC or any securities representing the
right to vote, purchase or otherwise receive any shares of CLFC Common Stock or
any other security of CLFC.
4.2.2. CLFC owns all of the capital stock of CLB, free and clear of
any lien or encumbrance. Except for the CLFC Subsidiaries and as disclosed on
CLFC DISCLOSURE SCHEDULE 4.2.2, CLFC does not possess, directly or indirectly,
any material equity interest in any corporate entity, except for equity
interests held in the investment portfolios of CLFC Subsidiaries, equity
interests held by CLFC Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the lending activities of CLFC Subsidiaries,
including stock in the FHLB.
4.2.3. Except as disclosed in CLFC DISCLOSURE SCHEDULE 4.2.3, to
CLFC's Knowledge, no Person or "group" (as that term is used in Section 13(d)(3)
of the Exchange Act), is the beneficial owner (as defined in Section 13(d) of
the Exchange Act) of 5% or more of the outstanding shares of CLFC Common Stock.
4.2.4. There are no options to purchase CLFC Common Stock issued and
outstanding.
4.3. Authority; No Violation.
4.3.1. CLFC and CLB each has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by CLFC and
CLB, and of the agreement referenced in Section 4.13, and the completion by CLFC
and CLB of the transactions contemplated hereby, up to and including the Merger,
have been duly and validly approved by the Board of Directors of CLFC and CLB,
respectively, and, except for approval of the shareholders of CLFC, no other
corporate proceedings on the part of CLFC or CLB are necessary to complete the
transactions contemplated hereby, up to and including the Merger. This
Agreement, and the agreement referenced in Section 4.13, have been duly and
validly executed and delivered by CLFC and CLB, and the Bank Merger has been
duly and validly approved by the Board of Directors of CLB, and by CLFC in its
capacity as sole shareholder of CLB, and subject to approval by the shareholders
of CLFC of the Agreement and receipt of the required approvals of the Bank
Regulators described in Section 8.4, constitutes the valid and binding
obligations of CLFC and CLB, enforceable against CLFC and CLB in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and as to CLB, the conservatorship or
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receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.
4.3.2. (A) The execution and delivery of this Agreement by CLFC and
CLB, and of the agreement referenced in Section 4.13, (B) subject to receipt of
approvals from the Bank Regulators referred to in Section 8.4, and CLFC's and
First Federal Financial's compliance with any conditions contained therein, and
subject to the receipt of the approval of CLFC's and First Federal Financial's
shareholders, the consummation of the transactions contemplated hereby, and (C)
compliance by CLFC and CLB with any of the terms or provisions hereof: will not
(i) conflict with or result in a breach of any provision of the certificate of
incorporation or bylaws of CLFC or any CLFC Subsidiary or the articles of
incorporation and bylaws of CLB; (ii) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to CLFC
or any CLFC Subsidiary or any of their respective properties or assets; or (iii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of CLFC or CLB under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which CLFC or CLB
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on CLFC and the CLFC
Subsidiaries taken as a whole.
4.4. Consents.
Except for the consents, waivers, approvals, filings and registrations from
or with the Bank Regulators referred to in Section 8.4 and compliance with any
conditions contained therein, and the approval of this Agreement by the
requisite vote of the shareholders of CLFC and First Federal Financial, no
consents, waivers or approvals of, or filings or registrations with, any Bank
Regulator are necessary, and no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(a) the execution and delivery of this Agreement by CLFC and CLB, and (b) the
completion by CLFC and CLB of the Merger and the Bank Merger. To the Knowledge
of CLFC and CLB, CLFC and CLB have no reason to believe that (i) any required
approvals from a Bank Regulator or other required consents or approvals will not
be received, or that (ii) any public body or authority, the consent or approval
of which is not required or to which a filing is not required, will object to
the completion of the transactions contemplated by this Agreement.
4.5. Financial Statements and Regulatory Reports.
4.5.1. CLFC has previously made available to First Federal Financial
the CLFC Regulatory Reports. The CLFC Regulatory Reports have been prepared in
all material respects in accordance with applicable regulatory accounting
principles and practices throughout the periods covered by such statements, and
fairly present in all material respects, the consolidated financial position,
results of operations and changes in stockholders' equity of CLFC as of and for
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the periods ended on the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
4.5.2. CLFC has previously made available to First Federal Financial
the CLFC Financial Statements. The CLFC Financial Statements have been prepared
in accordance with GAAP, and (including the related notes where applicable)
fairly present in each case in all material respects (subject in the case of the
unaudited interim statements to normal year-end adjustments), the consolidated
financial position, results of operations and cash flows of CLFC and the CLFC
Subsidiaries on a consolidated basis as of and for the respective periods ending
on the dates thereof, in accordance with GAAP during the periods involved,
except as indicated in the notes thereto.
4.5.3. At the date of each balance sheet included in the CLFC
Financial Statements or the CLFC Regulatory Reports, CLFC did not have any
liabilities, obligations or loss contingencies of any nature (whether absolute,
accrued, contingent or otherwise) of a type required to be reflected in such
CLFC Financial Statements or CLFC Regulatory Reports or in the footnotes thereto
which are not fully reflected or reserved against therein or fully disclosed in
a footnote thereto, except for liabilities, obligations and loss contingencies
which are not material individually or in the aggregate or which are incurred in
the ordinary course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
4.6. Taxes.
CLFC and the CLFC Subsidiaries are members of the same affiliated group
within the meaning of Code Section 1504(a). CLFC, or the appropriate CLFC
Subsidiary, has duly filed all federal, state and material local tax returns
required to be filed by or with respect to CLFC and every CLFC Subsidiary on or
prior to the Closing Date (all such returns, to CLFC's Knowledge, being accurate
and correct in all material respects) and has duly paid or made provisions for
the payment of all material federal, state and local taxes which (i) have been
incurred by CLFC and any CLFC Subsidiary; (ii) are due or claimed to be due from
CLFC or any CLFC Subsidiary by any taxing authority; or (iii) are due pursuant
to any written tax sharing agreement, in each case on or prior to the Closing
Date, other than taxes or other charges which (x) are not delinquent, (y) are
being contested in good faith, or (z) have not yet been fully determined. As of
the date of this Agreement, CLFC has received no written notice of, and to
CLFC's Knowledge there is no audit examination, deficiency assessment, tax
investigation or refund litigation with respect to any taxes of CLFC or any of
its Subsidiaries, and no claim has been made by any authority in a jurisdiction
where CLFC or any of its Subsidiaries do not file tax returns that CLFC or any
such Subsidiary is subject to taxation in that jurisdiction. CLFC and its
Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. CLFC and each of its Subsidiaries has withheld and paid all
material taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party, and CLFC and each of its Subsidiaries, to
CLFC's Knowledge, has timely complied with all applicable information reporting
22
requirements under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements.
4.7. No Material Adverse Effect.
CLFC and the CLFC Subsidiaries, taken as a whole, have not suffered any
Material Adverse Effect since December 31, 2004, and no event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on CLFC and the CLFC
Subsidiaries, taken as a whole.
4.8. Material Contracts; Leases; Defaults.
4.8.1. Except as set forth in CLFC DISCLOSURE SCHEDULE 4.8.1, neither
CLFC nor any CLFC Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract or material arrangement with any past or
present officer, director or employee of CLFC or any CLFC Subsidiary, except for
"at will" arrangements; (ii) any plan, material arrangement or contract
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or similar material arrangements for or with any past
or present officers, directors or employees of CLFC or any CLFC Subsidiary;
(iii) any collective bargaining agreement with any labor union relating to
employees of CLFC or any CLFC Subsidiary; (iv) any agreement which by its terms
limits the payment of dividends by CLFC or any CLFC Subsidiary; (v) any
instrument evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by way of purchase money obligation, conditional
sale, lease purchase, guaranty or otherwise, in respect of which CLFC or any
CLFC Subsidiary is an obligor to any person, which instrument evidences or
relates to indebtedness other than deposits, repurchase agreements, bankers'
acceptances, and "treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which contains
financial covenants or other restrictions (other than those relating to the
payment of principal and interest when due) which would be applicable on or
after the Closing Date to First Clover Leaf Financial or any First Clover Leaf
Financial Subsidiary; (vi) any agreement, written or oral, that obligates CLFC
or any CLFC Subsidiary for the payment of more than $20,000 annually; or (vii)
any agreement, contract, arrangement, commitment or understanding (whether
written or oral) that restricts or limits in any material way the conduct of
business by CLFC or any CLFC Subsidiary (it being understood that any
non-compete or similar provision shall be deemed material).
4.8.2. Each real estate lease that may require the consent of the
lessor or its agent resulting from the Merger or the Bank Merger by virtue of a
prohibition or restriction relating to assignment, by operation of law or
otherwise, or change in control, is listed in CLFC DISCLOSURE SCHEDULE 4.8.2
identifying the section of the lease that contains such prohibition or
restriction. Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, to its Knowledge, neither CLFC nor
any CLFC Subsidiary is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its assets, business, or operations
may be bound or affected, or under which it or its assets, business, or
operations receive benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
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4.8.3. True and correct copies of agreements, contracts, arrangements
and instruments referred to in Section 4.8.1 and 4.8.2 have been made available
to First Federal Financial on or before the date hereof, are listed on CLFC
DISCLOSURE SCHEDULE 4.8.1 and 4.8.2 and are in full force and effect on the date
hereof, and neither CLFC nor any CLFC Subsidiary (nor, to the Knowledge of CLFC,
any other party to any such contract, arrangement or instrument) has materially
breached any provision of, or is in default in any respect under any term of,
any such contract, arrangement or instrument. No party to any material contract,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, arrangement or instrument as a result of the
execution of, and the consummation of the transactions contemplated by, this
Agreement. No plan, contract, employment agreement, termination agreement, or
similar agreement or arrangement to which CLFC or any CLFC Subsidiary is a party
or under which CLFC or any CLFC Subsidiary may be liable contains provisions
which permit an employee or independent contractor to terminate it without cause
and continue to accrue future benefits thereunder. No such agreement, plan,
contract, or arrangement (x) provides for acceleration in the vesting of
benefits or payments due thereunder upon the occurrence of a change in ownership
or control of CLFC or any CLFC Subsidiary or upon the occurrence of a subsequent
event; or (y) requires CLFC or any CLFC Subsidiary to provide a benefit in the
form of CLFC Common Stock or determined by reference to the value of CLFC Common
Stock.
4.9. Ownership of Property; Insurance Coverage.
4.9.1. CLFC and each CLFC Subsidiary has good and, as to real
property, marketable title to all material assets and properties owned by CLFC
or each CLFC Subsidiary in the conduct of its businesses, whether such assets
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheets contained in the CLFC Regulatory
Reports and in the CLFC Financial Statements or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of in
the ordinary course of business, since the date of such balance sheets), subject
to no material encumbrances, liens, mortgages, security interests or pledges,
and except for (i) those items which secure liabilities for public or statutory
obligations or any discount with, inter-bank credit facilities, or any
transaction by a CLFC Subsidiary acting in a fiduciary capacity, and (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith. CLFC and the CLFC Subsidiaries, as lessee, have the right under
valid and existing leases of real and personal properties used by CLFC and its
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Such existing leases
and commitments to lease constitute or will constitute operating leases for both
tax and financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in all material respects in the notes to the CLFC Financial Statements.
4.9.2. With respect to all material agreements pursuant to which CLFC
or any CLFC Subsidiary has purchased securities subject to an agreement to
resell, if any, CLFC or such CLFC Subsidiary, as the case may be, has a lien or
security interest (which to CLFC's Knowledge is a valid, perfected first lien)
in the securities or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt secured
thereby.
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4.9.3. CLFC and each CLFC Subsidiary currently maintain insurance
considered by each of them to be reasonable for their respective operations.
Neither CLFC nor any CLFC Subsidiary has received notice from any insurance
carrier that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. There are presently no
material claims pending under such policies of insurance and no notices have
been given by CLFC or any CLFC Subsidiary under such policies. All such
insurance is valid and enforceable and in full force and effect, and within the
last three years CLFC and each CLFC Subsidiary has received each type of
insurance coverage for which it has applied and during such periods has not been
denied indemnification for any material claims submitted under any of its
insurance policies. CLFC DISCLOSURE SCHEDULE 4.9.3 identifies all policies of
insurance maintained by CLFC and each CLFC Subsidiary.
4.10. Legal Proceedings.
Neither CLFC nor any CLFC Subsidiary is a party to any, and there are no
pending or, to CLFC's Knowledge, threatened legal, administrative, arbitration
or other proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature (i) against CLFC or any
CLFC Subsidiary (other than routine bank regulatory examinations) or (ii) to
which CLFC or any CLFC Subsidiary's assets are or may be subject, except for any
proceedings, claims, actions, investigations or inquiries which, if adversely
determined, individually or in the aggregate, could not be reasonably expected
to have a Material Adverse Effect on CLFC and the CLFC Subsidiaries, taken as a
whole. There are no legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations challenging the validity or
propriety of any of the transactions and/or agreements contemplated by, referred
to in or related to this Agreement (including the schedules hereto).
4.11. Compliance With Applicable Law.
4.11.1. To CLFC's Knowledge, each of CLFC and each CLFC Subsidiary is
in compliance in all material respects with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to it, its properties, assets and deposits, its business, and
its conduct of business and its relationship with its employees, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977, the Home Mortgage Disclosure Act, and all
other applicable fair lending laws and other laws relating to discriminatory
business practices, and neither CLFC nor any CLFC Subsidiary has received any
written notice to the contrary.
4.11.2. Each of CLFC and each CLFC Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Knowledge of CLFC, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.4.
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4.11.3. Except as disclosed in CLFC DISCLOSURE SCHEDULE 4.11.3, for
the period beginning January 1, 2004, neither CLFC nor any CLFC Subsidiary has
received any written notification or to CLFC's Knowledge any other communication
from any Bank Regulator (i) asserting that CLFC or any CLFC Subsidiary is not in
material compliance with any of the statutes, regulations or ordinances which
such Bank Regulator enforces; (ii) threatening to revoke any license, franchise,
permit or governmental authorization which is material to CLFC or any CLFC
Subsidiary; (iii) requiring or threatening to require CLFC or any CLFC
Subsidiary, or indicating that CLFC or any CLFC Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in the
insurance of bank deposits restricting or limiting, or purporting to restrict or
limit, in any material respect the operations of CLFC or any CLFC Subsidiary,
including without limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any manner the operations of CLFC or any CLFC Subsidiary, including
without limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Neither CLFC nor any CLFC
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement. The most recent regulatory rating given to CLB as to compliance with
the Community Reinvestment Act is satisfactory or better.
4.12. Employee Benefit Plans.
4.12.1. CLFC DISCLOSURE SCHEDULE 4.12.1 includes a list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare and fringe benefit plans, employment, severance and change in
control agreements and all other material benefit practices, policies and
arrangements maintained by CLFC or any CLFC Subsidiary in which any employee or
former employee, consultant or former consultant or director or former director
of CLFC or any CLFC Subsidiary participates or to which any such employee,
consultant or director is a party or is otherwise entitled to receive benefits
(the "CLFC Compensation and Benefit Plans"). Neither CLFC nor any of its
Subsidiaries has any commitment to create any additional CLFC Compensation and
Benefit Plan or to materially modify, change or renew any existing CLFC
Compensation and Benefit Plan (any modification or change that increases the
cost of such plans would be deemed material), except as required to maintain the
qualified status thereof. CLFC has made available to First Federal Financial
true and correct copies of the CLFC Compensation and Benefit Plans.
4.12.2. To the Knowledge of CLFC, each CLFC Compensation and Benefit
Plan has been operated and administered in all material respects in accordance
with its terms and with applicable law, including, but not limited to, ERISA,
the Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act, COBRA, the Health Insurance Portability and Accountability Act
and any regulations or rules promulgated thereunder, and all material filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other applicable
26
law have been timely made or any interest, fines, penalties or other impositions
for late filings have been paid in full. Each CLFC Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and to the Knowledge of CLFC, no circumstances exist which are reasonably likely
to result in revocation of any such favorable determination letter. There is no
material pending or, to the Knowledge of CLFC, threatened action, suit or claim
relating to any CLFC Compensation and Benefit Plan (other than routine claims
for benefits). Neither CLFC nor any CLFC Subsidiary has engaged in a
transaction, or omitted to take any action, with respect to any CLFC
Compensation and Benefit Plan that would reasonably be expected to subject CLFC
or any CLFC Subsidiary to an unpaid tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA.
4.12.3. No liability, other than (a) PBGC premiums arising in the
ordinary course of business, or (b) any employer contribution required under the
terms of any CLFC Defined Benefit Plan (as defined herein) has been or is
expected by CLFC or any of its Subsidiaries to be incurred with respect to any
CLFC Compensation and Benefit Plan which is a defined benefit plan subject to
Title IV of ERISA ("CLFC Defined Benefit Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by CLFC or any entity which is considered one employer with
CLFC under Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate") (such plan hereinafter referred to as an "ERISA Affiliate Plan").
