AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT")
is made and entered into this 10th day of April, 1998, by and among First
Defiance Financial Corp., an Ohio corporation ("FDFC"); First Federal Savings
and Loan Association, a savings association organized under the laws of the
United States ("FIRST FEDERAL"); and The Leader Mortgage Company, an Ohio
corporation ("LEADER").
This AGREEMENT provides for the acquisition of LEADER in a
transaction in which FDFC or FIRST FEDERAL will acquire all of the outstanding
capital stock of LEADER for cash through a reverse merger of a subsidiary of
FDFC or FIRST FEDERAL to be incorporated under Ohio law ("MERGER SUB") for the
purpose of facilitating the MERGER (hereinafter defined) with and into LEADER.
Now, therefore, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, FDFC, FIRST FEDERAL and
LEADER, each intending to be legally bound, hereby agree as follows:
ARTICLE ONE
THE MERGER
Section 1.01. Merger of MERGER SUB and LEADER. On and subject
to the terms and conditions of this AGREEMENT and the MERGER AGREEMENT
(hereinafter defined), and in accordance with the provisions of the Ohio General
Corporation Law (the "OGCL"), MERGER SUB shall merge with and into LEADER (the
"MERGER") at the EFFECTIVE TIME (hereinafter defined). LEADER shall be the
continuing, surviving and resulting corporation in the MERGER and shall continue
to exist as an Ohio corporation. LEADER shall be the only one of MERGER SUB and
LEADER to continue its separate corporate existence after the EFFECTIVE TIME.
The name of the continuing, surviving and resulting corporation shall be "The
Leader Mortgage Company". From and after the EFFECTIVE TIME, LEADER, as the
surviving corporation, shall possess all assets and property of every
description, and every interest in the assets and property, wherever located,
and the rights, privileges, immunities, powers, franchises and authority, of a
public as well as a private nature, of MERGER SUB and LEADER and all obligations
belonging or due to each of them.
Section 1.02. Execution of Agreement of Merger. Promptly
following the incorporation of MERGER SUB, MERGER SUB and LEADER shall duly
execute and deliver a merger agreement in the form of the Merger Agreement
attached hereto as Exhibit A (the "MERGER AGREEMENT").
Section 1.03. Closing. (a) The closing of the MERGER pursuant
to this AGREEMENT and the MERGER AGREEMENT (the "CLOSING") shall take place at a
date and time selected by FDFC as soon as practicable after the satisfaction or
waiver of the last of the conditions to the MERGER set forth in Article Seven of
this AGREEMENT to be satisfied.
(b) At the CLOSING, (i) LEADER will deliver to FDFC the
various certificates, instruments, and documents referred to in Section 7.02 of
this AGREEMENT, (ii) FDFC will deliver to LEADER the various certificates,
instruments, and documents referred to in Section 7.03 of this AGREEMENT, (iii)
MERGER SUB and LEADER shall cause a Certificate of Merger in respect of the
MERGER to be filed in the Office of the Ohio Secretary of State in accordance
with Section 1701.81 of the OGCL; and (iv) the PARENT COMPANY (hereinafter
defined) will make the payments provided for in Section 2.01 below.
(c) The MERGER shall become effective at the date and time
indicated on the Certificate of Merger (the "EFFECTIVE TIME").
Section 1.04. Adoption by Shareholders. (a) This AGREEMENT
shall be submitted for consideration and adoption by the shareholders of LEADER
entitled to vote at an annual meeting of shareholders or a special meeting of
shareholders called for such purpose to be held at a time, date and place to be
determined by the Board of Directors of LEADER, subject to applicable laws and
regulations, or in a written action signed by all of the LEADER shareholders in
accordance with Section 1701.54 of the OGCL.
(b) The MERGER AGREEMENT shall be adopted by FDFC or FIRST
FEDERAL, as applicable, as the sole shareholder of MERGER SUB (the "PARENT
COMPANY").
Section 1.05. Regulatory Filings. FDFC and FIRST FEDERAL shall
prepare and cause to be filed with the Department of the Treasury, Office of
Thrift Supervision (the "OTS"), the Federal Deposit Insurance Corporation (the
FDIC") and any other regulatory authority having jurisdiction over the MERGER
and the transactions contemplated by this AGREEMENT, such applications, notices
or other instruments as may be required of FDFC, FIRST FEDERAL or MERGER SUB for
approval of the MERGER (collectively, the "REGULATORY APPLICATIONS").
Section 1.06. Articles of Incorporation and Code of
Regulations of the Surviving Corporation. The Articles of Incorporation and Code
of Regulations of LEADER shall be amended and restated at and as of the
EFFECTIVE TIME to read the same as the Articles of Incorporation and Code of
Regulations of MERGER SUB immediately prior to the EFFECTIVE TIME, until either
is thereafter amended in accordance with applicable law, except that the name
shall remain "The Leader Mortgage Company".
ARTICLE TWO
CONVERSION AND CANCELLATION OF LEADER SHARES
Section 2.01. Conversion and Cancellation of LEADER SHARES. At
the EFFECTIVE TIME and as a result of the MERGER, automatically and without
further act of FDFC, FIRST FEDERAL or LEADER, or the holders of LEADER SHARES
(hereinafter defined), the following shall occur:
(a) Each of the holders of the issued and outstanding LEADER
Class A Common Shares, no par value per share, including the Class A common
shares to be issued pursuant to the exercise of LEADER OPTIONS (hereinafter
defined) pursuant to Section 2.02 of this AGREEMENT (the "CLASS A SHARES"), and
the issued and outstanding LEADER Class E Common Shares, no par value per share
(the "CLASS E SHARES" and, together with the CLASS A SHARES, the "COMMON
SHARES"), shall receive from the PARENT COMPANY a cash payment equal to the
product of $32,935,106 (as it may be reduced pursuant to Section 6.07(b) or
Section 5.01 of the LEADER DISCLOSURE SCHEDULE (hereinafter defined)) multiplied
by a fraction, the numerator of which shall be the number of COMMON SHARES held
by such holder immediately before the EFFECTIVE TIME and the denominator of
which shall be the number of COMMON SHARES outstanding immediately before the
EFFECTIVE TIME (excluding TREASURY SHARES). Such payment shall be made upon
surrender of the CERTIFICATES (hereinafter defined) in accordance with Section
2.04 of this AGREEMENT; provided, however, that any COMMON SHARES as to which a
shareholder has filed a written demand, in accordance with Section 1701.85 of
the OGCL, for payment of the fair cash value of the COMMON SHARES held by such
shareholder ("DISSENTING SHARES") shall not, at the EFFECTIVE TIME, be converted
into the right to receive the merger consideration but shall be cancelled and
extinguished and converted into the right to receive such consideration as may
be determined to be due such holders with respect to such DISSENTING SHARES
pursuant to the OGCL.
(b) Prior to the EFFECTIVE TIME, The Leader Group, Inc., the
holder of the issued and outstanding LEADER Preferred Shares, $100 par value per
share (the "PREFERRED SHARES" and, together with the COMMON SHARES, the "LEADER
SHARES") shall receive from LEADER $114,894 in consideration and exchange for
the 900 issued and outstanding PREFERRED SHARES, upon surrender of its
CERTIFICATE;
(c) MERGER SUB shares issued and outstanding before the
EFFECTIVE TIME shall remain issued and outstanding after the EFFECTIVE TIME; and
(d) Any TREASURY SHARES held by LEADER and any LEADER SHARES
owned by FDFC or FIRST FEDERAL for its own account shall be cancelled and
retired at the EFFECTIVE TIME and no consideration shall be issued in exchange
therefor.
Section 2.02. LEADER OPTIONS. LEADER has granted options to
purchase 35,000 COMMON SHARES at an exercise price of $1.00 per share (the
"LEADER OPTIONS"). Schedule 2.02 attached to this AGREEMENT lists each
outstanding LEADER OPTION by name of recipient, award date, expiration date,
number of shares and exercise price per share. Any COMMON SHARES received
pursuant to LEADER OPTIONS exercised prior to the EFFECTIVE TIME will be
cancelled and extinguished in exchange for the consideration payable with
respect to COMMON SHARES pursuant to Section 2.01(a) of this AGREEMENT. Any
LEADER OPTIONS not exercised contemporaneous with the EFFECTIVE TIME shall
expire immediately after the EFFECTIVE TIME and the holder thereof shall have no
claim against LEADER or the PARENT COMPANY for any payment with respect thereto.
No option to purchase LEADER SHARES granted after January 14, 1998, shall be
valid in any respect, except for the replacement or modification of the existing
LEADER OPTIONS, not to exceed 35,000 CLASS A SHARES.
Section 2.03. Other Payments.
(a) The PARENT COMPANY shall pay to the persons identified on
Schedule 2.03 the aggregate sum of $4,500,000 in cash, to be allocated among
such persons and payable at such times as specified in Schedule 2.03, in
consideration and exchange for the execution by such persons of a noncompetition
agreement (the "NONCOMPETE AGREEMENT") in substantially the form of one of the
agreements attached hereto as Exhibit B-1 and Exhibit B-2 or an employment
contract (the "EMPLOYMENT CONTRACT") in substantially the form of the agreement
attached hereto as Exhibit C.
(b) Within five days following the SATISFACTION DATE
(hereinafter defined) the PARENT COMPANY shall pay to each holder of COMMON
SHARES outstanding immediately before the EFFECTIVE TIME (excluding TREASURY
SHARES and DISSENTING SHARES) who has complied with Section 2.04 of this
AGREEMENT the product of (x) a fraction, the numerator of which shall be the
number of COMMON SHARES held by such holder immediately before the EFFECTIVE
TIME and the denominator of which shall be the number of COMMON SHARES
outstanding immediately before the EFFECTIVE TIME (excluding TREASURY SHARES),
multiplied by (y) the HOLD BACK PAYMENT (hereinafter defined). The PARENT
COMPANY shall retain any HOLD BACK PAYMENT remaining with respect to DISSENTING
SHARES and COMMON SHARES as to which the holder has not complied with Section
2.04 of this AGREEMENT.
For purposes of this Section 2.03(b), the following terms
shall have the following meanings:
(i) SATISFACTION DATE means a date, to be selected by the
PARENT COMPANY, which is not more than 30 days after
the last to occur of the following: (A) the
satisfaction or release of all of LEADER's
obligations under (I) a Reimbursement Agreement dated
February 1, 1994, between Eexcel Cleveland Limited
Partnership ("EEXCEL") and Bank One, Cleveland, N.A.