Except as disclosed on CLFC DISCLOSURE SCHEDULE 4.12.3, no CLFC Defined Benefit
Plan had an "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, as of the last day of the end of the most recent
plan year ending prior to the date hereof. The fair market value of the assets
of each CLFC Defined Benefit Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such CLFC
Defined Benefit Plan as of the end of the most recent plan year with respect to
the respective CLFC Defined Benefit Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such CLFC Defined Benefit Plan as of the date hereof;
and no notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been required to
be filed for any CLFC Defined Benefit Plan within the 12-month period ending on
the date hereof. Neither CLFC nor any of its Subsidiaries has provided, or is
required to provide, security to any CLFC Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code or has taken any action, or omitted to take any action, that has resulted,
or would reasonably be expected to result in the imposition of a lien under
Section 412(n) of the Code or pursuant to ERISA. Except as disclosed on CLFC
DISCLOSURE SCHEDULE 4.12.3, neither CLFC, its Subsidiaries, nor any ERISA
Affiliate has contributed to any "multiemployer plan," as defined in Section
3(37) of ERISA, on or after September 26, 1980. To the Knowledge of CLFC, there
is no pending investigation or enforcement action by any Bank Regulator with
respect to any CLFC Compensation and Benefit Plan or any ERISA Affiliate Plan.
4.12.4. All material contributions required to be made under the terms
of any CLFC Compensation and Benefit Plan or ERISA Affiliate Plan to which CLFC
or any CLFC Subsidiary is a party or a sponsor have been timely made, and all
anticipated contributions and funding obligations are accrued on CLFC's
consolidated financial statements to the extent required by GAAP. CLFC and its
Subsidiaries have expensed and accrued as a liability the present value of
27
future benefits under each applicable CLFC Compensation and Benefit Plan for
financial reporting purposes to the extent required by GAAP.
4.12.5. Except as set forth in CLFC DISCLOSURE SCHEDULE 4.12.5,
neither CLFC nor any CLFC Subsidiary has any obligations to provide retiree
health, life insurance, disability insurance, or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code. There has been no communication to employees by CLFC or any
CLFC Subsidiary that would reasonably be expected to promise or guarantee such
employees retiree health, life insurance, disability insurance, or other retiree
death benefits.
4.12.6. CLFC and its Subsidiaries do not maintain any CLFC
Compensation and Benefit Plans covering employees who are not United States
residents.
4.12.7. With respect to each CLFC Compensation and Benefit Plan, if
applicable, CLFC has provided or made available to First Federal Financial
copies of the: (A) trust instruments and insurance contracts; (B) two most
recent Forms 5500 filed with the IRS; (C) most recent actuarial report and
financial statement; (D) most recent summary plan description; (E) most recent
determination letter issued by the IRS; (F) any Form 5310 or Form 5330 filed
with the IRS within the last two years; and (G) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
4.12.8. Except as disclosed in CLFC DISCLOSURE SCHEDULE 4.12.8, the
consummation of the Merger will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time) (A) entitle any employee, consultant
or director to any payment or benefit (including severance pay, change in
control benefit, or similar compensation) or any increase in compensation, (B)
result in the vesting or acceleration of any benefits under any CLFC
Compensation and Benefit Plan or (C) result in any material increase in benefits
payable under any CLFC Compensation and Benefit Plan.
4.12.9. Neither CLFC nor any CLFC Subsidiary maintains any
compensation plans, programs or arrangements under which (i) any payment is
reasonably likely to become non-deductible, in whole or in part, for tax
reporting purposes as a result of the limitations under Section 162(m) of the
Code and the regulations issued thereunder or (ii) any payment is reasonably
likely to become taxable under Section 409A of the Code.
4.12.10. The consummation of the Merger will not, directly or
indirectly (including without limitation, as a result of any termination of
employment or service at any time prior to or following the Effective Time),
entitle any current or former employee, director or independent contractor of
CLFC or any CLFC Subsidiary to any actual or deemed payment (or benefit) which
could constitute a "parachute payment" (as such term is defined in Section 280G
of the Code).
4.12.11. There are no stock appreciation or similar rights, earned
dividends or dividend equivalents, or shares of restricted stock, outstanding
28
under any of the CLFC Compensation and Benefit Plans or otherwise as of the date
hereof and none will be granted, awarded, or credited after the date hereof.
4.12.12. CLFC DISCLOSURE SCHEDULE 4.12.12 sets forth, as of the
payroll date immediately preceding the date of this Agreement, a list of the
full names of all employees of CLB or CLFC, their title and rate of salary,
their date of hire and any changes in their rate of salary or title effected
since December 31, 2004. CLFC DISCLOSURE SCHEDULE 4.12.12 also sets forth any
changes to any CLFC Compensation and Benefit Plan since December 28, 2004, the
date on which CLFC terminated the registration under Section 12(g) of the
Exchange Act of its common stock.
4.13. Brokers, Finders and Financial Advisors.
Neither CLFC nor any CLFC Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder or financial
advisor in connection with the transactions contemplated by this Agreement, or
incurred any liability or commitment for any fees or commissions to any such
person in connection with the transactions contemplated by this Agreement except
for the retention of RP Financial, LC. ("RP Financial") by CLFC and the fee
payable pursuant thereto.
4.14. Environmental Matters.
4.14.1. With respect to CLFC and each CLFC Subsidiary:
(A) Each of CLFC and the CLFC Subsidiaries, the Participation
Facilities (defined below), and, to CLFC's Knowledge, the Loan Properties
(defined below) are, and have been, in substantial compliance with, and are not
liable under, any Environmental Laws;
(B) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending and, to
CLFC's Knowledge, no such action is threatened, before any court, governmental
agency or other forum against it or any of the CLFC Subsidiaries or any
Participation Facility (x) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release (as defined herein) into the environment of any
Materials of Environmental Concern (as defined herein), whether or not occurring
at or on a site owned, leased or operated by it or any of the CLFC Subsidiaries
or any Participation Facility;
(C) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending and, to
CLFC's Knowledge no such action is threatened, before any court, governmental
agency or other forum relating to or against any Loan Property (or CLFC or any
of the CLFC Subsidiaries in respect of such Loan Property) (x) relating to
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the presence of or release into the
environment of any Materials of Environmental Concern, whether or not occurring
at or on a site owned, leased or operated by a Loan Property;
29
(D) To CLFC's Knowledge, the properties currently owned or operated by
CLFC or any CLFC Subsidiary (including, without limitation, soil, groundwater or
surface water on, under or adjacent to the properties, and buildings thereon)
are not contaminated with and do not otherwise contain any Materials of
Environmental Concern other than as permitted under applicable Environmental
Law;
(E) Neither CLFC nor any CLFC Subsidiary has received any written
notice, demand letter, executive or administrative order, directive or request
for information from any federal, state, local or foreign governmental entity or
any third party indicating that it may be in violation of, or liable under, any
Environmental Law;
(F) To CLFC's Knowledge, there are no underground storage tanks on, in
or under any properties owned or operated by CLFC or any of the CLFC
Subsidiaries or any Participation Facility, and no underground storage tanks
have been closed or removed from any properties owned or operated by CLFC or any
of the CLFC Subsidiaries or any Participation Facility;
(G) To CLFC's Knowledge, during the period of (s) CLFC's or any of the
CLFC Subsidiaries' ownership or operation of any of their respective current
properties or (t) CLFC's or any of the CLFC Subsidiaries' participation in the
management of any Participation Facility, there has been no contamination by or
release of Materials of Environmental Concern in, on, under or affecting such
properties. To CLFC's Knowledge, prior to the period of (x) CLFC's or any of the
CLFC Subsidiaries' ownership or operation of any of their respective current
properties or (y) CLFC's or any of the CLFC Subsidiaries' participation in the
management of any Participation Facility, there was no contamination by or
release of Materials of Environmental Concern in, on, under or affecting such
properties; and
(H) Except as disclosed on CLFC DISCLOSURE SCHEDULE 4.14.1(H), neither
CLB nor any other CLFC Subsidiary has conducted any environmental studies during
the past ten years with respect to any properties owned or leased by it or any
of its Subsidiaries, or with respect to any Loan Property or any Participation
Facility.
4.14.2. "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property. "Participation Facility" means any facility in which
the applicable party (or a Subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property.
4.15. Loan Portfolio.
4.15.1. The allowance for loan losses reflected in CLFC's audited
consolidated statement of financial condition at December 31, 2004 was, and the
allowance for loan losses shown on the balance sheets in CLFC's Financial
Statements for periods ending after December 31, 2004 will be, adequate, as of
the dates thereof, under GAAP.
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4.15.2. CLFC DISCLOSURE SCHEDULE 4.15.2 sets forth a listing, as of
December 31, 2005, by account, of: (A) all loans (including loan participations)
of CLB or any other CLFC Subsidiary that have been accelerated during the past
twelve months; (B) all loan commitments or lines of credit of CLB or any other
CLFC Subsidiary which have been terminated by CLB or any other CLFC Subsidiary
during the past twelve months by reason of a default or adverse developments in
the condition of the borrower or other events or circumstances affecting the
credit of the borrower; (C) all loans, lines of credit and loan commitments as
to which CLB or any other CLFC Subsidiary has given written notice of its intent
to terminate during the past twelve months; (D) with respect to all commercial
loans (including commercial real estate loans), all notification letters and
other written communications from CLB or any other CLFC Subsidiary to any of
their respective borrowers, customers or other parties during the past twelve
months wherein CLB or any other CLFC Subsidiary has requested or demanded that
actions be taken to correct existing defaults or facts or circumstances which
may become defaults; (E) each borrower, customer or other party which has
notified CLB or any other CLFC Subsidiary during the past twelve months of, or
has asserted against CLB or any other CLFC Subsidiary, in each case in writing,
any "lender liability" or similar claim, and, to the Knowledge of CLB, each
borrower, customer or other party which has given CLB or any other CLFC
Subsidiary any oral notification of, or orally asserted to or against CLB or any
other CLFC Subsidiary, any such claim; (F) all loans, (1) that are contractually
past due 90 days or more in the payment of principal and/or interest, (2) that
are on non-accrual status, (3) that as of the date of this Agreement are
classified as "Other Loans Specially Mentioned", "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Watch list" or
words of similar import, together with the principal amount of and accrued and
unpaid interest on each such loan and the identity of the obligor thereunder,
(4) where a reasonable doubt exists as to the timely future collectibility of
principal and/or interest, whether or not interest is still accruing or the
loans are less than 90 days past due, (5) where the interest rate terms have
been reduced and/or the maturity dates have been extended subsequent to the
agreement under which the loan was originally created due to concerns regarding
the borrower's ability to pay in accordance with such initial terms, or (6)
where a specific reserve allocation exists in connection therewith, and (G) all
assets classified by CLB or any CLB Subsidiary as real estate acquired through
foreclosure or in lieu of foreclosure, including in-substance foreclosures, and
all other assets currently held that were acquired through foreclosure or in
lieu of foreclosure. CLFC DISCLOSURE SCHEDULE 4.15.2 may exclude any individual
loan with a principal outstanding balance of less than $20,000, provided that
CLFC DISCLOSURE SCHEDULE 4.15.2 includes, for each category described, the
aggregate amount of individual loans with a principal outstanding balance of
less than $20,000 that have been excluded.
4.15.3. All loans receivable (including discounts) and accrued
interest entered on the books of CLFC and the CLFC Subsidiaries arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of CLFC's or the appropriate CLFC
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be. To the Knowledge of CLFC, the loans,
discounts and the accrued interest reflected on the books of CLFC and the CLFC
Subsidiaries are subject to no defenses, set-offs or counterclaims (including,
without limitation, those afforded by usury or truth-in-lending laws), except as
may be provided by bankruptcy, insolvency or similar laws affecting creditors'
31
rights generally or by general principles of equity. All such loans are owned by
CLFC or the appropriate CLFC Subsidiary free and clear of any liens.
The notes and other evidences of indebtedness evidencing the loans
described above, and all pledges, mortgages, deeds of trust and other collateral
documents or security instruments relating thereto are, in all material
respects, valid, true and genuine, and what they purport to be.
4.16. Related Party Transactions.
Except as set forth in CLFC DISCLOSURE SCHEDULE 4.16, neither CLFC nor any
CLFC Subsidiary is a party to any transaction (including any loan or other
credit accommodation) with any Affiliate of CLFC or any CLFC Affiliate. All such
transactions (a) were made in the ordinary course of business, (b) were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other Persons, and (c)
did not involve more than the normal risk of collectability or present other
unfavorable features. No loan or credit accommodation to any Affiliate of CLFC
or any CLFC Subsidiary is presently in default or, during the three year period
prior to the date of this Agreement, has been in default or has been
restructured, modified or extended. Neither CLFC nor any CLFC Subsidiary has
been notified that principal and interest with respect to any such loan or other
credit accommodation will not be paid when due or that the loan grade
classification accorded such loan or credit accommodation by CLFC is
inappropriate.
4.17. Schedule of Termination Benefits.
CLFC DISCLOSURE SCHEDULE 4.17 includes a schedule of all termination
benefits and related payments that would be payable to the individuals
identified thereon, under any and all employment agreements, special termination
agreements, change in control agreements, supplemental executive retirement
plans, deferred bonus plans, deferred compensation plans, salary continuation
plans, or any compensation arrangement, or other pension benefit or welfare
benefit plan maintained by CLFC or any CLFC Subsidiary for the benefit of
officers or directors of CLFC or any CLFC Subsidiary (the "Benefits Schedule"),
assuming their employment or service is terminated as of December 31, 2006 and
the Closing Date occurs on such date and based on the other assumptions
specified in such schedule. No other individuals are entitled to benefits under
any such plans.
4.18. Deposits.
Except as set forth in CLFC DISCLOSURE SCHEDULE 4.18, none of the deposits
of CLFC or any CLFC Subsidiary is a "brokered deposit" as defined in 12 CFR
Section 337.6(a)(2).
4.19. Antitakeover Provisions Inapplicable; Required Vote of Shareholders.
The Board of Directors of CLFC has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of CLFC) necessary to exempt CLFC and the Merger and the transactions
contemplated hereby from Section 203 of the DGCL ("Takeover Laws"). The
affirmative vote of a majority of the issued and outstanding shares of CLFC
32
Common Stock is required to approve this Agreement and the Merger under CLFC's
certificate of incorporation and the DGCL.
4.20. Registration Obligations.
Neither CLFC nor any CLFC Subsidiary is under any obligation, contingent or
otherwise, which will survive the Effective Time by reason of any agreement to
register any transaction involving any of its securities under the Securities
Act.
4.21. Risk Management Instruments.
Neither CLFC nor any CLFC Subsidiary is a party to any interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for CLFC's own account, or
for the account of one or more of CLFC's Subsidiaries.
4.22. Fairness Opinion.
The Board of Directors of CLFC has received an opinion from RP Financial to
the effect that, subject to the terms, conditions and qualifications set forth
therein, as of the date thereof, the Merger Consideration to be received by the
shareholders of CLFC pursuant to this Agreement is fair to such shareholders
from a financial point of view. Such opinion has not been amended or rescinded
as of the date of this Agreement.
4.23. Trust Accounts.
Neither CLFC, CLB nor any CLFC Subsidiary conducts any trust business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FIRST FEDERAL FINANCIAL
First Federal Financial, First Clover Leaf Financial, the Mutual Holding
Company and First Federal represent and warrant to CLFC and CLB that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V), except as set forth in the FIRST
FEDERAL FINANCIAL DISCLOSURE SCHEDULE delivered by First Federal Financial to
CLFC on the date hereof. First Federal Financial has made a good faith effort to
ensure that the disclosure on each schedule of the FIRST FEDERAL FINANCIAL
DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for
purposes of the FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE, any item disclosed
on any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant as and to the extent that it is
reasonably clear on the face of such schedule that such item applies to such
other schedule. References to the Knowledge of First Federal Financial shall
include the Knowledge of the Mutual Holding Company, First Clover Leaf Financial
and First Federal.
33
5.1. Organization.
5.1.1. First Federal Financial is a corporation duly organized,
validly existing and in good standing under federal law, and is duly registered
as a savings and loan holding company under the HOLA. First Clover Leaf
Financial is a Maryland corporation in formation and upon completion of the
Conversion will be duly organized, validly existing and in good standing under
the laws of the State of Maryland, and will be duly registered as a savings and
loan holding company under the HOLA. Each of the Mutual Holding Company and
First Federal Financial has full corporate power and authority to carry on its
business as now conducted and is duly licensed or qualified to do business in
the states of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires such qualification,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect on the Mutual Holding Company or First Federal
Financial.
5.1.2. First Federal is a savings association organized, validly
existing and in good standing under federal law. The deposits of First Federal
are insured by the FDIC to the fullest extent permitted by law, and all premiums
and assessments required to be paid in connection therewith have been paid when
due.
5.1.3. First Federal is a member in good standing of the FHLB and owns
the requisite amount of stock therein.
5.1.4. The respective minute books of the Mutual Holding Company,
First Federal Financial and First Federal accurately record, in all material
respects, all material corporate actions of their respective shareholders and
boards of directors (including committees).
5.1.5. Prior to the date of this Agreement, First Federal Financial
has made available to CLFC true and correct copies of the charters and bylaws of
First Federal Financial, the Mutual Holding Company and First Federal, and forms
of the Articles of Incorporation and bylaws of First Clover Leaf Financial
(which forms when finalized (and as to the Article of Incorporation, when filed
with the Maryland Department of Assessments and Taxation) shall not be
materially different from the forms provided).
5.2. Capitalization.
5.2.1. The authorized capital stock of First Federal Financial
consists of 10,000,000 shares of common stock, $0.10 par value, of which
3,920,060 shares are outstanding, validly issued, fully paid and nonassessable
and free of preemptive rights, and 1,000,000 shares of preferred stock, $0.10
par value ("First Federal Financial Preferred Stock"), none of which are
outstanding. There are no shares of First Federal Financial Common Stock held by
First Federal Financial as treasury stock. Neither First Federal Financial,
First Clover Leaf Financial nor any First Federal Financial Subsidiary has or is
bound by any Rights of any character relating to the purchase, sale or issuance
or voting of, or right to receive dividends or other distributions on any shares
of First Clover Leaf Financial and First Federal Financial Common Stock, or any
other security of First Clover Leaf Financial and First Federal Financial or any
securities representing the right to vote, purchase or otherwise receive any
shares of First Clover Leaf Financial or First Federal Financial Common Stock or
any other security of First Clover Leaf Financial or First Federal Financial,
34
other than, as to First Clover Leaf Financial Corp., subscription rights
issuable in connection with the Conversion.
5.2.2. First Federal Financial owns all of the capital stock of First
Federal free and clear of any lien or encumbrance. Following completion of the
Conversion, First Clover Leaf Financial will own all of the capital stock of
First Federal free and clear of any lien or encumbrance.
5.2.3. To the Knowledge of First Federal Financial, no Person or
"group" (as that term is used in Section 13(d)(3) of the Exchange Act), other
than the Mutual Holding Company, is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding shares of First
Federal Financial Common Stock.
5.3. Authority; No Violation.
5.3.1. First Clover Leaf Financial, the Mutual Holding Company, First
Federal Financial and First Federal each has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and, except for approval of the shareholders of First
Federal Financial and First Federal and the Members of the Mutual Holding
Company, each has full corporate power and authority to consummate the
Conversion. The execution and delivery of this Agreement by First Clover Leaf
Financial, the Mutual Holding Company, First Federal Financial and First Federal
and the completion by First Clover Leaf Financial, the Mutual Holding Company,
First Federal Financial and First Federal of the transactions contemplated
hereby, up to and including the Merger, have been duly and validly approved by
the Boards of Directors of First Clover Leaf Financial, the Mutual Holding
Company, First Federal Financial and First Federal, respectively, and, except
for approval of the shareholders of First Federal Financial and First Federal
and the Members of the Mutual Holding Company, no other corporate proceedings on
the part of First Clover Leaf Financial, the Mutual Holding Company, First
Federal Financial or First Federal are necessary to complete the transactions
contemplated hereby, up to and including the Merger. This Agreement has been
duly and validly executed and delivered by First Clover Leaf Financial, the
Mutual Holding Company, First Federal Financial and First Federal, and the Bank
Merger has been duly and validly approved by the Board of Directors of First
Federal, and by First Federal Financial in its capacity as sole shareholder of
First Federal, and subject to approval by the shareholders of First Federal
Financial and the Members of the Mutual Holding Company and receipt of the
required approvals of Bank Regulators described in Section 8.4, constitutes the
valid and binding obligations of First Clover Leaf Financial, the Mutual Holding
Company, First Federal Financial and First Federal, enforceable against First
Clover Leaf Financial, the Mutual Holding Company, First Federal Financial and
First Federal in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and as to
First Federal, the conservatorship or receivership provisions of the FDIA, and
subject, as to enforceability, to general principles of equity.
5.3.2. (A) The execution and delivery of this Agreement by First
Clover Leaf Financial, the Mutual Holding Company, First Federal Financial and
First Federal, (B) subject to receipt of approvals from the Bank Regulators
referred to in Section 8.4, and compliance by First Clover Leaf Financial, the
35
Mutual Holding Company, First Federal Financial and First Federal with any
conditions contained therein, and subject to the receipt of the approval of the
Members of the Mutual Holding Company and the shareholders of First Federal
Financial, the consummation of the transactions contemplated hereby, and (C)
compliance by First Clover Leaf Financial, the Mutual Holding Company, First
Federal Financial and First Federal with any of the terms or provisions hereof:
will not (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or charter or bylaws of First Clover Leaf Financial,
the Mutual Holding Company, First Federal Financial or any First Federal
Financial Subsidiary or the charter and bylaws of First Federal; (ii) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to First Federal Financial, the Mutual Holding Company or
any First Federal Financial Subsidiary or any of their respective properties or
assets; or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of First Clover Leaf Financial,
First Federal Financial, the Mutual Holding Company, First Federal or any First
Federal Financial Subsidiary under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other investment or obligation to which any of them is a party, or by which they
or any of their respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under clause (ii) or (iii)
hereof which, either individually or in the aggregate, will not have a Material
Adverse Effect on First Clover Leaf Financial or First Federal Financial taken
as a whole.
5.4. Consents.
Except for the consents, waivers, approvals, filings and registrations from
or with the Bank Regulators referred to in Section 8.4 and compliance with any
conditions contained therein, and the requisite vote of the shareholders of
First Federal Financial and First Federal and the Members of the Mutual Holding
Company, no consents, waivers or approvals of, or filings or registrations with,
any Bank Regulator are necessary, and no consents, waivers or approvals of, or
filings or registrations with, any other third parties are necessary, in
connection with (a) the execution and delivery of this Agreement by First Clover
Leaf Financial, the Mutual Holding Company, First Federal Financial and First
Federal, and (b) the completion by First Clover Leaf Financial, the Mutual
Holding Company, First Federal Financial and First Federal of the Merger and the
Bank Merger. First Federal Financial has no reason to believe that (i) any
required approvals from a Bank Regulator or other required consents or approvals
will not be received, or that (ii) any public body or authority, the consent or
approval of which is not required or to which a filing is not required, will
object to the completion of the transactions contemplated by this Agreement.
5.5. Financial Statements and Regulatory Reports.
5.5.1. First Federal Financial has previously made available to CLFC
the First Federal Financial Regulatory Reports. The First Federal Financial
Regulatory Reports have been prepared in all material respects in accordance
with applicable regulatory accounting principles and practices throughout the
periods covered by such statements, and fairly present in all material respects,
the consolidated financial position, results of operations and changes in
36
stockholders' equity of First Federal Financial as of and for the periods ended
on the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
5.5.2. First Federal Financial has previously made available to CLFC
the First Federal Financial Statements. The First Federal Financial Statements
have been prepared in accordance with GAAP, and (including the related notes
where applicable) fairly present in each case in all material respects (subject
in the case of the unaudited interim statements to normal year-end adjustments)
the consolidated financial position, results of operations and cash flows of
First Federal Financial and the First Federal Financial Subsidiaries on a
consolidated basis as of and for the respective periods ending on the dates
thereof, in accordance with GAAP during the periods involved, except as
indicated in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-QSB.
5.5.3. At the date of each balance sheet included in the First Federal
Financial Statements, First Federal Financial did not have any liabilities,
obligations or loss contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in such First
Federal Financial Statements or in the footnotes thereto which are not fully
reflected or reserved against therein or fully disclosed in a footnote thereto,
except for liabilities, obligations and loss contingencies which are not
material individually or in the aggregate or which are incurred in the ordinary
course of business, consistent with past practice, and except for liabilities,
obligations and loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the absence of
footnotes.
5.6. Taxes.
First Federal Financial and the First Federal Financial Subsidiaries are
members of the same affiliated group within the meaning of Code Section 1504(a).
First Federal Financial or the appropriate First Federal Financial Subsidiary
has duly filed all federal, state and material local tax returns required to be
filed by or with respect to First Federal Financial and each First Federal
Financial Subsidiary on or prior to the Closing Date (all such returns, to the
Knowledge of First Federal Financial, being accurate and correct in all material
respects) and has duly paid or made provisions for the payment of all material
federal, state and local taxes which (i) have been incurred by First Federal
Financial or the appropriate First Federal Financial Subsidiary, (ii) are due or
claimed to be due from First Federal Financial and any First Federal Financial
Subsidiary by any taxing authority, or (iii) are due pursuant to any written tax
sharing agreement, in each case on or prior to the Closing Date, other than
taxes or other charges which (x) are not delinquent, (y) are being contested in
good faith, or (z) have not yet been fully determined. As of the date of this
Agreement, First Federal Financial has received no notice of, and to the
Knowledge of First Federal Financial, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
First Federal Financial or any of its Subsidiaries, and no claim has been made
by any authority in a jurisdiction where First Federal Financial or any of its
Subsidiaries do not file tax returns that First Federal Financial or any such
Subsidiary is subject to taxation in that jurisdiction. First Federal Financial
and its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. First Federal Financial and each of its Subsidiaries has
37
withheld and paid all material taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party, and First Clover Leaf Financial and
First Federal Financial and each of its Subsidiaries, to the Knowledge of First
Federal Financial, has timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements.
5.7. No Material Adverse Effect.
First Federal Financial, taken as a whole, has not suffered any Material
Adverse Effect since December 31, 2004, and no event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on First Clover Leaf
Financial, or on First Federal Financial and the First Federal Financial
Subsidiaries, taken as a whole.
5.8. Ownership of Property; Insurance Coverage.
5.8.1. First Federal Financial and each First Federal Financial
Subsidiary has good and, as to real property, marketable title to all material
assets and properties owned by First Federal Financial or each First Federal
Financial Subsidiary in the conduct of their businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the First Federal
Financial Statements or acquired subsequent thereto (except to the extent that
such assets and properties have been disposed of in the ordinary course of
business, since the date of such balance sheets), subject to no material
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items which secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to FHLB, inter-bank credit
facilities, or any transaction by a First Federal Financial Subsidiary acting in
a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith. First Federal Financial and the First
Federal Financial Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by First Federal
Financial and its Subsidiaries in the conduct of their businesses to occupy or
use all such properties as presently occupied and used by each of them.
5.8.2. First Federal Financial and each First Federal Financial
Subsidiary currently maintain insurance considered by First Federal Financial to
be reasonable for their respective operations. Neither First Federal Financial
nor any First Federal Financial Subsidiary has received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no material claims pending under such policies of insurance and no notices have
been given by First Federal Financial or any First Federal Financial Subsidiary
under such policies. All such insurance is valid and enforceable and in full
force and effect, and within the last three years First Federal Financial and
each First Federal Financial Subsidiary has received each type of insurance
coverage for which it has applied and during such periods has not been denied
indemnification for any material claims submitted under any of its insurance
policies. FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 5.8 identifies all
38
policies of insurance maintained by First Federal Financial and each First
Federal Financial Subsidiary.
5.9. Legal Proceedings.
Neither First Federal Financial nor any First Federal Financial Subsidiary
is a party to any, and there are no pending or, to the Knowledge of First
Federal Financial, threatened legal, administrative, arbitration or other
proceedings, claims (whether asserted or unasserted), actions or governmental
investigations or inquiries of any nature (i) against First Clover Leaf
Financial and First Federal Financial or any First Federal Financial Subsidiary,
or (ii) to which First Clover Leaf Financial and First Federal Financial or any
First Federal Financial Subsidiary's assets are or may be subject, except for
any proceedings, claims, actions, investigations or inquiries which, if
adversely determined, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on First Federal Financial, taken as
a whole. There are no legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations challenging the validity or
propriety of any of the transactions and/or agreements contemplated by, referred
to in or related to this Agreement (including the schedules hereto).
5.10. Compliance With Applicable Law.
5.10.1. To the Knowledge of First Federal Financial, each of First
Federal Financial and each First Federal Financial Subsidiary is in compliance
in all material respects with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable to it, its properties, assets and deposits, its business, and its
conduct of business and its relationship with its employees, including, without
limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977, the Home Mortgage Disclosure Act, and all
other applicable fair lending laws and other laws relating to discriminatory
business practices, and neither First Federal Financial nor any First Federal
Financial Subsidiary has received any written notice to the contrary.
5.10.2. Each of First Clover Leaf Financial and First Federal
Financial and each First Federal Financial Subsidiary has all material permits,
licenses, authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Bank Regulators that are required in
order to permit it to own or lease its properties and to conduct its business as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the Knowledge of First
Federal Financial, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.4.
5.10.3. Except as disclosed in FIRST FEDERAL FINANCIAL DISCLOSURE
SCHEDULE 5.10.3, for the period beginning January 1, 2004, neither First Clover
Leaf Financial, First Federal Financial nor any First Federal Financial
Subsidiary has received any written notification or, to the Knowledge of First
Federal Financial, any other communication from any Bank Regulator (i) asserting
that First Clover Leaf Financial, First Federal Financial or any First Federal
Financial Subsidiary is not in material compliance with any of the statutes,
regulations or ordinances which such Bank Regulator enforces; (ii) threatening
39
to revoke any license, franchise, permit or governmental authorization which is
material to First Federal Financial; (iii) requiring or threatening to require
First Clover Leaf Financial, First Federal Financial or any First Federal
Financial Subsidiary, or indicating that First Clover Leaf Financial, First
Federal Financial or any First Federal Financial Subsidiary may be required, to
enter into a cease and desist order, agreement or memorandum of understanding or
any other agreement with any federal or state governmental agency or authority
which is charged with the supervision or regulation of banks or engages in the
insurance of bank deposits restricting or limiting, or purporting to restrict or
limit, in any material respect the operations of First Clover Leaf Financial,
First Federal Financial or any First Federal Financial Subsidiary, including
without limitation any restriction on the payment of dividends; or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any manner the operations of First Clover Leaf Financial, First Federal
Financial or any First Federal Financial Subsidiary, including without
limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). Except as disclosed in
FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 5.10.3, neither First Clover Leaf
Financial, First Federal Financial nor any First Federal Financial Subsidiary
has consented to or entered into any currently effective Regulatory Agreement.
The most recent regulatory rating given to First Federal and each Bank Affiliate
as to compliance with the Community Reinvestment Act is satisfactory or better.
5.11. Employee Benefit Plans.
5.11.1. FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 5.11.1 includes a
list of all existing bonus, incentive, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, stock appreciation,
phantom stock, severance, welfare and fringe benefit plans, employment,
severance and change in control agreements and all other material benefit
practices, policies and arrangements maintained by First Federal Financial or
any First Federal Financial Subsidiary in which any employee or former employee,
consultant or former consultant or director or former director of First Federal
Financial or any First Federal Financial Subsidiary participates or to which any
such employee, consultant or director is a party or is otherwise entitled to
receive benefits (the "First Federal Compensation and Benefit Plans"). First
Federal Financial has made available to CLFC true and correct copies of the
First Federal Compensation and Benefit Plans.
5.11.2. To the Knowledge of First Federal Financial, each First
Federal Compensation and Benefit Plan has been operated and administered in all
material respects in accordance with its terms and with applicable law,
including, but not limited to, ERISA, the Code, the Securities Act, the Exchange
Act, the Age Discrimination in Employment Act, COBRA, the Health Insurance
Portability and Accountability Act and any regulations or rules promulgated
thereunder, and all material filings, disclosures and notices required by ERISA,
the Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act and any other applicable law have been timely made or any
interest, fines, penalties or other impositions for late filings have been paid
in full. Each First Federal Compensation and Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension
40
Plan") and which is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS, and First Federal
Financial is not aware of any circumstances which are reasonably likely to
result in revocation of any such favorable determination letter. There is no
material pending or, to the Knowledge of First Federal Financial, threatened
action, suit or claim relating to any of the First Federal Compensation and
Benefit Plans (other than routine claims for benefits). Neither First Federal
Financial nor any First Federal Financial Subsidiary has engaged in a
transaction, or omitted to take any action, with respect to any First Federal
Compensation and Benefit Plan that would reasonably be expected to subject First
Federal Financial or any First Federal Financial Subsidiary to an unpaid tax or
penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
5.11.3. No First Federal Compensation and Benefit Plan is a defined
benefit plan subject to Title IV of ERISA ("First Federal Defined Benefit Plan")
or a "single-employer plan" (as defined in Section 4001(a) of ERISA), and no
such plan is currently or formerly maintained by First Federal Financial or any
entity which is considered one employer with First Federal Financial under
Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA Affiliate")
(such plan hereinafter referred to as an "ERISA Affiliate Plan"). Neither First
Federal Financial nor any of its Subsidiaries has provided, or is required to
provide, security to any First Federal Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code or has taken any action, or omitted to take any action, that has resulted,
or would reasonably be expected to result in the imposition of a lien under
Section 412(n) of the Code or pursuant to ERISA. Neither First Federal
Financial, its Subsidiaries, nor any ERISA Affiliate has contributed to any
"multiemployer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1986. To the Knowledge of First Federal Financial, there is no
pending investigation or enforcement action by any Bank Regulator with respect
to any First Federal Compensation and Benefit Plan or any ERISA Affiliate Plan.
5.11.4. All material contributions required to be made under the terms
of any First Federal Compensation and Benefit Plan or ERISA Affiliate Plan have
been timely made, and all anticipated contributions and funding obligations are
accrued on First Federal Financial's consolidated financial statements to the
extent required by GAAP. First Federal Financial and its Subsidiaries have
expensed and accrued as a liability the present value of future benefits under
each applicable First Federal Compensation and Benefit Plan for financial
reporting purposes to the extent required by GAAP.