("BANK ONE") (the "REIMBURSEMENT AGREEMENT"), (II) a
Guaranty Agreement dated February 1, 1994, between
LEADER and BANK ONE (the "GUARANTY AGREEMENT"), and
(III) a Cash Collateral Agreement dated February 1,
1994, between LEADER and BANK ONE (the "CASH
COLLATERAL AGREEMENT"); (B) the reasonable
determination by the PARENT COMPANY that matters
related to the interests of the City of Cleveland
(the "CITY") in the ▇▇▇▇▇▇▇▇ Greens Apartment
property have been resolved, including but not
limited to interests arising out of indebtedness owed
by EEXCEL to the CITY pursuant to an Amended and
Restated Promissory Note dated February 24, 1994, and
a Promissory Note dated December 19, 1994
(collectively, the "CITY NOTES") and (C) the second
anniversary of the EFFECTIVE TIME; and
(ii) HOLD BACK PAYMENT means the sum of $2,000,000 reduced
by any amounts paid or expenses incurred by LEADER
from the date of this AGREEMENT in connection with
(A) the REIMBURSEMENT AGREEMENT, (B) the GUARANTY
AGREEMENT, (C) the CASH COLLATERAL AGREEMENT, (D) the
satisfactory resolution of the interests of the CITY,
or (E) the matters specified in Section 6.13 of this
AGREEMENT, plus interest thereon at the rate of
5.574% per annum from the EFFECTIVE TIME.
Section 2.04. Share Certificates in the MERGER. (a) As soon as
practicable after the EFFECTIVE TIME, each LEADER SHAREHOLDER shall surrender to
the PARENT COMPANY the certificates formerly evidencing the LEADER SHARES
cancelled and extinguished as a result of the MERGER (collectively, the
"CERTIFICATES" and individually, a "CERTIFICATE"). Upon surrender of a
CERTIFICATE for cancellation, the holder of such CERTIFICATE shall be entitled
to receive in exchange therefor the per share merger consideration to which the
holder is entitled in accordance with the provisions of this AGREEMENT within
five days after surrender of the CERTIFICATE, and the CERTIFICATE so surrendered
shall thereafter be cancelled forthwith. FDFC may, at its election, designate an
exchange agent to discharge its duties pursuant to this Section 2.04. Nothing
herein is intended to limit the right of former holders of CERTIFICATES to
receive the additional per share merger consideration pursuant to Section 2.03
of this AGREEMENT.
(b) In the event that any holder of LEADER SHARES cancelled
and extinguished in accordance with this AGREEMENT is unable to deliver the
CERTIFICATE which evidences such LEADER SHARES, FDFC, in the absence of actual
notice that any LEADER SHARES theretofore evidenced by any such CERTIFICATE have
been acquired by a bona fide purchaser, shall deliver to such holder the
consideration to which such holder is entitled in accordance with the provisions
of this AGREEMENT upon the presentation of all of the following:
(i) Evidence to the reasonable satisfaction of
FDFC that any such CERTIFICATE has been
lost, wrongfully taken or destroyed;
(ii) Such security or indemnity as may be
reasonably requested by FDFC to indemnify
and hold FDFC harmless; and
(iii) Evidence to the reasonable satisfaction of
FDFC that such person is the owner of the
LEADER SHARES theretofore represented by
each CERTIFICATE claimed by him to be lost,
wrongfully taken or destroyed and that he is
the person who would be entitled to present
each such CERTIFICATE for exchange pursuant
to this AGREEMENT.
(c) Until surrendered in accordance with the provisions of
this Section 2.04, each CERTIFICATE shall represent for all purposes only the
right to receive the cash consideration determined pursuant to this AGREEMENT.
No payment shall be delivered by FDFC to any former holder of LEADER SHARES in
accordance with this AGREEMENT until such holder shall have complied with this
Section 2.04.
Section 2.05. Payment in Satisfaction of Rights. Except as set
forth in Section 2.03 and Section 2.04 of this AGREEMENT, all payments made upon
the surrender of CERTIFICATES pursuant to this Article Two shall be deemed to
have been made in full satisfaction of all rights pertaining to the shares
evidenced by such CERTIFICATES.
Section 2.06. No Further Registration or Transfer. After the
EFFECTIVE TIME, there shall be no further registration or transfer of LEADER
SHARES on the stock transfer books of LEADER. In the event that, after the
EFFECTIVE TIME, CERTIFICATES evidencing such LEADER SHARES are presented for
transfer, they shall be cancelled and exchanged as provided in this Article Two.
Section 2.07. Dissenting Shares. (a) Notwithstanding any other
provisions of this AGREEMENT, DISSENTING SHARES shall not, at the EFFECTIVE
TIME, be converted into the right to receive the merger consideration but shall
be cancelled and extinguished and converted into the right to receive such
consideration as may be determined to be due such holders with respect to such
DISSENTING SHARES pursuant to the OGCL. If any holder of DISSENTING SHARES
shall, after the EFFECTIVE TIME, withdraw such holder's demand for appraisal of
such DISSENTING SHARES or waive or lose such holder's right of appraisal of such
DISSENTING SHARES, in either case pursuant to the OGCL, such holder's DISSENTING
SHARES shall thereupon be deemed to have been converted, as of the EFFECTIVE
TIME into the right to receive the merger consideration with respect to such
DISSENTING SHARES in accordance with Section 2.01 of this AGREEMENT, without
interest.
(b) LEADER shall give FDFC prompt notice of any demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
in connection with such appraisal rights received by LEADER. Prior to the
EFFECTIVE TIME, FDFC shall have the right to participate in all negotiations and
proceedings with respect to demands for appraisal. Without the prior written
consent of FDFC, LEADER will not voluntarily make any payment with respect to
any demands for appraisal and will not settle or offer to settle any such
demands.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF LEADER
LEADER represents and warrants to FDFC and FIRST FEDERAL that
each of the following statements is true and accurate in all material respects,
except as otherwise disclosed in a schedule provided by LEADER to FDFC prior to
the execution of this AGREEMENT (the "LEADER DISCLOSURE SCHEDULE"):
Section 3.01. Organization and Standing. LEADER is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and has the corporate power and authority to own or hold
under lease all of its properties and assets and to conduct its business and
operations as presently conducted.
Section 3.02. Qualification, Permits and Licenses. (a) LEADER
is either duly qualified to do business and in good standing in each
jurisdiction in which such qualification is required or the failure to so
qualify does not have a material adverse effect on the business of LEADER in
such jurisdiction.
(b) LEADER has all material permits, licenses, orders and
approvals of all federal, state or local governmental or regulatory bodies
required for it to conduct its business as presently conducted, and all such
material permits, licenses, orders and approvals are in full force and effect,
without the threat of suspension or cancellation, except where the failure to
possess such qualifications, permits, approvals, licenses, and registrations
does not have a material adverse effect on the condition (financial or
otherwise), results of operations, assets or business prospects (a "MATERIAL
ADVERSE EFFECT") of LEADER in such jurisdiction. None of such permits, licenses,
orders or approvals will be adversely affected by the consummation of the
transactions contemplated by this AGREEMENT.
(c) LEADER is in compliance in all material respects with all
applicable local, state or federal laws and regulations.
(d) LEADER is approved and in good standing as (i) an issuer
of Government National Mortgage Association ("GNMA") securities and
seller/servicer of underlying mortgages, (ii) an issuer of Federal National
Mortgage Association ("FNMA") securities and seller/servicer of underlying
mortgages, (iii) an issuer of Federal Home Loan Mortgage Corporation ("FHLMC")
securities and seller/servicer of underlying mortgages, (iv) a Federal Housing
Authority ("FHA") approved mortgage lender, and (v) a Veterans Administration
("VA") approved mortgage lender.
Section 3.03. Capitalization. (a) The authorized capital of
LEADER consists solely of (i) 350,000 CLASS A SHARES, 182,440.57 of which are
issued and outstanding and held of record by approximately eight shareholders,
32,977.53 of which are treasury shares, and 35,000 of which are reserved for
issuance upon the exercise of LEADER OPTIONS (all at the option exercise price
of $1.00 per share), (ii) 250,000 CLASS E SHARES, 61,309.43 of which are issued
and outstanding and held of record by The Leader Mortgage Company Employee Stock
Ownership Plan (the "ESOP"), and (iii) 900 PREFERRED SHARES, all of which are
issued and outstanding and held of record by The Leader Group, Inc.
(b) All of the outstanding LEADER SHARES are duly authorized,
validly issued, fully paid and nonassessable, were issued in full compliance
with all applicable laws and regulations, and were not issued in violation of
the preemptive right of any shareholder of LEADER. Upon the exercise of the
LEADER OPTIONS contemporaneous with the EFFECTIVE TIME, the CLASS A SHARES to be
issued in connection with the exercise of such LEADER OPTIONS will be duly
authorized, validly issued, fully paid and nonassessable, will be issued in full
compliance with all applicable laws and regulations, and will not be issued in
violation of the preemptive right of any shareholder of LEADER.
(c) Except for the LEADER OPTIONS, there are no outstanding
subscription rights, options, conversion rights, warrants or other agreements or
commitments of any nature whatsoever (either firm or conditional) obligating
LEADER to issue, deliver or sell, cause to be issued, delivered or sold, or
restricting LEADER from selling any additional LEADER SHARES, or obligating
LEADER to grant, extend or enter into any such agreement or commitment.
Section 3.04. Governing Documents. Section 3.04 of the LEADER
DISCLOSURE SCHEDULE contains true and accurate copies of LEADER's Articles of
Incorporation and Code of Regulations. LEADER has granted FDFC access to all
records of all meetings and other corporate actions occurring before the
EFFECTIVE TIME by the shareholders, Board of Directors and Committees of the
Board of Directors of LEADER. The minute books of LEADER contain, in all
material respects, complete and accurate records of all meetings and other
corporate actions of its shareholders, Board of Directors and Committees of the
Board of Directors.
Section 3.05. Authority of LEADER. This AGREEMENT has been
duly executed and delivered by LEADER. Subject to the adoption of this AGREEMENT
by the LEADER shareholders, to the adoption of this AGREEMENT and the MERGER
AGREEMENT by the PARENT COMPANY as the sole shareholder of MERGER SUB, and to
the filing of all requisite regulatory notices and the receipt of all requisite
regulatory approvals, (a) LEADER has all requisite corporate power and authority
to enter into this AGREEMENT and the MERGER AGREEMENT and to perform all of its
obligations hereunder and thereunder; (b) the execution and delivery of this
AGREEMENT and the MERGER AGREEMENT and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action by LEADER; and (c) subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
applicability affecting the enforcement of creditors' rights generally, and the
effect of rules of law governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents, this AGREEMENT
is, and the MERGER AGREEMENT, when executed, will be, valid and binding
agreements of LEADER, enforceable against LEADER in accordance with their terms.