5.11.5. With respect to each First Federal Compensation and Benefit
Plan, if applicable, First Federal Financial has provided or made available to
CLFC copies of the: (A) trust instruments and insurance contracts; (B) two most
recent Forms 5500 filed with the IRS; (C) most recent actuarial report and
financial statement; (D) most recent summary plan description; (E) most recent
determination letter issued by the IRS; (F) any Form 5310 or Form 5330 filed
with the IRS within the last two years; and (G) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
41
5.12. Environmental Matters.
5.12.1. With respect to the Mutual Holding Company, First Federal
Financial and First Federal:
(A) Each of the Mutual Holding Company, First Federal Financial and
First Federal, the Participation Facilities (defined below), and, to the Mutual
Holding Company's, First Federal Financial's and First Federal's Knowledge, the
Loan Properties (defined below) are, and have been, in substantial compliance
with, and are not liable under, any Environmental Laws;
(B) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending and, to the
Mutual Holding Company's, First Federal Financial's and First Federal's
Knowledge, no such action is threatened, before any court, governmental agency
or other forum against any of them or any Participation Facility (x) for alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release (as defined
herein) into the environment of any Materials of Environmental Concern (as
defined herein), whether or not occurring at or on a site owned, leased or
operated by any of them or any Participation Facility;
(C) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending and, to the
Mutual Holding Company's, First Federal Financial's and First Federal's
Knowledge no such action is threatened, before any court, governmental agency or
other forum relating to or against any Loan Property (or the Mutual Holding
Company, First Federal Financial or First Federal in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the presence
of or release into the environment of any Materials of Environmental Concern,
whether or not occurring at or on a site owned, leased or operated by a Loan
Property;
(D) To the Mutual Holding Company's, First Federal Financial's and
First Federal's Knowledge, the properties currently owned or operated by the
Mutual Holding Company, First Federal Financial or First Federal (including,
without limitation, soil, groundwater or surface water on, under or adjacent to
the properties, and buildings thereon) are not contaminated with and do not
otherwise contain any Materials of Environmental Concern other than as permitted
under applicable Environmental Law;
(E) None of the Mutual Holding Company, First Federal Financial or
First Federal has received any written notice, demand letter, executive or
administrative order, directive or request for information from any federal,
state, local or foreign governmental entity or any third party indicating that
it may be in violation of, or liable under, any Environmental Law;
(F) To First Federal Financial's Knowledge, there are no underground
storage tanks on, in or under any properties owned or operated by First Federal
Financial or any of the First Federal Financial Subsidiaries or any
Participation Facility, and no underground storage tanks have been closed or
42
removed from any properties owned or operated by First Federal Financial or any
of the First Federal Financial Subsidiaries or any Participation Facility;
(G) To the Mutual Holding Company's, First Federal Financial's and
First Federal's Knowledge, during the period of (a) the Mutual Holding
Company's, First Federal Financial's or First Federal's ownership or operation
of any of their respective current properties or (b) the Mutual Holding
Company's, First Federal Financial's or First Federal's participation in the
management of any Participation Facility, there has been no contamination by or
release of Materials of Environmental Concern in, on, under or affecting such
properties. To the Mutual Holding Company's, First Federal Financial's and First
Federal's Knowledge, prior to the period of (x) the Mutual Holding Company's,
First Federal Financial's or First Federal's ownership or operation of any of
their respective current properties or (y) the Mutual Holding Company's, First
Federal Financial's or First Federal's participation in the management of any
Participation Facility, there was no contamination by or release of Materials of
Environmental Concern in, on, under or affecting such properties; and
(H) None of the Mutual Holding Company, First Federal Financial nor
First Federal has conducted any environmental studies during the past ten years
with respect to any properties owned or leased by it or any of its Subsidiaries,
or with respect to any Loan Property or any Participation Facility.
5.12.2. To the Knowledge of First Federal Financial, neither the
conduct nor operation of their business nor any condition of any property
currently or previously owned or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
lien, results or resulted in a violation of any Environmental Laws that is
reasonably likely to impose a material liability (including a material
remediation obligation) upon First Federal Financial or any of First Federal
Financial Subsidiary. To the Knowledge of First Federal Financial, no condition
has existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably likely
to result in any material liability to First Federal Financial or any First
Federal Financial Subsidiary by reason of any Environmental Laws. Neither First
Federal Financial nor any First Federal Financial Subsidiary has received any
written notice from any Person that First Federal Financial or any First Federal
Financial Subsidiary or the operation or condition of any property ever owned,
operated, or held as collateral or in a fiduciary capacity by any of them are
currently in violation of or otherwise are alleged to have financial exposure
under any Environmental Laws or relating to Materials of Environmental Concern
(including, but not limited to, responsibility (or potential responsibility) for
the cleanup or other remediation of any Materials of Environmental Concern at,
on, beneath, or originating from any such property) for which a material
liability is reasonably likely to be imposed upon First Federal Financial or any
First Federal Financial Subsidiary.
5.12.3. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
First Federal Financial's Knowledge, threatened, before any court, governmental
agency or other forum against First Federal Financial or any First Clover Leaf
Financial Subsidiary (x) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release (defined herein) into the environment of any
43
Materials of Environmental Concern (as defined herein), whether or not occurring
at or on a site owned, leased or operated by any of the First Federal Financial.
5.13. Loan Portfolio.
5.13.1. The allowance for loan losses reflected in First Federal
Financial's audited consolidated statement of financial condition at December
31, 2004 was, and the allowance for loan losses shown on the balance sheets in
First Federal Financial's Securities Documents for periods ending after December
31, 2004 will be, adequate, as of the dates thereof, under GAAP.
5.13.2. FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 5.13 sets forth a
listing, as of December 31, 2005, all loans of First Federal Financial and any
First Federal Financial Subsidiary, (1) that are contractually past due 90 days
or more in the payment of principal and/or interest, (2) that are on non-accrual
status, (3) that as of the date of this Agreement are classified as "Other Loans
Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss,"
"Classified," "Criticized," "Watch list" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the obligor thereunder, (4) where a reasonable doubt exists
as to the timely future collectibility of principal and/or interest, whether or
not interest is still accruing or the loans are less than 90 days past due, (5)
where the interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in accordance
with such initial terms, or (6) where a specific reserve allocation exists in
connection therewith; and all assets classified by of First Federal Financial
and any First Federal Financial Subsidiary as real estate acquired through
foreclosure or in lieu of foreclosure, including in-substance foreclosures, and
all other assets currently held that were acquired through foreclosure or in
lieu of foreclosure. DISCLOSURE SCHEDULE 5.13 may exclude any individual loan
with a principal outstanding balance of less than $20,000, provided that
DISCLOSURE SCHEDULE 5.13 includes, for each category described, the aggregate
amount of individual loans with a principal outstanding balance of less than
$20,000 that has been excluded.
5.13.3. All loans receivable (including discounts) and accrued
interest entered on the books of First Federal Financial and the each First
Federal Financial Subsidiary arose out of bona fide arm's-length transactions,
were made for good and valuable consideration in the ordinary course of
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are true and genuine and are what they purport to
be.
5.13.4. The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
5.14. Securities Documents.
First Federal Financial has made available to CLFC copies of its (i) annual
report on Form 10-KSB for the year ended December 31, 2004, (ii) quarterly
44
report on Form 10-QSB for each quarter ended on or after June 30, 2004 and (iii)
proxy materials used or for use in connection with its meetings of shareholders
held in 2005. Such reports and such proxy materials complied, at the time filed
with the SEC, in all material respects, with the Securities Laws.
5.15. Deposits.
None of the deposits of any First Federal Financial Subsidiary is a
"brokered deposit" as defined in 12 CFR Section 337.6(a)(2).
5.16. Risk Management Instruments.
Neither First Federal Financial nor First Federal is a party to any
interest rate swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether entered into
for First Federal Financial's own account, or for the account of any Subsidiary
of First Federal Financial.
5.17. Brokers, Finders and Financial Advisors.
Neither First Federal Financial nor any First Federal Financial Subsidiary,
nor any of their respective officers, directors, employees or agents, has
employed any broker, finder or financial advisor in connection with the
transactions contemplated by this Agreement, or incurred any liability or
commitment for any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement, except for the retention of ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ("KBW") by First Federal Financial and the fee payable pursuant
thereto.
5.18. Required Vote of Shareholders.
The affirmative vote of a majority of the issued and outstanding shares of
First Federal Financial Common Stock is required to approve the Merger (it being
understood that the affirmative vote of (i) at least two-thirds of the issued
and outstanding shares of First Federal Financial Common Stock and (ii) a
majority of the issued and outstanding shares of First Federal Financial Common
Stock held by stockholders other than Mutual Holding Company is required to
approve the Conversion and the transactions incident thereto).
5.19. Related Party Transaction.
Except as set forth in FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 5.19,
neither First Federal Financial, First Federal nor any First Federal Subsidiary
is a party to any transaction (including any loan or other credit accommodation)
with any Affiliate of First Federal Financial or any First Federal Financial
Affiliate. All such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. No loan or credit
accommodation to any Affiliate of First Federal Financial or any First Federal
Financial Subsidiary is presently in default or, during the three year period
prior to the date of this Agreement, has been in default or has been
restructured, modified or extended. Neither First Federal Financial nor any
First Federal Financial Subsidiary has been notified that principal and interest
45
with respect to any such loan or other credit accommodation will not be paid
when due or that the loan grade classification accorded such loan or credit
accommodation by First Federal Financial is inappropriate.
ARTICLE VI
COVENANTS OF CLFC
6.1. Conduct of Business.
6.1.1. Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of First
Federal Financial (which consent will not be unreasonably withheld, conditioned
or delayed, provided that First Federal Financial shall be deemed to have
consented to any written request as to which it has not responded within ten
(10) business days of receiving the written request), CLFC will: operate its
business, and it will cause each of the CLFC Subsidiaries to operate its
business, only in the usual, regular and ordinary course of business; use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises; and voluntarily take no action which would
(i) adversely affect the ability of CLFC, or to CLFC's Knowledge, First Federal
Financial to obtain any necessary approvals of governmental authorities required
for the transactions contemplated hereby or materially increase the period of
time necessary to obtain such approvals, or (ii) adversely affect its ability to
perform its covenants and agreements under this Agreement.
6.1.2. Negative Covenants. CLFC agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted or
required by this Agreement, or consented to by First Federal Financial in
writing (which consent shall not be unreasonably withheld, conditioned or
delayed, provided that First Federal Financial shall be deemed to have consented
to any written request as to which it has not responded within ten (10) business
days of receiving the written request), CLFC and CLB will not, and will cause
each of the CLFC Subsidiaries not to:
(A) change or waive any provision of its Certificate of Incorporation,
Charter or Bylaws, except as required by law;
(B) change the number of authorized or issued shares of its capital
stock, issue any shares that are held as "treasury shares" as of the date of
this Agreement, or issue or grant any Right or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of such stock, or split, combine or reclassify any shares of capital
stock, or declare, set aside or pay any dividend or other distribution in
respect of capital stock, or redeem or otherwise acquire any shares of capital
stock;
(C) enter into, amend in any material respect or terminate any
contract or agreement (including without limitation any settlement agreement
with respect to litigation) except in the ordinary course of business;
46
(D) make application for the opening or closing of any, or open or
close any, branch or automated banking facility;
(E) except as to bonus payments which have been accrued on the CLFC
Financial Statements as of December 31, 2005, grant or agree to pay any bonus,
severance or termination to, or enter into, renew or amend any employment
agreement, severance agreement and/or supplemental executive agreement with, or
increase in any manner the compensation or fringe benefits of, any of its
directors, officers or employees, except (i) as may be required pursuant to
commitments existing on the date hereof and set forth on CLFC DISCLOSURE
SCHEDULE 4.8.1 and 4.12.1; (ii) merit pay increases or bonuses consistent with
past practice; and (iii) CLB may hire at-will employees to fill vacancies that
may from time to time arise in the ordinary course of business;
(F) enter into or, except as may be required by law, materially modify
any pension, retirement, stock option, stock purchase, stock appreciation right,
stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution or defined benefit plan not
in the ordinary course of business consistent with past practice;
(G) merge or consolidate CLFC or any CLFC Subsidiary with any other
corporation; sell or lease all or any substantial portion of the assets or
business of CLFC or any CLFC Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other person, firm,
association, corporation or business organization other than in connection with
foreclosures, settlements in lieu of foreclosure, troubled loan or debt
restructuring, or the collection of any loan or credit arrangement between CLFC,
or any CLFC Subsidiary, and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; permit the
revocation or surrender by any CLFC Subsidiary of its certificate of authority
to maintain, or file an application for the relocation of, any existing branch
office;
(H) sell or otherwise dispose of the capital stock of CLFC or sell or
otherwise dispose of any asset of CLFC or of any CLFC Subsidiary other than in
the ordinary course of business consistent with past practice; subject any asset
of CLFC or of any CLFC Subsidiary to a lien, pledge, security interest or other
encumbrance (other than in connection with deposits, repurchase agreements,
bankers acceptances, "treasury tax and loan" accounts established in the
ordinary course of business and transactions in "federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other than
in the ordinary course of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any indebtedness for borrowed
money), except in the ordinary course of business consistent with past practice;
(I) take any action which would result in any of the representations
and warranties of CLFC set forth in this Agreement becoming untrue as of any
date after the date hereof or in any of the conditions set forth in Article IX
not being satisfied, except in each case as may be required by applicable law or
regulation or by any Bank Regulators;
47
(J) change any method, practice or principle of accounting, except as
may be required from time to time by GAAP (without regard to any optional early
adoption date) or any Bank Regulator responsible for regulating CLFC or CLB;
(K) waive, release, grant or transfer any material rights of value or
modify or change in any material respect any existing material agreement or
indebtedness to which CLFC or any CLFC Subsidiary is a party, other than in the
ordinary course of business, consistent with past practice;
(L) purchase any equity securities, or purchase any security for its
investment portfolio inconsistent with CLFC's or any CLFC Subsidiary's current
investment policy, or otherwise alter, in any material respect, the mix,
maturity, credit or interest rate risk profile of its portfolio of investment
securities or its portfolio of mortgage-backed securities;
(M) except for commitments issued prior to the date of this Agreement
which have not yet expired and which have been disclosed on the CLFC DISCLOSURE
SCHEDULE 6.1.2(M), make any loans other than loans which are consistent with
CLB's past practices and are made in the ordinary course of business, without
providing First Federal with all relevant documents related thereto and giving
First Federal a reasonable opportunity to review such loan and comment thereon;
(N) enter into, renew, extend or modify any other transaction (other
than deposit transactions) with any Affiliate outside of the ordinary course of
business;
(O) enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other agreement or
take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(P) except for the execution of this Agreement, and actions taken or
which will be taken in accordance with this Agreement and performance
thereunder, and, except for the payment of salaries under any existing
employment agreement, take any action that would give rise to a right of payment
to any individual under any employment agreement;
(Q) make any change in policies in existence on the date of this
Agreement with regard to: the extension of credit, or the establishment of
reserves with respect to the possible loss thereon or the charge off of losses
incurred thereon; investments; asset/liability management; or other material
banking policies in any material respect except as may be required by changes in
applicable law or regulations or by a Bank Regulator;
(R) except for the execution of this Agreement, and the transactions
contemplated therein, take any action that would give rise to an acceleration of
the right to payment to any individual under any CLFC Employee Plan;
(S) make any capital expenditures in excess of $25,000 individually or
$50,000 in the aggregate, other than pursuant to binding commitments existing on
the date hereof and other than expenditures necessary to maintain existing
assets in good repair;
48
(T) purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practices and policies;
(U) undertake or enter into any lease, contract or other commitment
for its account, other than in the normal course of providing credit to
customers as part of its banking business, involving a payment by CLFC or CLB of
more than $50,000 annually, or containing any financial commitment extending
beyond 12 months from the date hereof; or
(V) agree to do any of the foregoing.
6.2. Current Information.
6.2.1 During the period from the date of this Agreement to the
Effective Time, CLFC and CLB will cause one or more of its representatives to
confer with representatives of First Federal Financial and report the general
status of its ongoing operations at such times as First Federal Financial may
reasonably request, which shall include, but not be limited to, discussion of
the possible termination by CLFC and CLB of third-party service provider
arrangements effective at the Effective Time or at a date thereafter,
non-renewal of personal property leases and software licenses used by CLFC or
any of its Subsidiaries in connection with its systems operations, retention of
outside consultants and additional employees to assist with the conversion, and
outsourcing, as appropriate, of proprietary or self-provided system services, it
being understood that CLFC shall not be obligated to take any such action prior
to the Effective Time and, unless CLFC otherwise agrees, no conversion shall
take place prior to the Effective Time. CLFC will promptly notify First Federal
Financial of any material change in the normal course of its business or in the
operation of its properties and, to the extent permitted by applicable law, of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving CLFC or any CLFC Subsidiary.
6.2.2. CLB shall provide First Federal, within ten (10) business days
of the end of each calendar month, a written list of nonperforming assets (the
term "nonperforming assets," for purposes of this subsection, means (i) loans
that are "troubled debt restructuring" as defined in Statement of Financial
Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate owned, (iv) all
loans ninety (90) days or more past due as of the end of such month and (iv) and
impaired loans). On a bi-weekly basis, CLFC shall provide First Federal with a
schedule of all loan approvals, which schedule shall indicate the loan amount,
loan type and other material features of the loan.
6.3. Access to Properties and Records.
Subject to Section 12.1, CLFC and CLB shall permit First Federal Financial
reasonable access upon reasonable notice to its properties and those of the CLFC
Subsidiaries and to those CLFC employees designated on CLFC DISCLOSURE SCHEDULE
6.3, and shall disclose and make available to First Federal Financial during
normal business hours all of its books, papers and records relating to the
assets, properties, operations, obligations and liabilities, including, but not
limited to, all books of account (including the general ledger), tax records,
49
minute books of directors' (other than minutes that discuss any of the
transactions contemplated by this Agreement or other strategic alternatives) and
shareholders' meetings, organizational documents, Bylaws, material contracts and
agreements, filings with any regulatory authority, litigation files, plans
affecting employees, and any other business activities or prospects in which
First Federal Financial may have a reasonable interest; provided, however, that
CLFC shall not be required to take any action that would provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights or business interests or confidences of any customer or other person
or would result in the waiver by it of the privilege protecting communications
between it and any of its counsel. CLFC shall provide and shall request its
auditors to provide First Federal Financial with such historical financial
information regarding it (and related audit reports and consents) as First
Federal Financial may reasonably request for securities disclosure purposes.