Section 3.06. Mortgage Servicing Agreements. Section 3.06 of
the LEADER DISCLOSURE SCHEDULE lists all agreements by LEADER to service loans
for other parties who are the beneficial owners of such loans, including but not
limited to GNMA, FHLMC, FNMA and other public or private investors
(collectively, the "INVESTORS") pursuant to which LEADER services or
sub-services mortgage loans (the "SERVICING AGREEMENTS"). Except as set forth in
Section 3.06 of the LEADER DISCLOSURE SCHEDULE, all SERVICING AGREEMENTS in
effect on September 30, 1997, remain in full force and effect as of the date of
this AGREEMENT. LEADER has performed its obligations in all material respects
under the SERVICING AGREEMENTS in accordance with the terms of the SERVICING
AGREEMENTS and any applicable INVESTOR guidelines (the "GUIDELINES"), and is not
aware of any circumstances (other than the consummation of the MERGER) which,
with notice or passage of time, or both, would constitute a default under any of
the SERVICING AGREEMENTS or the applicable GUIDELINES. LEADER is in compliance
in all material respects with all applicable laws, rules, regulations and
requirements of the INVESTORS.
Section 3.07. No Conflicts; Consents. (a) Except as set forth
in Section 3.07 of the LEADER DISCLOSURE SCHEDULE, the execution and delivery of
this AGREEMENT and the MERGER AGREEMENT and, subject to the regulatory filings
and approvals referenced in Section 7.01(b) of this AGREEMENT, the consummation
of the transactions contemplated hereby and thereby will not (i) conflict with
or violate any provision of or result in the breach of any provision of the
Articles of Incorporation or Code of Regulations of LEADER; (ii) conflict with
or violate any provision of or result in the breach or the acceleration of or
entitle any party to accelerate (whether upon or after the giving of notice or
lapse of time or both) any obligation under, or otherwise materially and
adversely affect the terms of, any mortgage, lien, lease, agreement, license,
instrument, order, arbitration award, judgment or decree to which LEADER is a
party or by which LEADER or its property or assets is bound; (iii) result in the
creation or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any property or assets of LEADER; or (iv) violate or conflict
with any applicable law, ordinance, rule or regulation.
(b) Section 3.07(b) of the LEADER DISCLOSURE SCHEDULE lists
all third parties whose consent to the MERGER is required under any loan
servicing agreements, borrowings, financing arrangements or any material
contract, agreement or arrangement whether written or oral, between LEADER and
such third party, including but not limited to the SERVICING AGREEMENTS. Except
as set forth in Section 3.07 of the LEADER DISCLOSURE SCHEDULE or otherwise
contemplated in this AGREEMENT, no consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority, or any
party to any agreement or commitment to which LEADER is a party or by which
LEADER or its property or assets is bound is required in connection with the
execution and delivery of this AGREEMENT or the MERGER AGREEMENT by LEADER or
the consummation by LEADER of the transactions contemplated hereby and thereby.
Section 3.08. Financial Statements. (a) The combined
statements of financial condition of LEADER as of September 30, 1997, and the
related statements of income, stockholders' equity and cash flows for the year
ended September 30, 1997, audited and reported upon by Deloitte & Touche LLP,
certified public accountants ("DELOITTE") and the statements of financial
condition of LEADER as of September 30, 1996, and the related statements of
income, stockholders' equity and cash flows for each of the two years ended
September 30, 1996 and 1995, audited and reported upon by Ball & Associates,
Inc., complete copies of which have previously been delivered to FDFC (the
"LEADER AUDITED FINANCIALS"), have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis and fairly
present the financial position of LEADER at such dates and the results of its
operations and cash flows for such periods.
(b) Except as disclosed in the LEADER AUDITED FINANCIALS and
Section 3.10 of the LEADER DISCLOSURE SCHEDULE, as of September 30, 1997, LEADER
had no liabilities or obligations material to the business condition (financial
or otherwise) of LEADER and its consolidated subsidiaries taken as a whole,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due.
(c) The LEADER AUDITED FINANCIALS did not, as of the dates
thereof, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the information contained therein, in light of
the circumstances under which they were made, not misleading.
(d) The accounts receivable reflected on the LEADER AUDITED
FINANCIALS are valid and subsisting accounts owing to LEADER, are carried on the
books of LEADER at values determined in accordance with GAAP and are not subject
to any set-offs or claims of the account debtor arising from acts or omissions
of, or otherwise known to, LEADER.
(e) The mortgage servicing rights value maintained by LEADER
with respect to the mortgage servicing reflected on the LEADER AUDITED
FINANCIALS is adequate as of the date hereof in all material respects under the
requirements of GAAP.
Section 3.09. Absence of Material Adverse Effect: Conduct of
Business. Since September 30, 1997, nothing has occurred which would have a
MATERIAL ADVERSE EFFECT; LEADER has conducted business only in the ordinary and
usual course; and, except as set forth in Section 3.09 of the LEADER DISCLOSURE
SCHEDULE, LEADER has not:
(a) Authorized the creation or issuance of, issued, sold
or disposed of, or created any obligation to issue,
sell or dispose of, any stock, notes, bonds or other
securities, or any obligation convertible into or
exchangeable for, any shares of its capital stock;
(b) Except as set forth in Section 3.09 of the LEADER
DISCLOSURE SCHEDULE, declared, set aside, paid or
made any dividend or other distributions on its
capital stock or directly or indirectly redeemed,
purchased or acquired any shares thereof or entered
into any agreement in respect of the foregoing;
(c) Effected any stock split, recapitalization,
combination, exchange of shares, readjustment or
other reclassification;
(d) Amended its Articles of Incorporation or Code of
Regulations;
(e) Purchased, sold, assigned or transferred any material
tangible asset or any material patent, trademark,
trade name, copyright, license, franchise, design or
other intangible asset or property;
(f) Except as set forth in Section 3.09 of the LEADER
DISCLOSURE SCHEDULE, mortgaged, pledged or granted or
suffered to exist any lien or other encumbrance or
charge on any assets or properties, tangible or
intangible, except for liens for taxes not yet due
and payable and such other liens, encumbrances or
charges which do not materially adversely affect its
financial position;
(g) Cancelled any material debts or waived any material
claims other than for adequate consideration;
(h) Incurred any material obligation or liability
(absolute or contingent), including, without
limitation, any tax liability, or paid any material
liability or obligation (absolute or contingent)
other than liabilities and obligations incurred or
paid in the ordinary course of business and
consistent with past practice;
(i) Experienced any material change in the amount or
general composition of its liabilities;
(j) Entered into or amended any employment contract with
any of its employees, increased the compensation
payable to any officer or director or any relative of
any such employee or director, or become obligated to
increase any such compensation, except as set forth
in Section 3.09 of the LEADER DISCLOSURE SCHEDULE;
(k) Adopted or amended in any material respect any
employee benefit plan, severance plan or collective
bargaining agreement or made any awards or
distributions under any employee benefit plan not
consistent with past practice or custom, except as
set forth in Section 3.09 of the LEADER DISCLOSURE
SCHEDULE;
(l) Incurred any damage, destruction or similar loss,
whether or not covered by insurance, materially
affecting their businesses or properties;
(m) Acquired any stock or other equity interest in any
corporation, partnership, trust, joint venture or
other entity;
(n) Made any (i) material investment (except investments
made in the ordinary course of business and
consistent with past practice) or (ii) material
capital expenditure or commitment for any material
addition to property, plant or equipment; or
(o) Agreed, whether in writing or otherwise, to take any
action described in this Section 3.09.
Section 3.10 The MORTGAGE LOANS. The following representations
and warranties are made with respect to (i) each loan originated by LEADER and
of which LEADER is the beneficial owner, and (ii) each loan originated by LEADER
and sold by LEADER with recourse, but in each case excluding loans that have
been repurchased by LEADER (collectively, the "MORTGAGE LOANS"):
(a) Each MORTGAGE LOAN originated by LEADER and sold by LEADER
to an INVESTOR conforms in all material respects to the requirements and
specifications of the INVESTOR.
(b) The note, the mortgage, deed of trust or other instrument
securing the note, and the related documents for each MORTGAGE LOAN (the "LOAN
DOCUMENTS") are genuine and each is the legal, valid and binding obligation of
the maker thereof, enforceable in accordance with its terms. To the knowledge of
LEADER, all parties to the MORTGAGE LOAN had legal capacity to execute the LOAN
DOCUMENTS and each of the LOAN DOCUMENTS have been duly and properly executed by
such parties. None of the MORTGAGE LOANS is subject to any legally enforceable
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of any MORTGAGE LOAN, or the
exercise of any legally enforceable right thereunder, render any MORTGAGE LOAN
or any of the LOAN DOCUMENTS unenforceable, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including the defense
of usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto.
(c) The full original principal amount of each MORTGAGE LOAN
(net of any discounts) has been fully advanced or disbursed to the mortgagor
named therein, there is no requirement for future advances and any and all
requirements as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been satisfied. All costs, fees
and expenses incurred in making, closing or recording each MORTGAGE LOAN were
paid. There is no obligation on the part of LEADER to make supplemental payments
in addition to those made by the mortgagor named in each MORTGAGE LOAN.
(d) Each MORTGAGE LOAN has been duly acknowledged and recorded
and is a valid and subsisting first lien, and the mortgaged property is free and
clear of all encumbrances and liens having priority over the lien of the
MORTGAGE LOAN, except for (i) liens for real estate taxes and special
assessments not yet due and payable, (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of the public record,
acceptable to institutional mortgage lenders generally and (iii) other matters
to which like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the MORTGAGE LOAN
or the use, enjoyment, value or marketability of the related mortgaged property.
To the knowledge of LEADER, there are no mechanics or similar liens or claims
which have been filed for work, labor or material (and, to the knowledge of
LEADER, no rights are outstanding that under law could give rise to such lien)
affecting the mortgaged property which are or may be liens prior to, or equal or
coordinate with, the lien of the MORTGAGE LOAN.
A valid mortgagee's title policy or attorney's opinion letter
has been issued and is and shall remain in full force and effect for each such
MORTGAGE LOAN in an amount not less than the original principal amount of such
MORTGAGE LOAN, which title policy insures that the related MORTGAGE LOAN is a
valid first lien on the mortgaged property therein described and that the
mortgaged property is free and clear of all encumbrances and liens having
priority over the lien of the MORTGAGE LOAN, subject to the exceptions set forth
in this subparagraph. All tax identifications and property descriptions are
legally sufficient, and tax segregation, where required, has been completed. The
failure of LEADER have recorded intervening assignments of the MORTGAGE LOAN
will not cause a delay in the subsequent release of any MORTGAGE LOAN or
otherwise subject FDFC to any liabilities or costs.
(e) LEADER has not waived any default, breach, violation or
event of acceleration existing under any MORTGAGE LOAN. The terms of each
MORTGAGE LOAN have in no way been waived, impaired, changed or modified, except
in accordance with loss mitigation activity or by written instrument which has
been recorded, if necessary, and approved by the applicable INVESTORS. LEADER
has not advanced its funds to cure a default or delinquency with respect to any
such MORTGAGE LOANS, except for escrowed items or in accordance with the terms
of SERVICING AGREEMENTS.
(f) All payments received by LEADER with respect to any
MORTGAGE LOANS have been properly accounted for. All funds received by LEADER in
connection with the satisfaction of MORTGAGE LOANS, including but not limited to
foreclosure proceeds and insurance proceeds from hazard losses, have been
applied to reduce the principal balance of the loan in question, or for
reimbursement of repairs to the mortgaged property. The unpaid balances of the
MORTGAGE LOANS held by LEADER or serviced for others by LEADER are as stated in
the mortgage files to be delivered to FDFC.
(g) LEADER has complied and will continue to comply through
the EFFECTIVE TIME, with every applicable federal, state, or local law, statute,
and ordinance, and any rule, regulation, or order issued thereunder applicable
to LEADER, pertaining to the MORTGAGE LOANS, including, without limitation, real
estate settlement procedures, fair credit reporting, and every other prohibition
against unlawful discrimination or governing consumer credit, and also
including, without limitation, the Consumer Credit Reporting Act, Equal Credit
Opportunity Act of 1975 and Regulation B, Fair Credit Reporting Act, Truth in
Lending Law, in particular, Regulation Z as amended, the Flood Disaster
Protection Act of 1973, and state consumer credit codes and laws.
(h) All taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments, ground rents relating to
the MORTGAGE LOANS have been paid by LEADER as required.
(i) There exists no physical damage to the mortgaged property
related to any MORTGAGE LOAN from fire, flood, windstorm, earthquake, tornado,
hurricane or any other similar casualty, which physical damage would cause any
MORTGAGE LOAN to become delinquent or adversely affect the value or
marketability of any MORTGAGE LOAN or the mortgaged property or the eligibility
of the MORTGAGE LOAN for insurance benefits, or the amount of insurance
benefits. To the best of LEADER's knowledge, there is no proceeding pending for
the total or partial condemnation of, or eminent domain with respect to, any
mortgaged property related to a MORTGAGE LOAN.
(j) All MORTGAGE LOANS securitized in a GNMA, FHLMC or FNMA
pool, at the time of inclusion in the pool, met all applicable GUIDELINES. All
pools relating to the MORTGAGE LOANS have been initially certified, finally
certified and/or recertified in accordance with applicable GUIDELINES. The
principal balance outstanding and owing on the MORTGAGE LOANS held or serviced
by LEADER in each pool equals or exceeds the amount owing to the corresponding
security holder of such pool.
(k) The file for each MORTGAGE LOAN held by LEADER or serviced
by LEADER contains the LOAN DOCUMENTS, duly executed and in due and proper form
and the information contained therein is true, accurate and complete in all
material respects.
(l) Except as set for in Section 3.10(l) of the LEADER
DISCLOSURE SCHEDULE and except with respect to loans sold by LEADER, LEADER has
not previously assigned, transferred or encumbered its rights in the MORTGAGE
LOANS, no other party has any interest in the MORTGAGE LOANS, and there are no
contracts affecting the MORTGAGE LOANS to which LEADER will be bound after the
EFFECTIVE TIME.
(m) The origination, sale and collection practices of LEADER
with respect to each MORTGAGE LOAN are in all material respects legal, proper,
prudent and customary in the mortgage lending business. With respect to escrow
deposits and payments in those instances where such are required to be made by
LEADER, there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made, and no escrow deposits or
payments or other charges or prepayments due to the mortgagor named in the
MORTGAGE LOAN have been capitalized by LEADER under any MORTGAGE LOAN or the
related LOAN DOCUMENTS.
(n) None of the MORTGAGE LOANS is secured by liens or security
interests on cooperative properties.
(o) Except as set forth in Section 3.10(o) of the LEADER
DISCLOSURE SCHEDULE, LEADER has no recourse obligations with respect to any of
the MORTGAGE LOANS.
(p) All escrow accounts maintained by LEADER with respect to
the MORTGAGE LOANS (the "LEADER ESCROW ACCOUNTS") have been established and
continuously maintained in accordance with prudent practice and industry
standards. Except as to payments which are past due under the MORTGAGE LOANS,
all LEADER ESCROW ACCOUNT balances required by the MORTGAGE LOANS and paid to
LEADER for the account of the mortgagors under the MORTGAGE LOANS are on deposit
in the LEADER ESCROW ACCOUNTS. Within the last twelve (12) months, LEADER has
analyzed the payments required to be deposited into the LEADER ESCROW ACCOUNTS
and adjusted the payment thereto in order to eliminate any deficiency it may
have discovered.
Section 3.11. Loans Subject to SERVICING AGREEMENTS. The following
representations are made with respect to the SERVICING AGREEMENTS and loans
serviced by LEADER under the SERVICING AGREEMENTS (the "SERVICED LOANS"):
(a) All payments received by LEADER with respect to any
SERVICED LOANS have been remitted and properly accounted for as required by the
applicable INVESTOR. All funds received by LEADER in connection with the
satisfaction of SERVICED LOANS, including not limited to foreclosure proceeds
and insurance proceeds from hazard losses, have been deposited in the
appropriate principal and interest account or taxes and insurance account
included among the related escrow accounts, and all such funds have been applied
to reduce the principal balance of the SERVICED LOANS in question, or for
reimbursement of repairs to the mortgaged property or as otherwise required by
applicable INVESTOR or are and will be in one of the related escrow accounts on
the EFFECTIVE DATE. The unpaid balances of the SERVICED LOANS are as stated in
the mortgage files to be delivered to FDFC as of the dates indicated in such
files.
(b) All taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments, ground rents relating to
the SERVICED LOANS have been paid by LEADER as required by the applicable
INVESTOR.
(c) All GNMA, FHLMC or FNMA pools formed by LEADER met all
applicable GUIDELINES. All pools relating to the SERVICED LOANS have been
initially certified, finally certified and/or recertified in accordance with
applicable GUIDELINES. The principal balance outstanding and owing on the
SERVICED LOANS in each pool equals or exceeds the amount owing to the
corresponding security holder of such pool.
(d) Except as set for in Section 3.10(d) of the LEADER
DISCLOSURE SCHEDULE, LEADER has not previously assigned, transferred or
encumbered its rights under the SERVICING AGREEMENTS. There are no contracts
affecting the SERVICED LOANS or the SERVICING AGREEMENTS to which LEADER will be
bound after the EFFECTIVE TIME, and no other party has any interest in the
SERVICED LOANS or the SERVICING AGREEMENTS, except as required or permitted
under the GUIDELINES.
(e) All escrow accounts required to be maintained by LEADER
have been established and continuously maintained in accordance with the
GUIDELINES or other applicable requirements in all material respects. Except as
to payments which are past due under the SERVICED LOANS, all related escrow
account balances required by the SERVICED LOANS and paid to LEADER for the
account of the mortgagors under the SERVICED LOANS are on deposit in the
appropriate related escrow accounts. Within the last twelve (12) months, LEADER
has analyzed the payments required to be deposited into the related escrow
account and adjusted the payment thereto in order to eliminate any deficiency it
may have discovered.
(f) The SERVICED LOANS have been serviced in all material
respects in accordance with the applicable GUIDELINES.
Section 3.12. Properties. (a) A list and brief description of
all material fixed assets carried on the books of LEADER as of March 31, 1998
(the "PERSONAL PROPERTY"), is set forth in Section 3.12(a) of the LEADER
DISCLOSURE SCHEDULE. All PERSONAL PROPERTY has been maintained in good working
order, ordinary wear and tear excepted. LEADER owns and has good title to all of
the PERSONAL PROPERTY, free and clear of any mortgage, lien, pledge, charge,
claim, conditional sales or other agreement, lease, right or encumbrance, except
(i) to the extent stated or reserved against in the LEADER AUDITED FINANCIALS or
disclosed in Section 3.12(a) of the LEADER DISCLOSURE SCHEDULE, and (ii) such
other exceptions which are not material in character, amount or extent and do
not materially detract from the value of or interfere with the use of the
properties or assets subject thereto or affected thereby.
(b) A description of each parcel of real property (i) owned
legally or beneficially by LEADER or (ii) carried on the books of LEADER (the
"REAL PROPERTIES") is set forth in Section 3.12(b) of the LEADER DISCLOSURE
SCHEDULE. Excepts as set forth in Section 3.12(b) of the LEADER DISCLOSURE
SCHEDULE, LEADER is the owner of the REAL PROPERTIES in fee simple and has good
and marketable title to the REAL PROPERTIES free of any liens, claims, charges,
encumbrances or security interests of any kind, except (i) liens for real estate
taxes and assessments not yet delinquent and (ii) utility, access and other
easements, rights of way, restrictions and exceptions which do not impair the
REAL PROPERTIES for the use and business being conducted thereon. No party
leases any of the REAL PROPERTIES from LEADER.
(c) Except as set forth in Section 3.12(c) of the LEADER
DISCLOSURE SCHEDULE, LEADER has not received notification from any governmental
entity within the two-year period immediately preceding the date hereof of
contemplated improvements to the REAL PROPERTIES or surrounding area or
community by a public authority, the costs of which are to be assessed as
special taxes against the REAL PROPERTIES in the future.
(d) A description of all real property leased by LEADER from a
third party (the "LEASED REAL PROPERTY") is set forth in Section 3.12(d) of the
LEADER DISCLOSURE SCHEDULE. True and correct copies of all leases in respect of
the LEASED REAL PROPERTY (the "REAL PROPERTY LEASES") and all attachments,
amendments and addenda thereto have been delivered by LEADER to FDFC. The REAL
PROPERTY LEASES create, in accordance with their terms, valid and binding
leasehold interests of LEADER in all of the LEASED REAL PROPERTY, free and clear
of all liens, claims, charges, encumbrances or security interests of any kind.
LEADER has complied in all material respects with all of the provisions of the
REAL PROPERTY LEASES required on their part to be complied with and are not in
default with respect to any of their obligations (including payment obligations)
under any of the REAL PROPERTY LEASES. Except as set forth in Section 3.12(d) of
the LEADER DISCLOSURE SCHEDULE, the MERGER will not result in a termination, or
constitute grounds for termination, of any REAL PROPERTY LEASE.
(e) A description of all personal property leased by LEADER
from a third party (the "PERSONAL PROPERTY LEASES") is set forth in Section
3.12(e) of the LEADER DISCLOSURE SCHEDULE. The PERSONAL PROPERTY LEASES create,
in accordance with their terms, valid and binding leasehold interests of LEADER
in all of the personal property subject to the PERSONAL PROPERTY LEASES, free
and clear of all liens, claims, charges, encumbrances or security interests of
any kind. LEADER has complied in all material respects with all of the
provisions under the PERSONAL PROPERTY LEASES required on their part to be
complied with and is not in default with respect to any of its obligations
(including payment obligations) under any of the PERSONAL PROPERTY LEASES.