First Federal Financial shall use commercially reasonable efforts to minimize
any interference with CLFC's regular business operations during any such access
to CLFC's property, books and records. CLFC and each CLFC Subsidiary shall
permit First Federal Financial, at its expense, to cause a "Phase I
environmental audit" and a "Phase II environmental audit" to be performed at any
physical location owned or occupied by CLFC or any CLFC Subsidiary.
6.4. Financial and Other Statements.
6.4.1. Promptly upon receipt thereof, CLFC will furnish to First
Federal Financial copies of each annual, interim or special audit of the books
of CLFC and the CLFC Subsidiaries made by its independent accountants and copies
of all internal control reports submitted to CLFC by such accountants in
connection with each annual, interim or special audit of the books of CLFC and
the CLFC Subsidiaries made by such accountants.
6.4.2. As soon as reasonably available, but in no event later than the
date such documents are filed with the appropriate Bank Regulator, CLFC will
deliver to First Federal Financial the CLFC Regulatory Reports filed by it with
the Bank Regulators. CLFC will furnish to First Federal Financial copies of all
documents, statements and reports as it or any CLFC Subsidiary shall send to its
shareholders, the Bank Regulators or any other regulatory authority, except as
legally prohibited thereby. Within twenty-five (25) days after the end of each
month, CLFC will deliver to First Federal Financial a consolidated balance sheet
and a consolidated statement of operations, without related notes, for such
month prepared in accordance with current financial reporting practices.
6.4.3. CLFC will advise First Federal Financial promptly of the
receipt of any examination report of any Bank Regulator with respect to the
condition or activities of CLFC or any of the CLFC Subsidiaries.
6.4.4. With reasonable promptness, CLFC will furnish to First Federal
Financial such additional financial data as First Federal Financial may
reasonably request, including without limitation, detailed monthly financial
statements and loan reports.
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6.5. Maintenance of Insurance.
CLFC and CLB shall maintain, and cause their respective Subsidiaries to
maintain, insurance in such amounts as are reasonable to cover such risks as are
customary in relation to the character and location of its properties and the
nature of its business, with such coverage and in such amounts not less than
that currently maintained by CLFC and CLB.
6.6. Disclosure Supplements.
From time to time prior to the Effective Time, CLFC and CLB will promptly
supplement or amend the CLFC DISCLOSURE SCHEDULE delivered in connection
herewith with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such CLFC DISCLOSURE SCHEDULE or which is necessary to
correct any information in such CLFC DISCLOSURE SCHEDULE which has been rendered
materially inaccurate thereby. No supplement or amendment to such CLFC
DISCLOSURE SCHEDULE shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
6.7. Consents and Approvals of Third Parties.
CLFC and CLB shall use all commercially reasonable efforts to obtain as
soon as practicable all consents and approvals of any other Persons necessary or
desirable for the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, First Federal, at
its discretion, shall be permitted to require CLFC to utilize the services of a
professional proxy soliciting firm to provide assistance in obtaining the
stockholder vote required to be obtained hereunder.
6.8. All Reasonable Efforts.
Subject to the terms and conditions herein provided, CLFC and CLB agree to
use all commercially reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. A voting agreement in the form
attached as Exhibit A to this Agreement shall be executed by each director and
executive officer of CLFC and CLB as of the date of this Agreement.
6.9. Failure to Fulfill Conditions.
In the event that CLFC determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify First Federal Financial.
6.10. No Solicitation.
From and after the date hereof until the termination of this Agreement,
neither CLFC, nor any CLFC Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by CLFC or
51
any of its Subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain an Acquisition Proposal
or agree to or endorse any Acquisition Proposal, or authorize or permit any of
its officers, directors, or employees or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any of its subsidiaries to take any such action, and
CLFC shall notify First Federal Financial orally (within one business day) and
in writing (as promptly as practicable) of all of the relevant details relating
to all inquiries and proposals which it or any of its Subsidiaries or any such
officer, director, employee, investment banker, financial advisor, attorney,
accountant or other representative may receive relating to any of such matters,
provided, however, that nothing contained in this Section 6.10 shall prohibit
the Board of Directors of CLFC from furnishing information to, or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written proposal to acquire CLFC pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction, if, and only to the extent that: (A) the Board of Directors of CLFC
receives an opinion from its independent financial advisor (which may be the
financial advisor in this transaction) that such proposal may be or could be
superior to the Merger from a financial point-of-view to CLFC's shareholders,
(B) the Board of Directors of CLFC, after consultation with and after
considering the advice of independent legal counsel, determines in good faith
that the failure to furnish information to or enter into discussions with such
person may cause the Board of Directors of CLFC to breach its fiduciary duties
to shareholders under applicable law (such proposal that satisfies (A) and (B)
being referred to herein as a "Superior Proposal"); (C) CLFC promptly notifies
First Federal Financial of such inquiries, proposals or offers received by, any
such information requested from, or any such discussions or negotiations sought
to be initiated or continued with CLFC or any of its representatives indicating,
in connection with such notice, the name of such person and the material terms
and conditions of any inquiries, proposals or offers; and (D) the CLFC
Shareholders Meeting has not occurred. For purposes of this Agreement,
"Acquisition Proposal" shall mean any proposal or offer as to any of the
following (other than the transactions contemplated hereunder) involving CLFC or
any of its subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transactions; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 25% or more of the assets of
CLFC, taken as a whole, in a single transaction or series of transactions; (iii)
any tender offer or exchange offer for 25% or more of the outstanding shares of
capital stock of CLFC or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
6.11. Reserves and Merger-Related Costs.
Subject to compliance with GAAP, on or before the Effective Time, CLFC
shall establish such additional accruals and reserves as may be necessary to
conform the accounting reserve practices and methods (including credit loss
practices and methods) of CLFC to those of First Federal Financial (as such
practices and methods are to be applied to CLFC from and after the Closing Date)
52
and First Federal Financial's plans with respect to the conduct of the business
of CLFC following the Merger and otherwise to reflect Merger-related expenses
and costs incurred by CLFC, provided, however, that CLFC shall not be required
to take such action unless First Federal Financial agrees in writing that all
conditions to Closing set forth in Article IX have been satisfied or waived
(except for the expiration of any applicable waiting periods) and that it is not
aware of any fact or circumstance that would prevent completion of the Merger;
and provided further that CLFC shall not be required to take such action more
than thirty (30) days prior to the Effective Time. Prior to the delivery by
First Federal Financial of the writing referred to in the preceding sentence,
CLFC shall provide First Federal Financial a written statement, certified
without personal liability by the chief executive officer of CLFC and dated the
date of such writing, that the representation made in Section 4.15.1 is true as
of such date or, alternatively, setting forth in detail the circumstances that
prevent such representation from being true as of such date; and no accrual or
reserve made by CLFC or any CLFC Subsidiary pursuant to this subsection, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 11.1.2.
6.12. Board of Directors and Committee Meetings.
CLFC and CLB shall permit one or more representatives of First Federal
Financial to attend any meeting of the Board of Directors of CLFC and/or CLB or
the Executive Committees thereof as an observer (the "Observer"), provided that
neither CLFC nor CLB shall be required to permit the Observer to remain present
during any confidential discussion of this Agreement and the transactions
contemplated hereby or any third party proposal to acquire control of CLFC or
CLB or during any other matter that the respective Board of Directors has been
advised of by counsel that such attendance by the Observer may violate a
confidentiality obligation or fiduciary duty.
6.13. Prohibition on Solicitation of Employees.
If this Agreement is terminated or if the Merger is not consummated for any
reason, for a period of two (2) years from the date of termination, neither CLFC
nor any CLFC Subsidiary, nor any of their respective officers or directors will,
directly or indirectly, initiate, solicit or knowingly encourage any employee
who is designated as a Vice President or higher, or who is designated a loan
officer, of First Federal Financial or any First Federal Financial Subsidiary to
leave his employment with First Federal to pursue employment at CLFC or any CLFC
Subsidiary.
ARTICLE VII
COVENANTS OF FIRST FEDERAL FINANCIAL
7.1. Conduct of Business.
7.1.1. Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of CLFC, which
consent will not be unreasonably withheld, conditioned or delayed, each of the
Mutual Holding Company, First Clover Leaf Financial, First Federal Financial or
First Federal will conduct its business in the ordinary course consistent with
past practices and will not take any action that would: (i) adversely affect the
53
ability of any party to obtain the approvals from any Governmental Entity or the
Bank Regulators required for the transactions contemplated hereby or materially
increase the period of time necessary to obtain such approvals; (ii) adversely
affect its ability to perform its covenants and agreements under this Agreement;
or (iii) result in the representations and warranties contained in Article V not
being true and correct on the date of this Agreement or at any future date on or
prior to the Effective Time.
7.1.2. Negative Covenants. The Mutual Holding Company, First Federal
Financial and First Federal agree that from the date of this Agreement to the
Effective Time, except as otherwise specifically permitted or required by this
Agreement, or consented to by CLFC in writing (which consent shall not be
unreasonably withheld, conditioned or delayed, provided that CLFC shall be
deemed to have consented to any written request as to which it has not responded
within ten (10) business days of receiving the written request), the Mutual
Holding Company, First Federal Financial and First Federal will not:
(A) change or waive any provision of its Charter or Bylaws, except as
required by law;
(B) change the number of authorized or issued shares of its capital
stock, issue any shares that are held as "treasury shares" as of the date of
this Agreement, or issue or grant any Right or agreement of any character
relating to its authorized or issued capital stock or any securities convertible
into shares of such stock, or split, combine or reclassify any shares of capital
stock, or, except with respect to normal quarterly dividends paid by First
Federal Financial on its common stock in the ordinary course of business, set
aside or pay any dividend or other distribution in respect of capital stock.
7.2. Current Information.
7.2.1. During the period from the date of this Agreement to the
Effective Time, First Federal Financial will cause one or more of its
representatives to confer with representatives of CLFC and report the general
status of its ongoing operations, including the progress of the Merger and
Conversion and furnish copies of such documents to CLFC in connection therewith,
at such times as CLFC may reasonably request. First Federal Financial will
promptly notify CLFC, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving First Federal Financial and any First Federal
Financial Subsidiary.
7.2.2. CLB and First Federal shall meet on a regular basis to discuss
and plan for the conversion of First Federal's data processing and related
electronic informational systems to those used by CLB, which planning shall
include, but not be limited to, discussion of the possible termination by First
Federal of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by First Federal in connection with its systems
operations, retention of outside consultants and additional employees to assist
with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that First
54
Federal shall not be obligated to take any such action prior to the Effective
Time and, unless First Federal otherwise agrees, no conversion shall take place
prior to the Effective Time.
7.2.3. First Federal Financial will advise CLFC promptly of the
receipt of any examination report of any Bank Regulator with respect to the
condition or activities of First Federal Financial any of the First Federal
Financial Subsidiaries.
7.2.4. With reasonable promptness, First Federal Financial will
furnish to CLFC such additional financial data as CLFC may reasonably request,
including without limitation, detailed monthly financial statements and loan
reports.
7.3. Financial and Other Statements.
As soon as reasonably available, but in no event later than the date such
documents are filed with the SEC, First Federal Financial will deliver to CLFC
the Securities Documents filed by it with the SEC under the Securities Laws.
First Federal Financial will furnish to CLFC copies of all documents, statements
and reports as it or First Clover Leaf Financial file with the OTS or any other
regulatory authority with respect to the Merger and the Conversion.
7.4. Disclosure Supplements.
From time to time prior to the Effective Time, the Mutual Holding Company,
First Clover Leaf Financial, First Federal Financial and First Federal will
promptly supplement or amend the FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE
delivered in connection herewith with respect to any material matter hereafter
arising which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such FIRST FEDERAL
FINANCIAL DISCLOSURE SCHEDULE or which is necessary to correct any information
in such FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE which has been rendered
inaccurate thereby. No supplement or amendment to such FIRST FEDERAL FINANCIAL
DISCLOSURE SCHEDULE shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX.
7.5. Consents and Approvals of Third Parties.
The Mutual Holding Company, First Clover Leaf Financial, First Federal
Financial and First Federal shall use all commercially reasonable efforts to
obtain as soon as practicable all consents and approvals of any other Persons,
including the Members and shareholders of First Federal Financial necessary or
desirable for the consummation of the transactions contemplated by this
Agreement, including the Conversion.
7.6. All Reasonable Efforts.
Subject to the terms and conditions herein provided, the Mutual Holding
Company, First Clover Leaf Financial, First Federal Financial and First Federal
agree to use all commercially reasonable efforts to take, or cause to be taken,
55
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including the Conversion.
7.7. Failure to Fulfill Conditions.
In the event that the Mutual Holding Company, First Clover Leaf Financial,
First Federal Financial or First Federal determine that a condition to its
obligation to complete the Merger or Conversion cannot be fulfilled and that it
will not waive that condition, it will promptly notify CLFC.
7.8. Employee Benefits.
7.8.1. First Federal Financial will review all CLFC Compensation and
Benefit Plans and may, in its sole discretion, terminate or continue such plans,
provided, however, that any termination of a CLFC Compensation and Benefit Plan
that is subject to Code Section 409A shall comply with the requirements of that
Code section. All CLFC Employees who become participants in a First Federal
Compensation and Benefit Plan shall, for purposes of determining eligibility for
and for any applicable vesting periods of such employee benefits only (and not
for benefit accrual purposes) be given credit for meeting eligibility and
vesting requirements in such plans for service as an employee of CLFC or a CLFC
Subsidiary or any predecessor thereto prior to the Effective Time, except with
respect to the First Federal ESOP. Continuing Employees (as defined below) shall
be considered new employees for purposes of eligibility and vesting in the First
Federal ESOP.
7.8.2. Except as set forth in this Section 7.8, First Clover Leaf
Financial and/or First Federal Financial shall assume and honor in accordance
with their terms and in accordance with FIRST FEDERAL FINANCIAL DISCLOSURE
SCHEDULE 7.8.2, all employment, severance and other compensation agreements,
plans and arrangements existing prior to the execution of this Agreement which
are between CLFC or any of its Subsidiaries and any director, officer or
employee thereof and which have been disclosed in CLFC DISCLOSURE SCHEDULE
4.12.1. Except as expressly provided otherwise in this Agreement or in FIRST
FEDERAL FINANCIAL DISCLOSURE SCHEDULE 7.8.2, CLFC shall not accelerate the
payment of any amounts or benefits that are or may become payable under this
Agreement.
7.8.3. As of the date hereof, First Federal Financial and First
Federal shall enter into an employment agreement, which shall become effective
as of the Effective Time (a form of which is set forth in FIRST FEDERAL
FINANCIAL DISCLOSURE SCHEDULE 7.8.3), with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief
Executive Officer of CLFC and CLB. The employment agreement shall provide that
it supersedes any prior employment agreement and/or change in control agreement
to which ▇▇. ▇▇▇▇▇ is a party, which agreements shall terminate, effective as of
the Effective Time. FIRST FEDERAL FINANCIAL DISCLOSURE SCHEDULE 7.8.3 sets forth
a form of employment agreement to be entered into at the Effective Time between
First Clover Leaf Financial, First Clover Leaf Bank and ▇▇▇▇ ▇▇▇▇▇▇, and a form
of employment agreement to be entered into at the Effective Time between First
Clover Leaf Financial, First Clover Leaf Bank and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
56
7.8.4. In the event of any termination or consolidation of any CLB
health, disability or life insurance plan with any First Federal health,
disability or life insurance plan, First Federal shall make available to
employees of CLB who continue employment with First Federal ("Continuing
Employees") and their dependents employer-provided health, disability or life
insurance coverage on the same basis as it provides such coverage to First
Federal employees. Unless a Continuing Employee affirmatively terminates
coverage under a CLB health, disability or life insurance plan prior to the time
that such Continuing Employee becomes eligible to participate in the First
Federal health, disability or life insurance plan, no coverage of any of the
Continuing Employees or their dependents shall terminate under any of the CLB
health, disability or life insurance plans prior to the time such Continuing
Employees and their dependents become eligible to participate in the health,
disability or life insurance plans, programs and benefits common to all
employees of First Federal and their dependents. A Continuing Employee's prior
service with CLB or any CLFC Subsidiary shall also apply for purposes of
satisfying any waiting periods, actively-at-work requirements, and evidence of
insurability requirements. Continuing Employees who become covered under a First
Federal health plan shall be required to satisfy the deductible limitations of
the First Federal health plan for the plan year in which coverage commences,
without offset for deductibles satisfied under the CLB health plan, except to
the extent, CLB and/or the Continuing Employee shall provide substantiation in a
form satisfactory to First Federal, of the dollar amount of such deductibles
that have been satisfied for such Continuing Employees. In the event of any
termination of any CLB health plan, or consolidation of any CLB health plan with
any health plan of First Federal and/or any First Clover Leaf Financial
Subsidiary, the Health Insurance Portability Accountability Act of 1996
("HIPAA") will govern any coverage limitations due to pre-existing conditions.
7.9. Directors and Officers Indemnification and Insurance.
7.9.1. First Clover Leaf Financial shall maintain, or shall cause
First Federal to maintain, in effect for three years following the Effective
Time, the current directors' and officers' liability insurance policies
maintained by CLFC and the CLFC Subsidiaries (provided, that First Clover Leaf
Financial may substitute therefor policies of at least the same coverage
containing terms and conditions which are not less favorable) with respect to
matters occurring prior to the Effective Time; provided, however, that in no
event shall First Clover Leaf Financial be required to expend pursuant to this
Section 7.9.1 more than 150% of the annual cost currently expended by CLFC with
respect to such insurance. In connection with the foregoing, CLFC agrees in
order for First Clover Leaf Financial to fulfill its agreement to provide
directors and officers liability insurance policies for three years to provide
such insurer or substitute insurer with such representations as such insurer may
request.