Except as set forth in Section 3.12(e) of the LEADER DISCLOSURE SCHEDULE, the
MERGER will not result in a termination, or constitute grounds for termination,
of any PERSONAL PROPERTY LEASE.
Section 3.13. Investments. Section 3.13 of the LEADER
DISCLOSURE SCHEDULE sets forth (a) a true, accurate and complete list of all
investments, other than investments in the PERSONAL PROPERTY and REAL
PROPERTIES, owned by LEADER (hereafter referred to as the "INVESTMENTS") as of
March 31, 1998, the name of the registered holder thereof, the location of the
certificates therefor or other evidence thereof and any stock powers or other
authority for transfer granted with respect thereto and (b) a true, accurate and
complete list of the names of each bank or other depository in which either
LEADER has an account or safe deposit box, and the names of all persons
authorized to draw thereon or to have access thereto. The INVESTMENTS are owned
by LEADER free and clear of all liens, pledges, claims, security interests,
encumbrances, charges or restrictions of any kind and may be freely disposed of
by LEADER at any time. LEADER is not a party to or has no interest in any
repurchase agreements or reverse repurchase agreements.
Section 3.14. Reports and Records. LEADER has filed all
reports and maintained all records required to be filed or maintained by it
under LEADER's contracts with third parties, including but not limited to loan
sale agreements and loan servicing agreements. All such documents and reports
complied in all material respects with applicable requirements of laws and
regulations in effect at the time of filing such documents and contained in all
material respects the information required to be stated therein. None of such
documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.15. Taxes and Related Matters. (a) LEADER is a
regular corporation as defined in Subchapter C of the CODE, and has duly and
timely filed, including applicable extension periods, all federal, state, county
and local income, profits, franchise, excise, sales, customs, property, use,
occupation, withholding, social security and other tax and information returns
and reports required to have been filed by them through the date hereof. LEADER
has paid or accrued all taxes and duties (and all interest and penalties with
respect thereto) due or claimed to be due to any governmental authority by
LEADER. LEADER does not have, to its knowledge, any liability for any taxes or
duties (or interest or penalties with respect thereto) of any nature whatsoever,
and, to LEADER's knowledge, there is no basis for any additional material claims
or assessments, other than taxes accrued in the ordinary course of business.
True copies of the federal, state and local income tax returns of LEADER for
each of the three tax years ended September 30, 1996, 1995 and 1994, have been
delivered to FDFC, and the federal, state and local income tax returns of LEADER
for the fiscal year ended September 30, 1997, will be delivered to FDFC when
they are filed with the IRS.
(b) There are no federal, state or local tax returns or
reports not filed which would be due but for an extension of time for filing
having been granted, except as disclosed in Section 3.15(b) of the DISCLOSURE
SCHEDULE. LEADER has not executed or filed with the Internal Revenue Service
(the "IRS") or any state or local tax authority any agreement extending the
period for assessment and collection of any tax, nor is LEADER a party to any
action or proceeding of any governmental authority for assessment or collection
of taxes. There is no outstanding assessment or claim for collection of taxes
against LEADER. LEADER has not received any notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental agency with
respect to any federal, state or local taxes. No tax return of LEADER is
currently the subject of any audit by the IRS or any other governmental agency.
No material deficiencies have been asserted in connection with the tax returns
of LEADER, and LEADER has no reason to believe that any deficiency would be
asserted relating thereto. Except as disclosed in Section 3.15(b) of the
DISCLOSURE SCHEDULE: (i) LEADER has never been a member of an "affiliated group
of corporations" (within the meaning of Section 1504(a) of the Internal Revenue
Code of 1986, as amended (the "CODE") filing consolidated returns, other than
the affiliated group of which LEADER is the parent; and (ii) LEADER is not a
party to any tax sharing agreement.
(c) LEADER has filed all IRS forms, including but not limited
to Forms 1041 KI, 1041, 1099 INT, 1099 MISC, 1099A and 1098, as appropriate,
which are required to be filed with respect to the SERVICING AGREEMENTS. Each
MORTGAGE LOAN file contains an executed and correct IRS Form W-9 or other
acceptable evidence of a borrower's social security number to the extent
required by IRS Regulations.
Section 3.16. Material Contracts. (a) Except as set forth in
Section 3.16(a) of the LEADER DISCLOSURE SCHEDULE, LEADER is not a party to or
bound by any written or oral (i) contract or commitment for capital expenditures
in excess of $25,000 for any one project or $50,000 in the aggregate; (ii)
contract or commitment made in the ordinary course of business for the purchase
of materials or supplies or for the performance of services involving payments
to or by LEADER of an amount exceeding $25,000 in the aggregate or extending for
more than six months from the date hereof; (iii) contract or option for the
purchase of any property, real or personal, for an amount exceeding $25,000;
(iv) letter of credit or indemnity calling for payment of more than $25,000; (v)
guarantee agreement; (vi) instrument granting any person authority to transact
business on behalf of LEADER; (vii) contracts or commitments to make loans
(including unfunded commitments and lines of credit) to any one person (together
with "affiliates" of that person), except for contracts or commitments entered
into in the ordinary course of business; (viii) employment, management,
consulting, deferred compensation, severance or other similar contract with any
director, officer or employee of LEADER; (ix) note, debenture or loan agreement
pursuant to which LEADER has incurred indebtedness; (x) loan participation
agreement; (xi) hedging contract, options or interest rate swap arrangements or
agreements; (xii) commitment or agreement to do any of the foregoing; or (xiii)
other contract, agreement or commitment made outside the ordinary course of
business. (The contracts, agreements, commitments and other arrangements
described in clauses (i) through (xiii) of this Section 3.16(a) are hereinafter
collectively referred to as the "CONTRACTS").
(b) Except as set forth in Section 3.16(b) of the LEADER
DISCLOSURE SCHEDULE, LEADER has previously delivered or made available to FDFC
copies of all of the CONTRACTS.
(c) LEADER is not in material default under any CONTRACT and
no claim of such default by any party has been made or is now, to the knowledge
of LEADER, threatened, except to the extent such a default would not have a
MATERIAL ADVERSE EFFECT. Except as set forth in Section 3.16 of the LEADER
DISCLOSURE SCHEDULE, there does not exist any event which, with notice or lapse
of time or both, would constitute a material default by LEADER under, or would
excuse performance by any party thereto from, any CONTRACT, except to the extent
such a default would not have a MATERIAL ADVERSE EFFECT.
Section 3.17. Insurance. Section 3.17 of the LEADER DISCLOSURE
SCHEDULE sets forth a true and complete list of all insurance policies,
indemnities, bonds or similar arrangements maintained by or for the benefit of
LEADER. All material properties and operations of LEADER are insured in amounts
and types as are customary for mortgage banking companies similarly situated.
The performance by the officers and employees of LEADER of their duties is
bonded in such amounts and against such risks as are usually insured against or
bonded by entities similarly situated, under valid and enforceable policies of
insurance or bonds issued by insurers or bonding companies of recognized
responsibility, financial or otherwise. LEADER maintains all insurance policies,
indemnities and bonds required to be maintained by LEADER in accordance with the
terms of the servicing agreement and in form, substance and amount specified by
the servicing agreements.
Section 3.18. Litigation. Except as set forth in Section 3.18
of the LEADER DISCLOSURE SCHEDULE, (a) there are no actions, suits, proceedings
or investigations pending or, to the best knowledge of LEADER, threatened
against or affecting the business, operations or financial condition of LEADER
in any court or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, (b) the
management of LEADER has no knowledge of any reasonable and legally cognizable
basis for any such action, suit, proceeding or investigation, and (c) LEADER is
not in default in respect of any judgment, order, writ, injunction or decree of
any court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality.
Section 3.19. Governmental Regulations. LEADER is not a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is LEADER a "registered investment
company", or an "affiliated person" or a "principal underwriter" of a
"registered investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
Section 3.20. Employee Benefit Plans; ERISA. (a) Section
3.20(a) of the LEADER DISCLOSURE SCHEDULE sets forth a true and complete list of
all qualified pension or profit-sharing plans, deferred compensation,
consulting, bonus, group insurance plans or agreements and all other incentive,
welfare or employee benefit plans or agreements maintained for the benefit of
employees or former employees of LEADER. Copies of such plans and agreements,
together with (i) when applicable, the most recent actuarial and financial
reports prepared with respect to any such plan, (ii) the most recent annual
reports filed with any government agency and (iii) all rulings and determination
letters received from governmental agencies and any open requests for rulings or
letters that pertain to any such plan, have been delivered or will be delivered
to FDFC.
(b) Except as may be disclosed in Section 3.20(b) of the
LEADER DISCLOSURE SCHEDULE, LEADER does not currently maintain any "employee
pension benefit plan," as defined in Section 3(2) of The Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), (each such plan, together
with any related trust or other funding mechanism, as maintained by LEADER, a
"PENSION BENEFIT PLAN"), which is intended to be qualified under Section 401(a)
of the CODE.
(c) LEADER currently does not maintain, nor has ever
maintained, any PENSION BENEFIT PLAN subject to the provisions of Title IV of
ERISA.
(d) LEADER does not currently participate in, nor have it ever
participated in, any multiemployer plan, as such term is defined in Section
3(37) of ERISA.
(e) All of the PENSION BENEFIT PLANS have complied and comply
currently in all material respects, both as to form and operation, with the
provisions of ERISA and the CODE, where required in order to be tax-qualified
under Section 401(a) of the CODE, and all other applicable laws, rules and
regulations. LEADER is not aware of any event which might jeopardize the tax
qualified status of any PENSION BENEFIT PLAN. Each PENSION BENEFIT PLAN which is
intended to be qualified under Section 401(a) of the CODE has received a
determination letter from the IRS which considers amendments made to the CODE by
the Tax Reform Act of 1986. All reports required by any governmental agency with
respect to each PENSION BENEFIT PLAN have been timely filed with such agency
and, where required, distributed to participants and beneficiaries of such
PENSION BENEFIT PLAN within the time required by law.
(f) Each "employee welfare benefit plan," as defined in
Section 3(1) of ERISA, (each such plan together with any related trust or other
funding mechanism, as maintained by LEADER, a "WELFARE BENEFIT PLAN") has been
administered to date in all material respects in compliance with the
requirements of the CODE and ERISA, and all reports required by any governmental
agency with respect to each WELFARE BENEFIT PLAN has been timely filed with such
agency and, where required, distributed to participants and beneficiaries of
such WELFARE BENEFIT PLAN within the time required by law.
(g) Neither LEADER, nor to the knowledge of LEADER, any plan
fiduciary of any WELFARE BENEFIT PLAN or PENSION BENEFIT PLAN has engaged in any
transaction in violation of Section 406(a) or (b) of ERISA (for which no
exemption exists under Section 408 of ERISA) or any "prohibited transaction" (as
defined in Section 4975(c)(1) of the CODE) for which no exemption exists under
Section 4975(c)(1) of the CODE.
Section 3.21. Environmental Matters. (a) LEADER is in material
compliance with all applicable ENVIRONMENTAL LAWS (hereinafter defined). LEADER
has not received any written or oral communication from any organization, person
or otherwise, which alleges that either (i) LEADER is not in compliance with all
applicable ENVIRONMENTAL LAWS or (ii) any properties or assets of LEADER may
have been affected by any MATERIALS OF ENVIRONMENTAL CONCERN (hereinafter
defined). All permits and other governmental authorizations currently held or
being applied for by LEADER pursuant to the ENVIRONMENTAL LAWS are set forth in
Section 3.21(a) of the LEADER DISCLOSURE SCHEDULE.
(b) There is no ENVIRONMENTAL CLAIM (hereinafter defined)
pending or, to the knowledge of LEADER, threatened (i) against LEADER, (ii)
against any person or entity whose liability for any ENVIRONMENTAL CLAIM has or
may have been retained or assumed by LEADER either contractually or by operation
of law, or (iii) against any real or personal property which LEADER owns,
manages, supervises or participates in the management of, or, to the knowledge
of LEADER, which LEADER leases or in which LEADER holds a security interest in
connection with a MORTGAGE LOAN or any other loan or loan participation, other
than such as would not, either individually or in the aggregate, have a MATERIAL
ADVERSE EFFECT.
(c) There are no present or, to the knowledge of LEADER, past
activities, conditions, or incidents, including, without limitation, the release
or disposal of any MATERIALS OF ENVIRONMENTAL CONCERN, that could reasonably
form the basis of any ENVIRONMENTAL CLAIM against LEADER or against any person
or entity whose liability for any ENVIRONMENTAL CLAIM has or may have been
retained or assumed by LEADER, either contractually or by operation of law,
other than such as would not, either individually or in the aggregate, have a
Material Adverse Effect.
(d) To the best of LEADER's knowledge, without independent
inquiry, no MATERIALS OF ENVIRONMENTAL CONCERN, are present on, in, at or under
the mortgaged property securing a MORTGAGE LOAN or a SERVICED LOAN such that (i)
the value of such mortgaged property is materially and adversely affected, or
(ii) under applicable federal, state or local law, (I) such hazardous material
would be required to be eliminated before such mortgaged property could be
altered, renovated, demolished or transferred or (II) the presence of such
hazardous material would (upon action by the appropriate governmental
authorities) subject the owner of such mortgaged property, or the holder of a
security interest therein, to liability for the cost of eliminating such
hazardous material or the hazard created thereby.
(e) As used in this AGREEMENT:
(i) "ENVIRONMENTAL CLAIM" means any claim, cause of
action or notice (written or oral) by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (I) the presence, or release into the environment, of any
MATERIALS OF ENVIRONMENTAL CONCERN at any location, whether or not owned by
LEADER or (II) circumstances forming the basis of any violation, or alleged
violation, of any ENVIRONMENTAL LAW;
(ii) "ENVIRONMENTAL LAWS" means all laws and
regulations relating to pollution or protection of human health or the
environment including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of MATERIALS OF
ENVIRONMENTAL CONCERN, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of MATERIALS OF ENVIRONMENTAL CONCERN; and
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" shall mean
(I) any "hazardous waste" as defined in 42 U.S.C. Section 6903, as amended from
time to time, and regulations promulgated thereunder from time to time; (II) any
"hazardous substance" as defined in 42 U.S.C. Section 9601, as amended from time
to time, and regulations promulgated thereunder from time to time; (III)
asbestos; (IV) PCB's; (V) any substance the presence of which on LEADER's
property is prohibited by any applicable law, ordinance, or regulation; (VI)
petroleum products; and (VII) underground storage tanks and above ground storage
tanks.
Section 3.22. Employment Matters. LEADER is in compliance with
all federal, state or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and have not
and are not engaged in any unfair labor practice, except where such failure to
comply or such practice would not have a MATERIAL ADVERSE EFFECT on LEADER. No
unfair labor practice complaint against LEADER is pending before any
governmental agency or court and there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving LEADER. No
representation question exists in respect of the employees of LEADER and no
labor grievance which might have a material adverse effect upon LEADER or the
conduct of their businesses is pending or, to the knowledge of LEADER,
threatened. LEADER has not entered into any collective bargaining agreement with
any labor organization with respect to any group of employees of LEADER, and, to
the knowledge of LEADER, there is no present effort nor existing proposal to
attempt to unionize any group of employees of LEADER.
Section 3.23. Untrue Statements and Omissions. The
certificates, statements and other information furnished to FDFC in writing by
or on behalf of LEADER in connection with the transactions contemplated hereby,
including, but not limited to, disclosures and information set forth in the
LEADER DISCLOSURE SCHEDULE, but excluding statements or information pertaining
to parties unrelated to LEADER, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.24. Proxy Materials. None of the information
relating to LEADER included in any information statement which is to be mailed
to the shareholders of LEADER in connection with any meeting of shareholders
convened in accordance with Sections 1.05(a) and 6.06 of this AGREEMENT (the
"INFORMATION STATEMENT") will, at the time the INFORMATION STATEMENT is mailed
or at the time of the meeting to which the INFORMATION STATEMENT relates,
contain any untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading, except to the
extent it contains information about FDFC or FIRST FEDERAL provided in writing
to LEADER by FDFC or FIRST FEDERAL.
Section 3.25. Brokers. Except for amounts payable to ▇▇▇▇▇▇▇▇
& Company Securities, Inc. ("MCDONALD & COMPANY"), as disclosed in Section 3.24
of the LEADER DISCLOSURE SCHEDULE, there are no claims or agreements for
brokerage commission, finder's fees, or similar compensation in connection with
the transactions contemplated by this AGREEMENT payable by LEADER.
Section 3.26. Regulatory Enforcement. LEADER is not subject
to, nor has it received any notice or advice that it is or may become subject
to, any order, agreement or memorandum of understanding of any federal or state
agency having supervisory or regulatory authority with respect to LEADER. LEADER
has not received any notice or advice that it is not in compliance with any
statute or regulation. LEADER has received no notice from any governmental
authority or any INVESTOR threatening to revoke any license, franchise, permit
or governmental authorization.
Section 3.27. Subsidiaries; Equity Interest. The term
"subsidiary" means an organization or entity which is consolidated or is
eligible to be consolidated with a party to this AGREEMENT for financial
reporting purposes. LEADER has no subsidiaries. Except as set forth in Section
3.26 of the LEADER DISCLOSURE SCHEDULE, LEADER does not own, beneficially or
otherwise, any shares of EQUITY SECURITIES (as defined below) or similar
interest of any corporation, bank, business trust, association or similar
organization. "EQUITY SECURITIES" of an issuer means capital stock or other
equity securities of such issuer, options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, shares of any capital stock or other equity
securities of any issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue additional
shares of its capital stock or other equity securities of such issuer, or
options, warrants, scrip or rights to purchase, acquire, subscribe to, calls on
or commitments for any shares of its capital stock or other equity securities.
LEADER is not a party to any partnership or joint venture except as set forth in
Section 3.27 of the LEADER DISCLOSURE SCHEDULE.
Section 3.28. Compensation and Retirement Plan. Section 3.28
of the LEADER DISCLOSURE SCHEDULE contains a true and accurate list of any
nonqualified compensation or retirement plans, agreements or arrangements,
whether written or oral, maintained by LEADER, together with the names of the
recipients, award dates, expiration dates and amounts relating to and arising
out of any such plan, agreement or arrangement.
Section 3.29. Arms Length Transactions; Conflicts of Interest.
Except as set forth in Section 3.29 of the LEADER DISCLOSURE SCHEDULE, all
transactions by LEADER are and have been conducted on an arms length basis, and
there is no transaction, and no transaction has been proposed, between LEADER
and any shareholder, officer, director or employee of LEADER or an affiliate of
any such person. LEADER has no knowledge of any favorable pricing, purchase or
lease arrangements which will not continue to be available after the MERGER on
substantially equivalent terms. Except as set forth in Section 3.28 of the
DISCLOSURE SCHEDULE, no shareholder, director, officer or employee of LEADER or
of any affiliate of LEADER or any such person, has any interest in (i) any
property, real or personal, tangible or intangible, including, but not limited
to, any intellectual property, used or useful in connection with or pertaining
to the business or (ii) any creditor, supplier, manufacturer, dealer,
distributor or representative of LEADER.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF FDFC AND FIRST FEDERAL
FDFC and FIRST FEDERAL represent and warrant to LEADER that
each of the following statements is true and accurate in all material respects:
Section 4.01. Organization and Standing. (a) FDFC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and has the corporate power and authority to own or hold
under lease all of its properties and assets and to conduct its business and
operations as presently conducted. FDFC is registered as a savings and loan
holding company under the Home Owners Loan Act ("HOLA").
(b) FIRST FEDERAL is a savings and loan association duly
organized, validly existing and in good standing under the laws of the United
States and has the corporate power and authority to own or hold under lease all
of its properties and assets and to conduct its business and operations as
presently conducted. FIRST FEDERAL is a member of the Federal Home Loan Bank of
Cincinnati. The deposit accounts of FIRST FEDERAL are insured up to applicable
limits by the Savings Association Insurance Fund. FIRST FEDERAL is in compliance
in all material respects with all applicable local, state and federal laws and
regulations, including, without limitation, the regulations of the Federal
Deposit Insurance Corporation and the OTS.
Section 4.02. Qualification. FDFC and FIRST FEDERAL are either
duly qualified to do business and in good standing in each jurisdiction in which
such qualification is required or the failure to so qualify would not have a
material adverse effect on the business of FDFC or FIRST FEDERAL.
Section 4.03. Authority of FDFC and FIRST FEDERAL. This
AGREEMENT has been duly executed and delivered by FDFC and FIRST FEDERAL.
Subject to the adoption of the MERGER AGREEMENT by the PARENT COMPANY as the
sole shareholder of MERGER SUB, and to the filing of all requisite regulatory
notices and the receipt of all required regulatory approvals, (a) FDFC has all
requisite corporate power and authority to enter into this AGREEMENT and to
perform all of its obligations hereunder; (b) FIRST FEDERAL has all requisite
corporate power and authority to enter into this AGREEMENT and to perform all of
its obligations hereunder and thereunder; (c) the execution and delivery of this
AGREEMENT and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action by FDFC and
FIRST FEDERAL; and (d) subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general applicability
affecting the enforcement of creditors' rights generally, and the effect of
rules of law governing specific performance, injunctive relief and other
equitable remedies on the enforceability of such documents, and except to the
extent such enforceability may be limited by laws relating to safety and
soundness of insured depository institutions as set forth in 12 U.S.C ss.1818(b)
or by the appointment of a conservator by the FDIC, (i) this AGREEMENT is the
valid and binding agreement of FDFC, enforceable against FDFC in accordance with
its terms, and (ii) this AGREEMENT is the valid and binding agreement of FIRST
FEDERAL, enforceable against FIRST FEDERAL in accordance with its terms.