7.9.2. In addition to Section 7.9.1, for a period of six years after
the Effective Time, First Clover Leaf Financial and First Federal Financial
shall indemnify, defend and hold harmless each person who is now, or who has
been at any time before the date hereof or who becomes before the Effective
Time, an officer or director of CLFC or a CLFC Subsidiary (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
attorney's fees), liabilities or judgments or amounts that are paid in
settlement (which settlement shall require the prior written consent of First
57
Clover Leaf Financial, which consent shall not be unreasonably withheld,
conditioned or delayed) of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, or administrative (each a
"Claim"), in which an Indemnified Party is, or is threatened to be made, a party
or witness in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director, officer or employee of CLFC or a CLFC
Subsidiary if such Claim pertains to any matter of fact arising, existing or
occurring before the Effective Time (including, without limitation, the Merger
and the other transactions contemplated hereby), regardless of whether such
Claim is asserted or claimed before, or after, the Effective Time (the
"Indemnified Liabilities"), to the fullest extent permitted under applicable
state or federal law, and First Clover Leaf Financial's Articles of
Incorporation and Bylaws. First Clover Leaf Financial shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by applicable state or Federal
law upon receipt of an undertaking to repay such advance payments if such
Indemnified Party shall be adjudicated or determined to be not entitled to
indemnification in the manner set forth below. Any Indemnified Party wishing to
claim indemnification under this Section 7.9.2 upon learning of any Claim, shall
notify First Clover Leaf Financial (but the failure so to notify First Clover
Leaf Financial shall not relieve it from any liability which it may have under
this Section 7.9.2, except to the extent such failure materially prejudices
First Clover Leaf Financial) and shall deliver to First Clover Leaf Financial
the undertaking referred to in the previous sentence. In the event of any such
Claim (whether arising before or after the Effective Time) (1) First Clover Leaf
Financial shall have the right to assume the defense thereof (in which event the
Indemnified Parties will cooperate in the defense of any such matter) and upon
such assumption First Clover Leaf Financial shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if First Clover Leaf Financial elects not to assume such
defense, or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between First Clover
Leaf Financial and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them, and First Clover Leaf Financial shall
pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) except to the extent otherwise required due to conflicts of
interest, First Clover Leaf Financial shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties whose
reasonable fees and expenses shall be paid promptly as statements are received
unless there is a conflict of interest that necessitates more than one law firm,
(3) First Clover Leaf Financial shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld, conditioned or delayed), and (4) no Indemnified Party shall be
entitled to indemnification hereunder with respect to a matter as to which (x)
such Indemnified Party shall have been adjudicated in any proceeding not to have
acted in good faith and in a manner such Indemnified Party reasonably believed
to be in, or not opposed to, the best interests of CLFC or any CLFC Subsidiary,
or (y) in the event that a proceeding is compromised or settled so as to impose
any liability or obligation upon an Indemnified Party, if there is a
determination that with respect to said matter said Indemnified Party did not
act in good faith and in a manner such Indemnified Party reasonably believed to
be in, or not opposed to, the best interests of CLFC or any CLFC Subsidiary. The
determination shall be made by a majority vote of a quorum consisting of the
Directors of First Clover Leaf Financial who are not involved in such
proceeding.
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7.9.3. In the event that either First Clover Leaf Financial or any of
its successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving bank or entity of such
consolidation or merger or (ii) transfers 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 First Clover Leaf
Financial shall assume the obligations set forth in this Section 7.9.
7.9.4. The obligations of First Clover Leaf Financial provided under
this Section 7.9 are intended to be enforceable against First Clover Leaf
Financial directly by the Indemnified Parties and shall be binding on all
respective successors and permitted assigns of First Clover Leaf Financial.
7.10. Stock Listing.
First Clover Leaf Financial agrees to list on the Stock Exchange (or such
other national securities exchange on which the shares of the First Clover Leaf
Financial Common Stock shall be listed as of the date of consummation of the
Merger), subject to official notice of issuance, the shares of First Clover Leaf
Financial Common Stock to be issued in the Merger.
7.11. Maintenance of Insurance.
First Federal Financial shall maintain, and cause its Subsidiary to
maintain, insurance in such amounts as is reasonable to cover such risks as are
customary in relation to the character and location of its properties and the
nature of its business, with such coverage and in such amounts not less than
that currently maintained by First Federal Financial.
7.12. Access to Properties and Records.
Subject to Section 12.1, First Federal Financial shall permit CLFC and CLB
reasonable access upon reasonable notice to its properties and those of the
First Federal Financial Subsidiaries, and shall disclose and make available to
CLFC during normal business hours all of its books, papers and records relating
to the assets, properties, operations, obligations and liabilities, including,
but not limited to, all books of account (including the general ledger), tax
records, minute books of directors' (other than minutes that discuss any of the
transactions contemplated by this Agreement or other strategic alternatives) and
shareholders' meetings, organizational documents, Bylaws, material contracts and
agreements, filings with any regulatory authority, litigation files, plans
affecting employees, and any other business activities or prospects in which
CLFC may have a reasonable interest; provided, however, that First Federal
Financial shall not be required to take any action that would provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights or business interests or confidences of any customer or
other person or would result in the waiver by it of the privilege protecting
communications between it and any of its counsel. First Federal Financial shall
provide and shall request its auditors to provide CLFC with such historical
financial information regarding it (and related audit reports and consents) as
CLFC may reasonably request for securities disclosure purposes. CLFC shall use
commercially reasonable efforts to minimize any interference with First Federal
Financial's regular business operations during any such access to First Federal
Financial's property, books and records. First Federal Financial and each First
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Federal Financial Subsidiary shall permit CLFC, at its expense, to cause a
"Phase I environmental audit" and a "Phase II environmental audit" to be
performed at any physical location owned or occupied by First Federal Financial
or any First Federal Financial Subsidiary.
7.13. Prohibition on Solicitation of Employees.
If this Agreement is terminated or if the Merger is not consummated for any
reason, for a period of two (2) years from the date of termination, neither
First Federal Financial nor any First Federal Financial Subsidiary, nor any of
their respective officers or directors will, directly or indirectly, initiate,
solicit or knowingly encourage any employee who is designated as a Vice
President or higher, or who is designated a loan officer, of CLFC or any CLFC
Subsidiary to leave his employment with CLFC to pursue employment at First
Federal Financial or any CLFC Subsidiary.
ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. CLFC and First Federal Financial Shareholder Meetings.
8.1.1. CLFC will (i) as promptly as practicable after the Merger
Registration Statement is declared effective by the SEC, take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "CLFC Shareholders Meeting"), for the purpose of considering
this Agreement and the Merger, and for such other purposes as may be, in CLFC's
reasonable judgment, necessary or desirable, (ii) subject to the next sentence,
have its Board of Directors recommend approval of this Agreement to the CLFC
shareholders. The Board of Directors of CLFC may fail to make such a
recommendation, or withdraw, modify or change any such recommendation only in
connection with a Superior Proposal, as set forth in Section 6.10, and only if
such Board of Directors, after having consulted with and considered the advice
of outside counsel to such Board, has determined that the making of such
recommendation, or the failure so to withdraw, modify or change its
recommendation, may constitute a breach of the fiduciary duties of such
directors under applicable law; and (iii) cooperate and consult with First
Federal Financial and First Clover Leaf Financial with respect to each of the
foregoing matters. The CLFC Shareholders Meeting shall not be held until the
Conversion Registration Statement has been declared effective by the SEC.
8.1.2. First Federal Financial will (i) as promptly as practicable
after the Merger Registration Statement is declared effective by the SEC, take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its shareholders (the "First Federal Financial Shareholders Meeting"), which
shall not be held until the requisite approvals from the Bank Regulators have
been obtained and the Conversion Registration Statement has been declared
effective by the SEC, for the purpose of approving the transactions contemplated
by this Agreement, and for such other purposes as may be, in First Federal
Financial's reasonable judgment, necessary or desirable, (ii) subject to the
fiduciary responsibility of the Board of Directors of First Federal Financial as
advised by counsel, recommend to its shareholders the approval of the
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aforementioned matters to be submitted by it to its shareholders, and (iii)
cooperate and consult with CLFC with respect to each of the foregoing matters.
8.2. Proxy Statement-Prospectus.
8.2.1. For the purposes (x) of registering First Clover Leaf Financial
Common Stock to be offered to holders of CLFC Common Stock in connection with
the Merger with the SEC under the Securities Act and applicable state securities
laws and (y) of holding the CLFC Shareholders Meeting and First Federal
Financial Shareholders Meeting, First Clover Leaf Financial shall draft and
prepare, and CLFC shall cooperate in the preparation of, the Merger Registration
Statement, including a combined proxy statement and prospectus or statements
satisfying all applicable requirements of applicable state securities and
banking laws, and of the Securities Act and the Exchange Act, and the rules and
regulations thereunder (such proxy statement/prospectus in the form mailed by
CLFC to the CLFC shareholders and by First Federal Financial to the First
Federal Financial shareholders, together with any and all amendments or
supplements thereto, being herein referred to as the "Proxy
Statement-Prospectus"). First Clover Leaf Financial shall file the Merger
Registration Statement, including the Proxy Statement-Prospectus, with the SEC.
Each of First Clover Leaf Financial and CLFC shall use their best efforts to
have the Merger Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing, and each of CLFC and First
Clover Leaf Financial shall thereafter promptly mail the Proxy
Statement-Prospectus to its shareholders. First Clover Leaf Financial shall also
use its best efforts to obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement, and CLFC shall furnish all information concerning CLFC and the
holders of CLFC Common Stock as may be reasonably requested in connection with
any such action.
8.2.2. CLFC shall provide First Clover Leaf Financial with any
information concerning itself that First Federal Financial may reasonably
request in connection with the drafting and preparation of the Proxy
Statement-Prospectus, and First Federal Financial shall notify CLFC promptly of
the receipt of any comments of the SEC with respect to the Proxy
Statement-Prospectus and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to CLFC
promptly copies of all correspondence between First Clover Leaf Financial, First
Federal Financial or any of their representatives and the SEC. The information
to be provided by CLFC for inclusion in the Proxy Statement-Prospectus will not,
at the time the Proxy Statement-Prospectus is mailed, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading. The information supplied,
or to be supplied, by CLFC for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority, be accurate in all
material aspects. First Clover Leaf Financial and First Federal Financial shall
give CLFC and its counsel, which may be any independent third-party counsel
selected by the board of directors of CLFC, the opportunity to review, comment
on and approve the Proxy Statement-Prospectus prior to its being filed with the
SEC and shall give CLFC and its counsel the opportunity to review, comment on
and approve all amendments and supplements to the Proxy Statement-Prospectus and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of First Federal
Financial, First Clover Leaf Financial and CLFC agrees to use all reasonable
efforts, after consultation with the other party hereto, to respond promptly to
all such comments of and requests by the SEC and to cause the Proxy
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Statement-Prospectus and all required amendments and supplements thereto to be
mailed to the holders of CLFC Common Stock and First Federal Financial Common
Stock entitled to vote at the CLFC Shareholders Meeting and First Federal
Financial Shareholders Meeting, respectively, referred to in Section 8.1 at the
earliest practicable time.
8.2.3. CLFC and First Federal Financial shall promptly notify the
other party if at any time it becomes aware that the Proxy Statement-Prospectus
or the Merger Registration Statement contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. In such event, CLFC
shall cooperate with First Federal Financial and First Clover Leaf Financial in
the preparation of a supplement or amendment to such Proxy Statement-Prospectus
which corrects such misstatement or omission, and First Clover Leaf Financial
shall file an amended Merger Registration Statement with the SEC, and each of
CLFC, First Federal Financial and First Clover Leaf Financial shall mail an
amended Proxy Statement-Prospectus to CLFC's and First Federal Financial's
shareholders, respectively.
8.3. The Mutual Holding Company Conversion from Mutual to Stock Form.
Commencing promptly after the date of this Agreement, the Mutual Holding
Company, First Federal Financial, First Clover Leaf Financial and First Federal
will take all reasonable steps necessary to effect the Conversion. In addition,
without limiting the generality of the foregoing, the Mutual Holding Company and
First Federal Financial shall cause the following to be done:
8.3.1. The First Federal Financial Shareholders Meeting. First Federal
Financial will (i) as promptly as practicable after the Conversion Registration
Statement is declared effective by the SEC, and the requisite approvals from the
Bank Regulators have been obtained, take all steps necessary to duly call, give
notice of, convene and hold the First Federal Financial Shareholders Meeting for
the purpose of approving the Conversion and/or the Plan of Conversion, and for
such other purposes as may be, in the reasonable judgment of First Federal
Financial, necessary or desirable, and (ii) subject to the fiduciary
responsibility of the Board of Directors of First Federal Financial as advised
by counsel, recommend to its shareholders the approval of the aforementioned
matters to be submitted by it to its shareholders.
8.3.2. The Mutual Holding Company Special Meeting. The Mutual Holding
Company will (i) as promptly as practicable after the Conversion Registration
Statement is declared effective by the SEC, and the requisite approvals from the
Bank Regulators have been obtained, take all steps necessary to duly call, give
notice of, convene and hold a meeting of Members (the "Members Meeting") for the
purpose of approving the Plan of Conversion, and for such other purposes as may
be, in the reasonable judgment of the Mutual Holding Company, necessary or
desirable, (ii) subject to the fiduciary responsibility of the Board of
Directors of the Mutual Holding Company as advised by counsel, recommend to
Members the approval of the aforementioned matters to be submitted by it to
Members, and (iii) cooperate and consult with CLFC with respect to each of the
foregoing matters.
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8.3.3. The Mutual Holding Company will use all reasonable efforts to
prepare and file all required regulatory applications required in connection
with the Conversion.
8.3.4. First Federal Financial and First Clover Leaf Financial shall
prepare as promptly as practicable, and CLFC shall cooperate in the preparation
of, the Conversion Prospectus. Such Conversion Prospectus shall be incorporated
into the Conversion Registration Statement. First Clover Leaf Financial shall
file the Conversion Registration Statement with the SEC. First Clover Leaf
Financial shall use its reasonable best efforts to have the Conversion
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing.
8.3.5. CLFC shall provide First Federal Financial and First Clover
Leaf Financial with any information concerning it that First Federal Financial
or First Clover Leaf Financial may reasonably request in connection with the
Conversion Prospectus, and First Federal Financial shall notify CLFC promptly of
the receipt of any comments of the SEC, the OTS and any other Bank Regulator
with respect to the Conversion Prospectus and of any requests by the SEC, the
OTS or any other Bank Regulator for any amendment or supplement thereto or for
additional information, and shall provide to CLFC promptly copies of all
correspondence between First Clover Leaf Financial or any representative of
First Clover Leaf Financial and the SEC, the OTS or any other Bank Regulator.
First Clover Leaf Financial shall give CLFC and its counsel the opportunity to
review and comment on the Conversion Prospectus prior to its being filed with
the SEC, the OTS and any Bank Regulator and shall give CLFC and its counsel the
opportunity to review and comment on all amendments and supplements to the
Conversion Prospectus and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC,
the OTS and any Bank Regulator. Each of First Federal Financial, First Clover
Leaf Financial and CLFC agrees to use all reasonable efforts, after consultation
with the other party hereto, to respond promptly to all such comments of and
requests by the SEC, the OTS and any Bank Regulator and to cause the Conversion
Prospectus and all required amendments and supplements thereto to be mailed to
Members at the earliest practicable time.
8.3.6. CLFC shall promptly notify First Federal Financial if at any
time it becomes aware that the Conversion Prospectus or the Conversion
Registration Statement contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, CLFC shall cooperate with First
Federal Financial and First Clover Leaf Financial in the preparation of a
supplement or amendment to such Conversion Prospectus, which corrects such
misstatement or omission, and First Clover Leaf Financial shall file an amended
Conversion Registration Statement with the SEC. CLFC shall provide to First
Clover Leaf Financial, First Federal Financial and the placement agent for the
sale of First Clover Leaf Financial Common Stock in the Conversion Offering a
"comfort" letter from the independent certified public accountants for CLFC,
dated as of the date of the Conversion Prospectus and updated as of the date of
consummation of the Conversion, with respect to certain financial information
regarding CLFC, each in form and substance which is customary in transactions
such as the Conversion, and shall cause its counsel to deliver to the placement
agent for the Conversion such opinions as First Federal Financial and First
Clover Leaf Financial may reasonably request.
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8.3.7. The aggregate price for which the shares of First Clover Leaf
Financial Common Stock are sold to purchasers in the Conversion Offering shall
be based on the Independent Valuation. The Independent Valuation shall be
expressed as a range, the maximum and minimum of which shall vary 15% above and
below the midpoint of such range, and the maximum of such range may be increased
by an additional 15%.
8.3.8. If any shares of First Clover Leaf Financial Common Stock that
are offered for sale in the subscription offering that is conducted as part of
the Conversion Offering remain unsold then, at First Federal Financial's
discretion, such shares may be issued to CLFC shareholders as part of the Merger
Consideration if necessary to complete the Conversion.