Section 4.04. No Conflicts. The execution and delivery of this
AGREEMENT and, subject to the regulatory filings and approvals referenced in
Section 7.01(b) of this AGREEMENT, the consummation of the transactions
contemplated hereby will not (a) conflict with or violate any provision of or
result in the breach of any provision of the Articles of Incorporation or Code
of Regulations of FDFC or the Charter or Bylaws of FIRST FEDERAL; (b) conflict
with or violate any provision of or result in the breach or the acceleration of
or entitle any party to accelerate (whether upon or after the giving of notice
or lapse of time or both) any obligation under, or otherwise materially affect
the terms of, any mortgage, lien, lease, agreement, license, instrument, order,
arbitration award, judgment or decree to which FDFC or FIRST FEDERAL is a party
or by which FDFC or FIRST FEDERAL or their property or assets is bound; (c)
require the consent of any party to any agreement or commitment to which FDFC or
FIRST FEDERAL is a party or by which FDFC or FIRST FEDERAL or their property or
assets is bound, the failure to obtain which could, individually or in the
aggregate with all the other failures to obtain required consents, have a
material adverse effect on the business, operations, condition (financial or
otherwise) or prospects of FDFC or FIRST FEDERAL; (d) result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any property or assets of FDFC or FIRST FEDERAL that would impair the
ability of FDFC or FIRST FEDERAL to perform their obligations under this
AGREEMENT, or (e) violate or conflict with any applicable law or ordinance, rule
or regulation.
Section 4.05. Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
AGREEMENT by FDFC or FIRST FEDERAL or the consummation by FDFC or FIRST FEDERAL
of the transactions contemplated hereby, except for filings, authorizations,
consents or approvals referenced in Section 7.01(a) and Section 7.01(b) of this
AGREEMENT.
Section 4.06. Financial Statements. The consolidated
statements of financial condition of FDFC as of December 31, 1997 and 1996, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years ended December 31, 1997, 1996 and 1995,
examined and reported upon by Ernst & Young, LLP ("E&Y"), complete copies of
which have previously been delivered to LEADER (the "FDFC AUDITED FINANCIALS"),
have been prepared in conformity with GAAP applied on a consistent basis and
fairly present the financial position of FDFC at such dates and the results of
its operations and cash flows for such periods.
Section 4.07. Absence of Material Adverse Change. Since
December 31, 1997, there have been no material adverse changes in the financial
condition, assets, liabilities, obligations, properties, business or prospects
of FDFC and its consolidated subsidiaries, taken as a whole.
Section 4.08. Regulatory Enforcement. Neither FDFC nor FIRST
FEDERAL is subject to, nor has it received any notice or advice that it is or
may become subject to, any order, agreement or memorandum of understanding of
any federal or state agency having supervisory or regulatory authority with
respect to FDFC or FIRST FEDERAL. Neither FDFC nor FIRST FEDERAL has received
any notice or advice that it is not in compliance with any statute or
regulation. Neither FDFC nor FIRST FEDERAL has received notice from any
governmental authority threatening to revoke any license, franchise, permit or
governmental authorization.
Section 4.09. Fulfillment of Obligations. Neither FDFC nor
FIRST FEDERAL is aware of any condition (regulatory or otherwise) that would
prevent the consummation of the transactions contemplated hereby and FDFC and/or
FIRST FEDERAL are, and at the CLOSING will be, able to perform its financial
obligations under this AGREEMENT without incurring any additional borrowing.
ARTICLE FIVE
COVENANTS
Section 5.01. Conduct of LEADER's Business. From the date of
this AGREEMENT until the EFFECTIVE TIME, LEADER, except as expressly
contemplated or permitted by this AGREEMENT or with the prior written consent of
FDFC, which shall not be unreasonably withheld, will conduct its business only
in the ordinary course, in accordance with past practices and policies and in
compliance with all applicable statutes, rules and regulations. Notwithstanding
the foregoing, except as otherwise expressly contemplated or permitted by this
AGREEMENT or disclosed in the LEADER DISCLOSURE SCHEDULE, without the prior
written consent of FDFC, which shall not be unreasonably withheld, LEADER will
not:
(a) Authorize or agree to authorize the creation or
issuance of, or issue, sell or dispose of, or create
any obligation to issue, sell or dispose of, any
stock, notes, bonds or other securities of which
LEADER is the issuer, or any obligations convertible
into or exchangeable for any shares of its capital
stock, other than the conversion of CLASS E SHARES to
CLASS A SHARES and the issuance of CLASS A SHARES in
connection with the exercise of LEADER OPTIONS;
(b) Declare, set aside, pay or make any dividend or other
distribution on its capital stock, or directly or
indirectly redeem, purchase or otherwise acquire any
shares thereof, except with respect to the proposed
redemption or repurchase by LEADER of the PREFERRED
SHARES and certain CLASS A SHARES as described in
Section 5.01 of the LEADER DISCLOSURE SCHEDULE, or
enter into any agreement with respect to the
foregoing;
(c) Effect any stock split, recapitalization,
combination, exchange of shares, readjustment or
other reclassification;
(d) Amend its Articles of Incorporation or Code of
Regulations, other than to eliminate the CLASS E
SHARES and the PREFERRED SHARES;
(e) Purchase, sell, assign or transfer any material
tangible asset, other than MORTGAGE LOANS or any
material patent, trademark, trade name, copyright,
license, franchise, design or other intangible assets
or property;
(f) Mortgage, pledge, grant or suffer to exist any lien
or other encumbrance or charge on any assets or
properties, tangible or intangible, except for liens
in connection with the borrowing of funds pursuant to
existing secured lines of credit;
(g) Waive any rights of material value or cancel any
material debts or claims;
(h) Incur any material obligation or liability (absolute
or contingent), including, without limitation, any
tax liability, or pay any material liability or
obligation (absolute or contingent, other than
obligations or liabilities incurred in the ordinary
course of business);
(i) Cause any material adverse change in the amount or
general composition of its assets or its liabilities;
(j) Enter into or amend any employment contract with any
of its employees, increase the compensation payable
to any employee or director or any relative of any
such employee or director or become obligated to
increase any such compensation, except for normal
salary increases in the ordinary course of business
consistent with past practice to non-management
employees;
(k) Adopt or amend in any material respect any employee
benefit plan, severance plan or collective bargaining
agreement or make awards or distributions under any
employee benefit plan not consistent with past
practice or custom;
(l) Acquire any stock or other equity interest in any
corporation, partnership, trust, joint venture or
other entity;
(m) Make any material capital expenditure or commitment
for any material addition to property, plant, or
equipment, other than expenditures on computers and
other amounts consistent with LEADER's current
budget; provided, however, that LEADER shall provide
FDFC with a report each month identifying such
expenditures;
(n) Originate or enter into a commitment to originate or
agree to purchase any loan secured by one- to
four-family residential real estate in a principal
amount greater that the FNMA or FHLMC single-family
limit in effect from time to time, or more or any
loan secured by nonresidential real estate in a
principal amount of $200,000 or more;
(o) Except for renewals of existing financing
arrangements on comparable terms and borrowings under
existing lines of credit, borrow or agree to borrow
any funds, including but not limited to repurchase
transactions, or indirectly guarantee or agree to
guarantee any obligations of others;
(p) Enter into any securities transactions for its own
account or purchase or otherwise acquire any
investment security for its own account;
(s) Foreclose upon or otherwise take title to or
possession or control of any real property without
first obtaining a Phase I Environmental Report
thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste
materials including petroleum products; provided,
however, that LEADER shall not be required to obtain
such a report with respect to single-family,
non-agriculture residential property of one acre or
less to be foreclosed upon unless it has reason to
believe such property may contain any such
pollutants, contaminants, waste materials or
petroleum products;
(t) Enter into any consulting agreement or, except in the
ordinary course of business, any material contract;
(u) Alter its status as a regular corporation under
Subchapter C of the CODE; or
(v) Agree, whether in writing or otherwise, to take any
action described in this Section 5.01.
Section 5.02. Acquisition Transactions. LEADER shall (i) not,
directly or indirectly, solicit or initiate any proposals or offers from any
person or entity, and except to the extent legally required for the discharge by
the Board of Directors of LEADER of its fiduciary duties, not discuss or
negotiate with any such person or entity, including, but not limited to Matrix
Capital Corporation ("MATRIX"), regarding any acquisition or purchase of all or
a material amount of the assets of, any of the PREFERRED SHARES or 10% or more
of the COMMON SHARES of, or any merger, consolidation or business combination
with, LEADER (collectively, "ACQUISITION TRANSACTIONS"), and not disclose to any
person any information not customarily disclosed publicly or provide access to
its properties, books or records or otherwise assist or encourage any person in
connection with any of the foregoing, and (iii) give FDFC prompt notice of any
such inquiries, offers or proposals. LEADER shall give FDFC prompt notice of any
such proposal of an ACQUISITION TRANSACTION and keep FDFC promptly informed
regarding the substance thereof and the response of the Board of Directors of
LEADER thereto.
Section 5.03. Accounting Policies. Before the EFFECTIVE TIME
and at the request of FDFC, LEADER shall promptly (a) establish and take such
reserves and accruals to conform LEADER's loan, accrual and reserve policies to
FIRST FEDERAL's policies; (b) establish and take such accruals, reserves and
charges in order to implement such policies in respect of excess facilities and
equipment capacity, severance costs, the LEADER OPTIONS, litigation matters,
write-off or write-down of various assets and other appropriate accounting
adjustments; and (c) recognize for financial accounting purposes such expenses
of the MERGER and restructuring charges related to, or to be incurred in
connection with, the MERGER, to the extent permitted by law and consistent with
GAAP and with the fiduciary duties of the officers and directors of LEADER;
provided, however, that LEADER shall not be obligated to make any such changes
or adjustments until (i) FIRST FEDERAL specifies its request in a writing
delivered to LEADER, (ii) all conditions set forth in Sections 7.01 and Section
7.02 (other than items to be delivered at the CLOSING) have been satisfied, and
(iii) no basis for termination of this AGREEMENT by any party pursuant to
Article Eight is then extant.