8.4. Regulatory Approvals.
Each of CLFC, CLB, the Mutual Holding Company, First Clover Leaf Financial,
First Federal Financial and First Federal will cooperate with the other and use
all reasonable efforts to promptly prepare all necessary documentation, to
effect all necessary filings and to obtain all necessary permits, consents,
approvals and authorizations of the SEC, the OTS, and any other Bank Regulator
and third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement, including without limitation the
Merger and the Conversion. CLFC and First Federal Financial will furnish each
other and each other's counsel with all information concerning themselves, their
subsidiaries, directors, officers and shareholders and such other matters as may
be necessary or advisable in connection with the Conversion Prospectus, the
Proxy Statement-Prospectus and any application, petition or any other statement
or application made by or on behalf of CLFC, First Clover Leaf Financial or
First Federal Financial to any governmental body in connection with the
Conversion, the Merger, and the other transactions contemplated by this
Agreement. CLFC shall have the right to review and approve in advance all
characterizations of the information relating to CLFC and any of its
Subsidiaries, which appear in any filing made in connection with the
transactions contemplated by this Agreement with any governmental body. In
addition, CLFC, First Federal Financial and First Clover Leaf Financial shall
each furnish to the other for review a copy of each such filing made in
connection with the transactions contemplated by this Agreement with any
governmental body prior to its filing.
8.5. Affiliates.
CLFC shall use all reasonable efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act) of CLFC to deliver to First Federal Financial, as soon as
practicable after the date of this Agreement, and at least thirty (30) days
prior to the date of the shareholders meeting called by CLFC to approve this
Agreement, a written agreement, in the form of Exhibit B hereto, providing that
such person will not sell, pledge, transfer or otherwise dispose of any shares
of First Clover Leaf Financial Common Stock to be received by such "affiliate,"
as a result of the Merger otherwise than in compliance with the applicable
provisions of the Securities Act and the rules and regulations thereunder.
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ARTICLE IX
CLOSING CONDITIONS
9.1. Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Pre-Closing Date of the following
conditions, none of which may be waived:
9.1.1. Shareholder and Member Approval.
(A) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the shareholders of CLFC and by the
shareholders of First Federal Financial and First Federal.
(B) The Conversion and the Plan of Conversion shall have been approved
by the requisite vote of Members and shareholders of First Federal Financial.
9.1.2. Injunctions. None of the parties hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction that
enjoins or prohibits the consummation of the transactions contemplated by this
Agreement.
9.1.3. Regulatory Approvals. All necessary approvals, authorizations
and consents of all Bank Regulators and Governmental Entities required to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect and all waiting periods
relating to such approvals, authorizations or consents shall have expired; and
no such approval, authorization or consent shall include any condition or
requirement, excluding standard conditions that are normally imposed by the
regulatory authorities in bank merger transactions or in mutual-to-stock
conversions, that would, in the good faith reasonable judgment of the Board of
Directors of First Federal Financial, materially and adversely affect the
business, operations, financial condition, property or assets of the combined
enterprise or otherwise materially impair the value of CLFC or CLB to First
Federal Financial or First Clover Leaf Financial.
9.1.4. Effectiveness of Merger Registration Statement. The Merger
Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Merger Registration Statement
shall have been issued, and no proceedings for that purpose shall have been
initiated or threatened by the SEC and, if the offer and sale of First Clover
Leaf Financial Common Stock in the Merger is subject to the Blue Sky laws of any
state, shall not be subject to a stop order of any state securities
commissioner.
9.1.5. Stock Exchange Listing. The shares of First Clover Leaf
Financial Common Stock to be issued in the Merger shall have been authorized for
listing on the Stock Exchange, subject to official notice of issuance.
9.1.6. Tax Opinion. On the basis of facts, representations and
assumptions which shall be consistent with the state of facts existing at the
Pre-Closing date, First Federal Financial, First Clover Leaf Financial and CLFC
shall have received an opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. reasonably
65
acceptable in form and substance to First Federal Financial, First Clover Leaf
Financial and CLFC dated as of the Pre-Closing Date, substantially to the effect
that, for Federal income tax purposes:
(A) The Merger, when consummated in accordance with the terms hereof,
either will constitute a reorganization within the meaning of Section 368(a) of
the Code or will be treated as part of a reorganization within the meaning of
Section 368(a) of the Code;
(B) None of the Conversion, the Exchange Offer, or the Bank Merger
will adversely affect the Merger qualifying as a Reorganization within the
meaning of Section 368(a) of the Code;
(C) No gain or loss will be recognized by First Federal Financial,
First Clover Leaf Financial, First Federal, CLFC or CLB by reason of the Merger;
(D) The exchange of CLFC Common Stock to the extent exchanged for
First Clover Leaf Financial Common Stock will not give rise to recognition of
gain or loss for Federal income tax purposes to the shareholders of CLFC;
(E) The basis of the First Clover Leaf Financial Common Stock to be
received (including any fractional shares deemed received for tax purposes) by a
CLFC shareholder will be the same as the basis of the CLFC Common Stock
surrendered pursuant to the Merger in exchange therefor, increased by any gain
recognized by such CLFC shareholder as a result of the Merger and decreased by
any cash received by such CLFC shareholders in the Merger; and
(F) The holding period of the shares of First Clover Leaf Financial
Common Stock to be received by a shareholder of CLFC will include the period
during which the shareholder held the shares of CLFC Common Stock surrendered in
exchange therefor, provided the CLFC Common Stock surrendered is held as a
capital asset at the Effective Time.
Each of First Federal Financial, First Clover Leaf Financial and CLFC shall
provide a letter setting forth the facts, assumptions and representations on
which such counsel may rely in rendering its opinion.
9.1.7. Conversion. First Clover Leaf Financial shall have received and
accepted orders to purchase, including any shares to be issued as Merger
Consideration, for at least the minimum number of shares of First Clover Leaf
Financial Common Stock offered for sale in the Conversion Offering.
9.2. Conditions to the Obligations of First Federal Financial under
this Agreement.
The obligations of First Federal Financial and First Clover Leaf
Financial under this Agreement shall be further subject to the satisfaction of
the conditions set forth in Sections 9.2.1 through 9.2.7 at or prior to the
Closing, any of which may be waived by First Federal Financial:
9.2.1. Representations and Warranties. Except as otherwise
contemplated by this Agreement or consented to in writing by First Federal
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Financial, each of the representations and warranties of CLFC and CLB set forth
in this Agreement which is qualified as to materiality shall be true and
correct, and each such representation or warranty that is not so qualified shall
be true and correct in all material respects, in each case as of the date of
this Agreement, and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time; and CLFC shall have
delivered to First Federal Financial a certificate of CLFC to such effect signed
by the Chief Executive Officer and the Chief Financial Officer of CLFC as of the
Effective Time.
9.2.2. Agreements and Covenants. CLFC, CLB and each CLFC Subsidiary
shall have performed in all material respects all obligations and complied in
all material respects with all agreements or covenants to be performed or
complied with by each of them at or prior to the Effective Time, and First
Federal Financial shall have received a certificate signed on behalf of CLFC by
the Chief Executive Officer and Chief Financial Officer of CLFC to such effect
dated as of the Effective Time.
9.2.3. Permits, Authorizations, Etc. CLFC and the CLFC Subsidiaries
shall have obtained any and all material permits, authorizations, consents,
waivers, clearances or approvals required for the lawful consummation of the
Merger by CLFC, the failure to obtain which would have a Material Adverse Effect
on First Federal Financial and any Subsidiary of First Federal Financial.
9.2.4. Accountants' Letter. First Federal Financial shall have
received a "comfort" letter from the independent certified public accountants
for CLFC, dated (i) the effective date of the Merger Registration Statement and
(ii) the Pre-Closing Date, with respect to certain financial information
regarding CLFC, each in form and substance which is customary in transactions of
the nature contemplated by this Agreement.
9.2.5. No Material Adverse Effect. Since December 31, 2004, no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on CLFC.
9.2.6. Dissenting Shares. As of immediately prior to the Effective
Time, not more than 10% of the issued and outstanding shares of CLFC Common
Stock shall have dissented to the Merger under the DGCL, and preserved, as of
immediately prior to the Effective Time, the right to pursue their right of
appraisal for the fair value of their shares of CLFC Common Stock under the
DGCL.
9.2.7. Opinion of CLFC's Counsel. First Clover Leaf Financial shall
have received an opinion of Burroughs, Hepler, Broom, MacDonald, ▇▇▇▇▇▇▇ & True,
LLP, counsel to CLFC, dated the Closing Date, in form and substance reasonably
satisfactory to First Clover Leaf Financial and its counsel to the effect set
forth on Exhibit C attached hereto.
CLFC will furnish First Federal Financial with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 9.2 as First Federal Financial may
reasonably request.
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9.3. Conditions to the Obligations of CLFC under this Agreement.
The obligations of CLFC under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.6 at
or prior to the Closing, any of which may be waived by CLFC:
9.3.1. Representations and Warranties. Except as otherwise
contemplated by this Agreement or consented to in writing by CLFC, each of the
representations and warranties of First Federal Financial, First Clover Leaf
Financial, First Federal and the Mutual Holding Company set forth in this
Agreement which is qualified as to materiality shall be true and correct, and
each such representation or warranty that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement,
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time; and First Federal Financial shall have
delivered to CLFC a certificate of First Federal Financial to such effect signed
by the Chief Executive Officer and the Chief Financial Officer of First Federal
Financial as of the Effective Time.
9.3.2. Agreements and Covenants. As of the Pre-Closing Date, First
Federal Financial, First Clover Leaf Financial, the Mutual Holding Company and
First Federal shall have performed in all material respects all obligations and
complied in all material respects with all agreements or covenants to be
performed or complied with by each of them at or prior to the Effective Time,
and CLFC shall have received a certificate signed on behalf of First Federal
Financial by the Chief Executive Officer and Chief Financial Officer of First
Federal Financial to such effect dated as of the Effective Time.
9.3.3. Permits, Authorizations, Etc. The Mutual Holding Company, First
Clover Leaf Financial, First Federal Financial and First Federal shall have
obtained any and all material permits, authorizations, consents, waivers,
clearances or approvals required for the lawful consummation of the Merger by
First Federal Financial and First Clover Leaf Financial, the failure to obtain
which would have a Material Adverse Effect on First Federal Financial and its
Subsidiaries, taken as a whole.
9.3.4. Payment of Merger Consideration. First Clover Leaf Financial
shall have delivered the Exchange Fund to the Exchange Agent on or before the
Closing Date and the Exchange Agent shall provide CLFC with a certificate
evidencing such delivery.
9.3.5. No Material Adverse Effect. Since December 31, 2004, no event
has occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on First Federal
Financial.
9.3.6. Opinion of First Clover Leaf Financial's Counsel. CLFC shall
have received an opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to
First Clover Leaf Financial, dated the Closing Date, in form and substance
reasonably satisfactory to CLFC and its counsel to the effect set forth on
Exhibit D attached hereto.
First Federal Financial and First Clover Leaf Financial will furnish CLFC
with such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 9.3 as CLFC may
reasonably request.
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ARTICLE X
THE CLOSING
10.1. Time and Place.
Subject to the provisions of Articles IX and XI, the Closing of the
transactions contemplated hereby shall take place at the offices of ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. at
10:00 a.m. on the date determined by First Federal Financial, in its sole
discretion, upon five (5) days prior notice to CLFC, but in no event later than
thirty days (30) after the last condition precedent pursuant to this Agreement
has been fulfilled or waived (including the expiration of any applicable waiting
period), or at such other place, date or time upon which First Federal Financial
and CLFC mutually agree. A pre-closing of the transactions contemplated hereby
(the "Pre-Closing") shall take place at the offices of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. at 10:00 a.m.
on the day prior to the Closing Date (the "Pre-Closing Date").
10.2. Deliveries at the Pre-Closing and the Closing.
At the Pre-Closing there shall be delivered to First Federal Financial,
First Clover Leaf Financial and CLFC the opinions, certificates, and other
documents and instruments required to be delivered at the Pre-Closing under
Article IX. At or prior to the Closing, First Federal Financial or First Clover
Leaf Financial shall deliver the Merger Consideration as set forth under Section
9.3.4.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination.
This Agreement may be terminated at any time prior to the Pre-Closing Date,
whether before or after approval of the Merger by the shareholders of CLFC:
11.1.1. At any time by the mutual written agreement of First Federal
Financial and CLFC;
11.1.2. By either CLFC or First Federal Financial (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach by its nature cannot be
cured prior to the Pre-Closing Date or, provided that the breach is curable in
nature, shall not have been cured within the first to occur of the Pre-Closing,
or 30 days after written notice by First Federal Financial to CLFC (or by CLFC
to First Federal Financial) of such breach;
11.1.3. By either CLFC or First Federal Financial (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material failure to perform or comply with any of the covenants or agreements
69
set forth in this Agreement on the part of the other party, which failure by its
nature cannot be cured prior to the Pre-Closing Date or, provided that the
failure is curable in nature, shall not have been cured within the first to
occur of the Pre-Closing, or 30 days after written notice by First Federal
Financial to CLFC (or by CLFC to First Federal Financial) of such failure;
11.1.4. At the election of either First Federal Financial or CLFC, if
the Closing shall not have occurred by the Termination Date, or such later date
as shall have been agreed to in writing by First Federal Financial and CLFC;
provided, that no party may terminate this Agreement pursuant to this Section
11.1.4 if the failure of the Closing to have occurred on or before said date was
due to such party's breach of any of its obligations under this Agreement;
11.1.5. By either CLFC or First Federal Financial if the shareholders
of CLFC shall have voted at the CLFC shareholders meeting on the transactions
contemplated by this Agreement and such vote shall not have been sufficient to
approve such transactions;
11.1.6. By either CLFC or First Federal Financial if (i) final action
has been taken by a Bank Regulator whose approval is required in connection with
this Agreement and the transactions contemplated hereby, which final action (x)
has become unappealable and (y) does not approve this Agreement or the
transactions contemplated hereby, (ii) any Bank Regulator whose approval or
nonobjection is required in connection with this Agreement and the transactions
contemplated hereby has stated in writing that it will not issue the required
approval or nonobjection, or (iii) any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger or
Conversion and such order, decree, ruling or other action shall have become
final and nonappealable;
11.1.7. By the Board of Directors of either party (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section 11.1.4;
11.1.8. By the Board of Directors of First Federal Financial if CLFC
has received a Superior Proposal, and in accordance with Section 6.10, the Board
of Directors of CLFC has entered into an acquisition agreement with respect to
the Superior Proposal, terminated this Agreement, or withdraws its
recommendation of this Agreement, fails to make such recommendation, or modifies
or qualifies its recommendation in a manner adverse to First Federal Financial;
or
11.1.9. By the Board of Directors of CLFC if CLFC has received a
Superior Proposal, and in accordance with Section 6.10, the Board of Directors
of CLFC has made a determination to accept such Superior Proposal; provided that
CLFC shall not terminate this Agreement pursuant to this Section 11.1.9 and
enter in a definitive agreement with respect to the Superior Proposal until the
expiration of five (5) business days following First Federal Financial's receipt
of written notice advising First Federal Financial that CLFC has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal (and including a copy thereof with all accompanying documentation, if
in writing) identifying the person making the Superior Proposal and stating
70
whether CLFC intends to enter into a definitive agreement with respect to the
Superior Proposal. After providing such notice, CLFC shall provide a reasonable
opportunity to First Federal Financial during the five-day period to make such
adjustments in the terms and conditions of this Agreement as would enable CLFC
to proceed with the Merger on such adjusted terms.
It is the intention of the parties that following completion of the
Pre-Closing, which completion will be acknowledged in writing by the parties at
such time, neither party shall have the right to terminate this Agreement at any
time thereafter. If, after the Pre-Closing Date, any party hereto shall attempt
to terminate this Agreement or shall fail to take any action necessary to effect
the consummation of the Merger (including, without limitation, First Federal
Financial's obligation to satisfy the condition set forth in Section 9.3.4), the
other party shall be entitled to injunctive relief to enforce this Agreement,
and the first party hereby agrees not to contest any judicial proceeding seeking
the granting of such an injunction.
11.2. Effect of Termination.
11.2.1. In the event of termination of this Agreement pursuant to any
provision of Section 11.1, this Agreement shall forthwith become void and have
no further force, except that the provisions of Sections 11.2, 12.1, 12.2, 12.6,
12.9, 12.10, and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect.
11.2.2. If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
(B) In the event of a termination of this Agreement because of a
willful breach of any representation, warranty, covenant or agreement contained
in this Agreement, the breaching party shall remain liable for any and all
damages, costs and expenses, including all reasonable attorneys' fees, sustained
or incurred by the non-breaching party as a result thereof or in connection
therewith or with respect to the enforcement of its rights hereunder.
(C) As a condition of First Federal Financial's willingness, and in
order to induce First Federal Financial to enter into this Agreement, and to
reimburse First Federal Financial for incurring the costs and expenses related
to entering into this Agreement and consummating the transactions contemplated
by this Agreement, CLFC and CLB hereby agree to pay First Federal Financial or
First Clover Leaf Financial, and First Federal Financial or First Clover Leaf
Financial shall be entitled to payment of a fee of $1,000,000 (the "Fee"),
within three business days after written demand for payment is made by First
Federal Financial or First Clover Leaf Financial, following the occurrence of
any of the events set forth below:
(i) CLFC terminates this Agreement pursuant to Section 11.1.9 or
First Federal Financial or First Clover Leaf Financial terminates this
Agreement pursuant to Section 11.1.8; or
71
(ii) The entering into a definitive agreement by CLFC relating to
an Acquisition Proposal or the consummation of an Acquisition Proposal
involving CLFC within twelve (12) months after the occurrence of any
of the following: (i) the termination of this Agreement by First
Federal Financial pursuant to Section 11.1.2 or 11.1.3 because of a
willful breach by CLFC or any CLFC Subsidiary; or (ii) the failure of
the shareholders of CLFC to approve this Agreement after the
occurrence of an Acquisition Proposal.
(D) If demand for payment of the Fee is made pursuant to Section
11.2.2(C) and payment is timely made, then neither First Federal Financial nor
First Clover Leaf Financial will have any other rights or claims against CLFC or
CLB, their Subsidiaries, and their respective officers and directors, under this
Agreement, it being agreed that the acceptance of the Fee under Section
11.2.2(C) will constitute the sole and exclusive remedy of First Federal
Financial and First Clover Leaf Financial against CLFC and CLB, their
Subsidiaries and their respective officers and directors.
11.3. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the Effective Time (whether
before or after approval thereof by the shareholders of CLFC), the parties
hereto by action of their respective Boards of Directors, may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of this
Agreement and the transactions contemplated hereby by the shareholders of CLFC
and First Federal Financial, there may not be, without further approval of such
shareholders, any amendment of this Agreement which reduces the amount, value or
changes the form of consideration to be delivered to CLFC's shareholders
pursuant to this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE XII
MISCELLANEOUS
12.1. Confidentiality.
Except as specifically set forth herein, First Federal Financial and CLFC
mutually agree to be bound by the terms of the reciprocal confidentiality
agreement dated October 31, 2005, previously executed by the parties hereto (the
"Confidentiality Agreement") that relate to the confidentiality of information.
The parties hereto agree that such Confidentiality Agreement shall continue in
accordance with their respective terms, notwithstanding the termination of this
Agreement. Notwithstanding the foregoing, the parties (and each employee,
representative, or other agent of the parties) may disclose to any and all
persons, without limitation of any kind, the tax treatment and any facts that
72
may be relevant to the tax structure of the transaction beginning on the
earliest of (i) the date of public announcement of discussions relating to the
transaction, (ii) the date of public announcement of the transaction or (iii)
the date of the execution of an agreement (with or without conditions) to enter
into the transaction; provided, however, that neither party (nor any employee,
representative or other agent thereof) may disclose any other information that
is not relevant to understanding the tax treatment and tax structure of the
transaction (including the identity of any party and any information that could
lead another to determine the identity of any party), or any other information
to the extent that such disclosure could result in a violation of any federal or
state securities law.
12.2. Public Announcements.
CLFC and First Federal Financial shall cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement, and except as may be otherwise
required by law, neither CLFC nor First Federal Financial shall issue any news
release, or other public announcement or communication with respect to this
Agreement unless such news release, public announcement or communication has
been mutually agreed upon by the parties hereto.
12.3. Survival.
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on and be
terminated and extinguished at the Effective Time, other than those covenants
set forth in Sections 2.5, 7.8, 7.9 and 12.1, which shall survive or be
performed after the Effective Time.
12.4. Notices.
All notices or other communications hereunder shall be in writing and shall
be deemed given if delivered by receipted hand delivery or mailed by prepaid
registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to CLFC or CLB, to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
Clover Leaf Financial Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
73
With copies to: ▇▇▇▇ ▇. True, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ MacDonald Hebrank
& True, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Suelthaus PC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to First Federal ▇▇▇▇▇ ▇. ▇▇▇▇▇
Financial, First Clover President and Chief Executive Officer
Leaf Financial or First First Federal Financial Services, Inc.
Federal, to: ▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party, and that (except as provided in Section 7.9) nothing
in this Agreement is intended to confer upon any other person any rights or
remedies under or by reason of this Agreement.
12.6. Complete Agreement.
This Agreement, including the Exhibits and Disclosure Schedules hereto and
the documents and other writings referred to herein or therein or delivered
74
pursuant hereto, and the Confidentiality Agreement, referred to in Section 12.1,
contains the entire agreement and understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings (other than the Confidentiality Agreement referred to in Section
12.1) between the parties, both written and oral, with respect to its subject
matter. None of the parties to this Agreement has entered into this Agreement in
reliance on any representation by any other party or any other person, except as
expressly set forth in this Agreement.
12.7. Counterparts.
This Agreement may be executed in one or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original.
12.8. Severability.
In the event that any one or more provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
12.9. Governing Law.
This Agreement shall be governed by the laws of Delaware, without giving
effect to its principles of conflicts of laws.
12.10. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which are part of the related
Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5"
and references to "Section 5.5" would also refer to material contained in the
subsection described as "Section 5.5.1"). The table of contents, index and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation 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." The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date set
forth in the Recitals to this Agreement.
12.11. Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
75
being in addition to any other remedy to which they are entitled at law or in
equity.
76
IN WITNESS WHEREOF, the Mutual Holding Company, First Federal Financial,
First Clover Leaf Financial, First Federal, CLFC and CLB have caused this
Agreement to be executed under seal by their duly authorized officers as of the
date first set forth above.
First Federal Financial Services, MHC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board of Directors
First Federal Financial Services, Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board of Directors
First Clover Leaf Financial Corp.
(in formation)
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board of Directors
First Federal Savings & Loan Association of
Edwardsville
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board of Directors
Clover Leaf Financial Corp.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive
Officer
Clover Leaf Bank
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive
Officer
77
EXHIBIT A
FORM OF VOTING AGREEMENT
---------------------
First Federal Financial Services, Inc.
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned is a director of Clover Leaf Financial Corp. ("CLFC") and
is the beneficial holder of shares of common stock of CLFC ("CLFC Common
Stock").
CLFC and First Federal Financial Services, Inc. ("First Federal Financial")
are considering the execution of an Agreement and Plan of Reorganization
("Agreement") contemplating the merger of CLFC with and into First Federal
Financial or a successor thereto (collectively referred to as First Federal
Financial), with First Federal Financial as the surviving corporation of the
merger (the "Merger"), such execution being subject in the case of First Federal
Financial to the execution and delivery of this letter agreement ("letter
agreement"). In consideration of the substantial expenses that First Federal
Financial will incur in connection with the transactions contemplated by the
Agreement and in order to induce First Federal Financial to execute the
Agreement and to proceed to incur such expenses, the undersigned agrees and
undertakes, in his capacity as a shareholder of CLFC and not in his capacity as
a director of CLFC, as follows:
1. The undersigned, while this letter agreement is in effect, shall vote in
favor of the Agreement or cause to be voted in favor of the Agreement all of the
shares of CLFC Common Stock that the undersigned shall be entitled to so vote,
whether such shares are beneficially owned by the undersigned on the date of
this letter agreement or are subsequently acquired, at the meeting of CLFC's
shareholders to be called and held following the date hereof, to consider the
Agreement and the Merger.
2. The undersigned, while this letter agreement is in effect, agrees not to
sell, transfer or otherwise dispose of any shares of common stock of CLFC on or
prior to the date of the meeting of CLFC shareholders to vote on the Merger
Agreement, unless the purchaser or transferee agrees to be bound by the terms of
this letter agreement.
3. The undersigned acknowledges and agrees that any remedy at law for
breach of the foregoing provisions shall be inadequate and that, in addition to
any other relief which may be available, First Federal Financial shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving actual damages.
4. The foregoing restrictions shall not apply to shares with respect to
which the undersigned may have voting power as a fiduciary for others. In
addition, this letter agreement shall only apply to actions taken by the
undersigned in his capacity as a shareholder of CLFC and shall not in any way
limit or affect actions the undersigned may take in his capacity as a director
of CLFC.
5. This letter agreement shall automatically terminate upon termination of
the Agreement in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
Very truly yours,
Signature
------------------------------
Name (please print)
Accepted and agreed to as of the date first above written:
FIRST FEDERAL FINANCIAL SERVICES, INC.
By:
-----------------------------------------
Title:
--------------------------------------
A-2
EXHIBIT B
AFFILIATES AGREEMENT
--------------
First Federal Financial Services, Inc.
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Clover Leaf Financial Corp., a Delaware corporation ("CLFC"), for purposes of
paragraphs (c) and (d) of Rule 145 of the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Securities Act").
First Federal Financial Services, Inc. ("First Federal Financial") and CLFC
have entered into an Agreement and Plan of Reorganization, dated as of January
__, 2006 (the "Agreement"). Upon consummation of the merger contemplated by the
Agreement (the "Merger"), I may receive shares of common stock of First Clover
Leaf Financial or any successor thereto ("First Clover Leaf Financial Common
Stock") in exchange for my shares of common stock, par value $0.10 per share, of
CLFC ("CLFC Common Stock"). This agreement is hereinafter referred to as the
"Letter Agreement."
I represent and warrant to, and agree with, First Federal Financial as
follows:
1. I have read this Letter Agreement and the Agreement and have discussed
their requirements and other applicable limitations upon my ability to sell,
pledge, transfer or otherwise dispose of shares of the First Clover Leaf
Financial Common Stock, to the extent I felt necessary, with my counsel or
counsel for CLFC.
2. I have been advised that any issuance of shares of the First Clover Leaf
Financial Common Stock to me pursuant to the Merger will be registered with the
SEC. I have also been advised, however, that, because I may be an "affiliate" of
CLFC at the time the Merger will be submitted for a vote of the shareholders of
CLFC and my disposition of such shares has not been registered under the
Securities Act, I must hold such shares indefinitely unless (i) such disposition
of such shares is subject to an effective registration statement and to the
availability of a prospectus under the Securities Act, (ii) a sale of such
shares is made in conformity with the provisions of Rule 145(d) under the
Securities Act, (iii) a sale of such shares is made following expiration of the
restrictive period set forth in Rule 145(d)(2) or (iv) in an opinion of counsel,
in form and substance reasonably satisfactory to First Federal Financial, I am
advised that some other exemption from registration is available with respect to
any such proposed disposition of such shares.
3. I understand and agree that stop transfer instructions will be given to
the transfer agent of First Federal Financial with respect to the shares of
First Federal Financial Common Stock I receive pursuant to the Merger and that
there will be placed on the certificate representing such shares, or any
certificates delivered in substitution therefore, a legend stating in substance:
The shares represented by this certificate were issued in a transaction to
which Rule 145 under the Securities Act applies. The shares represented by this
certificate may only be transferred in accordance with the terms of an agreement
between the registered holder hereof and First Clover Leaf Financial, a copy of
which agreement is on file at the principal offices of First Clover Leaf
Financial. A copy of such agreement shall be provided to the holder hereof
without charge upon receipt by First Clover Leaf Financial of a written request.
4. Unless a transfer of my shares of the First Clover Leaf Financial Common
Stock is a sale made in conformity with the provisions of Rule 145(d), made
following expiration of the restrictive period set forth in Rule 145(d) or made
pursuant to any effective registration statement under the Securities Act, First
Clover Leaf Financial reserves the right to put an appropriate legend on the
certificate issued to my transferee.
It is understood and agreed that this Letter Agreement shall terminate and
be of no further force and effect if the Agreement is terminated in accordance
with its terms. It is also understood and agreed that this Letter Agreement
shall terminate and be of no further force and effect and the stop transfer
instructions set forth above shall be lifted forthwith upon the delivery by the
undersigned to First Clover Leaf Financial of a copy of a letter from the staff
of the SEC, an opinion of counsel in form and substance reasonably satisfactory
to First Clover Leaf Financial, or other evidence reasonably satisfactory to
First Federal Financial, to the effect that a transfer of my shares of the First
Clover Leaf Financial Common Stock will not violate the Securities Act or any of
the rules and regulations of the SEC thereunder. In addition, it is understood
and agreed that the legend set forth in Paragraph 3 above shall be removed
forthwith from the certificate or certificates representing my shares of the
First Clover Leaf Financial Common Stock upon expiration of the restrictive
period set forth in Rule 145(d)(2), so long as First Clover Leaf Financial is
then in compliance with SEC Rule 144(c), or if First Clover Leaf Financial shall
have received a copy of a letter from the staff of the SEC, an opinion of
counsel in form and substance reasonably satisfactory to First Clover Leaf
Financial, or other evidence satisfactory to First Clover Leaf Financial that a
transfer of my shares of the First Clover Leaf Financial Common Stock
represented by such certificate or certificates will be a sale made in
conformity with the provisions of Rule 145(d), or made pursuant to an effective
registration statement under the Securities Act.
5. I recognize and agree that the foregoing provisions also apply to (i) my
spouse, (ii) any relative of mine or my spouse's occupying my home, (iii) any
trust or estate in which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as trustee, executor or in any
similar capacity and (iv) any corporation or other organization in which I, my
spouse or any such relative owns at least 10% of any class of equity securities
or of the equity interest.
B-2
6. I further recognize that in the event I become a director or officer of
First Clover Leaf Financial upon consummation of the Merger, any sale of First
Clover Leaf Financial stock by me may be subject to further restrictions on
transferability and additional liability pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended.
7. Execution of this Letter Agreement should not be construed as an
admission on my part that I am an "affiliate" of CLFC as described in the first
paragraph of this Letter Agreement or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
Letter Agreement.
* * * * *
This Letter Agreement shall be binding on my heirs, legal representative
and successors.
Very truly yours,
Signature
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Name (Please Print)
Accepted as of the date first above written
FIRST FEDERAL FINANCIAL SERVICES, INC.
By:
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Name:
Title:
B-3
EXHIBIT C
MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO FIRST CLOVER
LEAF FINANCIAL PURSUANT TO SECTION 9.2.7 OF THE AGREEMENT
(a) Each of CLFC, CLB and each CLFC Subsidiary is incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each such entity has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted. CLFC is duly registered as a bank holding company under the
BHCA and the regulations of the FRB thereunder.
(b) CLFC and CLB each has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by CLFC and CLB, and of the
engagement agreement referenced in Section 4.13, and the completion by CLFC and
CLB of the transactions contemplated hereby, up to and including the Merger,
have been duly and validly approved by the Board of Directors of CLFC and CLB,
respectively, and no other corporate proceedings on the part of CLFC or CLB are
necessary to complete the transactions contemplated hereby. This Agreement, and
the engagement agreement referenced in Section 4.13, have been duly and validly
executed and delivered by CLFC and CLB, and the Bank Merger has been duly and
validly approved by the Board of Directors of CLB, and by CLFC in its capacity
as sole shareholder of CLB, and constitutes the valid and binding obligations of
CLFC and CLB, enforceable against CLFC and CLB in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and as to CLB, the conservatorship or receivership
provisions of the FDIA, and subject, as to enforceability, to general principles
of equity.
(c) The execution and delivery of this Agreement by CLFC and CLB, and of
the engagement agreement referenced in Section 4.13, and the consummation of the
transactions contemplated thereby, will not conflict with or result in a breach
of any provision of the certificate of incorporation or bylaws of CLFC or any
CLFC Subsidiary or the articles of incorporation and bylaws of CLB.
(d) The Agreement, including consummation of the transactions contemplated
thereby, has been approved by the requisite vote of stockholders of CLFC.
The opinion of such counsel may include such qualifications and
explanations of the basis thereof as may be reasonably acceptable to First
Clover Leaf Financial
EXHIBIT D
MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO CLFC
PURSUANT TO SECTION 9.3.6 OF THE AGREEMENT
(a) First Federal Financial is a corporation duly organized, validly
existing and in good standing under federal law, and is duly registered as a
savings and loan holding company under the HOLA. First Clover Leaf Financial is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland.
(b) Each of Mutual Holding Company and First Federal Financial has full
corporate power and authority to carry on its business as now conducted and is
duly licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on the Mutual
Holding Company or First Federal Financial.
(c) First Federal is a savings association organized, validly existing and
in good standing under federal law. The deposits of First Federal are insured by
the FDIC to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when due.
(d) Each of First Clover Leaf Financial, the Mutual Holding Company, First
Federal Financial and First Federal has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by First
Clover Leaf Financial, Mutual Holding Company, First Federal Financial and First
Federal and the completion by First Clover Leaf Financial, Mutual Holding
Company, First Federal Financial and First Federal of the transactions
contemplated hereby, up to and including the Merger, have been duly and validly
approved by the Board of Directors of First Clover Leaf Financial, the Mutual
Holding Company, First Federal Financial and First Federal, respectively, and,
no other corporate proceedings on the part of First Clover Leaf Financial,
Mutual Holding Company, First Federal Financial or First Federal are necessary
to complete the transactions contemplated hereby, up to and including the
Merger. The Agreement has been duly and validly executed and delivered by First
Clover Leaf Financial, the Mutual Holding Company, First Federal Financial and
First Federal, and the Bank Merger has been duly and validly approved by the
Board of Directors of First Federal, and by First Clover Leaf Financial and
First Federal Financial in their capacity as sole shareholder of First Federal,
and constitutes the valid and binding obligations of First Clover Leaf
Financial, the Mutual Holding Company, First Federal Financial and First
Federal, enforceable against First Clover Leaf Financial, the Mutual Holding
Company, First Federal Financial and First Federal in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and as to First Federal, the conservatorship or
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.
(e) The execution and delivery of the Agreement by First Clover Leaf
Financial, Mutual Holding Company, First Federal Financial and First Federal
will not conflict with or result in a breach of any provision of the articles of
incorporation or charter or bylaws of First Clover Leaf Financial, Mutual
Holding Company, First Federal Financial or any First Federal Financial
Subsidiary or the charter and bylaws of First Federal.
(f) The shares of First Clover Leaf Financial Common Stock to be issued to
former shareholders of CLFC have been duly and validly authorized for issuance,
and when issued and delivered by First Clover Leaf Financial will be fully paid
and nonassessable.
The opinion of such counsel may include such qualifications and
explanations of the basis thereof as may be reasonably acceptable to CLFC.
D-2