Section 5.04. Merger Sub. The PARENT COMPANY shall cause
MERGER SUB to be duly organized. The Board of Directors of MERGER SUB, and the
PARENT COMPANY, as the sole stockholder of MERGER SUB, shall approve and adopt
the MERGER AGREEMENT, and MERGER SUB shall enter into the MERGER AGREEMENT and
shall cooperate, and shall cause its directors and officers to cooperate, in
connection with the consummation of the transactions contemplated by the MERGER
AGREEMENT.
Section 5.05. Conduct of FDFC's Business. From the date of
this AGREEMENT until the EFFECTIVE TIME, FDFC and FIRST FEDERAL will each
conduct its business in a manner that will not materially and adversely affect
its ability to perform its obligations under this AGREEMENT.
ARTICLE SIX
FURTHER AGREEMENTS
Section 6.01. Regulatory Approvals; Cooperation; Consents. (a)
FDFC and FIRST FEDERAL shall use their best efforts to file within 20 days of
the date hereof all REGULATORY APPLICATIONS required in order to consummate the
MERGER FDFC shall keep LEADER reasonably informed as to the status of such
applications and make available to LEADER copies of such applications as filed
and any supplementary filed materials and all responses from the regulatory
authorities.
(b) LEADER will cooperate and will cause its respective
directors, officers, employees, agents and advisors to cooperate, to the extent
reasonable or necessary, with FDFC and FIRST FEDERAL in connection with the
preparation of the REGULATORY APPLICATIONS, including but not limited to
preparation and submission of a plan and timetable for year 2000 compliance.
(c) FDFC and FIRST FEDERAL will cooperate and will cause their
respective directors, officers, employees, agents and advisors to cooperate, to
the extent reasonable or necessary, with LEADER in connection with the
preparation of the INFORMATION STATEMENT.
(d) Each of the parties will file any Notification and Report
Forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, will use its reasonable efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable.
(e) LEADER will use its best efforts to secure prior to the
EFFECTIVE TIME all required consents or approvals of third parties, including
but not limited to the INVESTORS, to the execution and delivery of this
AGREEMENT or the performance of the transactions contemplated hereby by LEADER.
(f) FDFC and FIRST FEDERAL shall use their respective best
efforts to cause the MERGER to be consummated as soon as reasonably practicable.
Section 6.02. Approval of Shareholders of LEADER. LEADER shall
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders, or obtain the unanimous written consent of its
shareholders (including any ESOP participants who are entitled under the terms
of the ESOP or applicable law to vote on the MERGER) for the purposes of
adopting this AGREEMENT, as required by applicable law. LEADER shall use its
reasonable efforts to hold such meeting or obtain such written consent as soon
as practicable following the date of this AGREEMENT. The Board of Directors of
LEADER shall (i) to the extent consistent with their fiduciary duties, recommend
to the LEADER shareholders the adoption of this AGREEMENT and the approval of
the transactions contemplated hereby and any other matters to be submitted to
the shareholders in connection therewith and (ii) use its reasonable efforts to
obtain the necessary adoptions by the shareholders of this AGREEMENT, any
amendments hereto, and the transactions contemplated hereby.
Section 6.03. Employees. (a) LEADER shall use its best efforts
to cause each of the persons listed on Schedule 6.03 to this AGREEMENT to enter
into an Employment Agreement.
(b) LEADER's Employee Stock Ownership Plan (the "ESOP") shall
be terminated as soon as practical after the EFFECTIVE TIME, subject to Section
5.01 of the LEADER DISCLOSURE SCHEDULE.
(c) FDFC will establish an incentive compensation program for
members of LEADER's management group and certain other employees of LEADER to be
designated by FDFC in consultation with LEADER.
(d) FDFC will establish a retention bonus pool for certain
employees to be designated by FDFC in consultation with LEADER.
(e) LEADER shall be permitted to match employee salary
reduction contributions to the Leader Mortgage Company Savings and Investment
Plan and Trust at a rate of 100% through December 31, 1998, subject to the
limits of Section 415 of the CODE.
Section 6.04. Access. (a) Until the EFFECTIVE TIME, upon
reasonable notice LEADER shall afford to FDFC and to its officers and
representatives (including, without limitation, counsel, financial advisers and
independent accountants), reasonable access during normal business hours to its
properties, personnel, books, records and affairs, including, but not limited
to, (i) permitting verification, by audit or otherwise, of any representation or
warranty made hereunder; (ii) authorizing release of any information (including
the work papers of such independent auditors) and financial consultants; (iii)
consistent with applicable regulations or procedures, furnishing regular and
special examination reports since the date of this AGREEMENT; (iv) delivering
copies of all documents or reports or correspondence filed and any
correspondence with any federal regulatory or supervisory agency from the date
of this AGREEMENT and (v) furnishing FDFC with such additional financial and
operating data and other information regarding its businesses and properties as
FDFC may be reasonably requested.
(b) FDFC shall deliver to LEADER copies of its quarterly
reports on Form 10-Q and any other filings made by FDFC with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
Section 6.05. Confidentiality. The parties acknowledge the
confidential and proprietary nature of the information as hereinafter described
which has heretofore been exchanged and which will be received from each party
hereunder (the "INFORMATION") and agree to hold and keep the same confidential.
Such INFORMATION will include any and all financial, technical, commercial,
marketing, customer or other information concerning the business, operations and
affairs of a party that may be provided to the other, irrespective of the form
of the communications, by such party's employees or agents. Such INFORMATION
shall not include information that is or becomes generally available to the
public other than as a result of a disclosure by a party or its representatives
in violation of this AGREEMENT, or INFORMATION which is required to be furnished
or used in connection with legal proceedings. The parties agree that the
INFORMATION will be used solely for the purposes contemplated by this AGREEMENT
and that such INFORMATION will not be disclosed to any person other than
employees and agents of a party who are directly involved in evaluating the
transaction. The INFORMATION shall not be used in any way detrimental to a
party, including use directly or indirectly in the conduct of the other party's
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party. Upon the
written request of the disclosing party, upon termination of this AGREEMENT, the
other parties will promptly return or destroy INFORMATION in their possession
and certify to the disclosing party that the party has done so.
Section 6.06. Press Releases. FDFC and LEADER shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the MERGER and shall not issue any such press release
or make any such public statement without obtaining the prior consent of the
other party, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities association.
Section 6.07. Costs and Expenses; Termination Fee. (a) Whether
or not the MERGER is consummated, all costs and expenses incurred in connection
with this AGREEMENT, LEADER SHAREHOLDER MEETING, the INFORMATION STATEMENT, and
the transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
(b) Acquisition costs incurred by LEADER, including
but not limited to legal and accounting fees and expenses, fees to McDonald &
Company or any other broker or investment banker, and termination fees to MATRIX
or any other party, shall not exceed $652,500, without the prior written consent
of FDFC. The purchase price payable in accordance with Section 2.01 of this
AGREEMENT shall be reduced by the amount by which LEADER's acquisition costs
exceed $652,500.
(c) Notwithstanding the foregoing, in the event the
Board of Directors of LEADER, without having received FDFC's prior written
consent, enters into an agreement to engage in, or accepts in any manner an
ACQUISITION TRANSACTION prior to the earlier of (i) termination of this
AGREEMENT, other than a termination due to a breach of this AGREEMENT by LEADER,
or (ii) December 31, 1998, LEADER shall pay to FDFC $1.75 million in immediately
available federal funds within two days of the execution of a definitive
agreement or letter of intent with respect to such ACQUISITION TRANSACTION.
Section 6.08. Reasonable Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
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.
Section 6.09. Notification of Events. At all times from the
date of this AGREEMENT until the EFFECTIVE TIME, each party shall promptly
notify the other in writing of any materially adverse business conditions
threatening its normal business operations or of the occurrence of any event or
the failure of any event to occur which might reasonably be expected to result
in a breach of or a failure to comply with any representation, warranty,
covenant, condition or agreement contained in this AGREEMENT or of the
commencement of any action, suit, proceeding or investigation against it.
Section 6.10. Voting Agreement. Concurrently with the
execution and delivery of this AGREEMENT, and as a condition and material
inducement to FDFC's willingness to enter into this AGREEMENT, each of the
directors and executive officers of LEADER shall enter into a shareholder
agreement in substantially the form of the agreement attached hereto as Exhibit
D.
Section 6.11. Indemnification and Insurance. (a) For a period
of two years after the EFFECTIVE TIME, the current and former officers and
directors of LEADER shall be indemnified by the PARENT COMPANY from their acts
and omissions occurring prior to the EFFECTIVE TIME to the maximum extent
permitted by the Articles of Incorporation and Code of Regulations of the PARENT
COMPANY but subject to any limitations applicable law or regulation. As a
condition to receiving such indemnification, the party claiming indemnification
shall assign to the PARENT COMPANY, by separate writing, all right, title and
interest in and to the proceeds of the claiming party's applicable insurance
coverage, if any, including insurance maintained or provided by the PARENT
COMPANY or LEADER to the extent of such indemnity. No person shall be entitled
to such indemnification with respect to a claim if such person fails to
cooperate in the defense and investigation of such claim as to which
indemnification may be made, or if such person fails to deliver such notices as
may be required under any applicable directors and officers liability insurance
policy to preserve any possible claims of which the claiming party is aware, to
the extent such failure results in the denial of payment under such policy.
Notwithstanding the foregoing no indemnification will be provided by the PARENT
COMPANY or LEADER with respect to the administration of the ESOP or service by
any party as a trustee of the ESOP.
(b) For a period of two years after the EFFECTIVE TIME, FDFC
will provide director and officer liability insurance coverage for the current
and former officers and directors of LEADER on terms at least as favorable as
those contained in the liability insurance currently maintained by LEADER for
the benefit of its directors and officers.
Section 6.12. Related Party Loans. Prior to the CLOSING,
LEADER shall require the repayment of any loans receivable from any directors,
officers, employees or shareholders of LEADER, to the extent permitted by the
terms of such loans.
Section 6.13. Post-Closing Claims. Any costs or expenses,
including judgments, fines, losses, claims, damages or liabilities, not to
exceed $2,000,000, incurred during the two year period after the EFFECTIVE TIME
with respect to any representations set forth in Sections 3.06, 3.07, 3.08,
3.09, 3.16, 3.18, 3.20, 3.22, 3.23 and 3.26 of this AGREEMENT which are not true
and accurate as of the EFFECTIVE TIME shall be charged against the $2,000,000
holdback amount provided for in Section 2.03(b) of this AGREEMENT.
ARTICLE SEVEN
CLOSING MATTERS
Section 7.01. Conditions to Obligations of FDFC, FIRST FEDERAL
and LEADER. Notwithstanding any other provision of this AGREEMENT, the
obligations of FDFC, FIRST FEDERAL and LEADER to effect the MERGER shall be
subject to the fulfillment of each of the following conditions:
(a) This AGREEMENT shall have been validly adopted by the
affirmative vote of the holders of at least the
number of outstanding LEADER SHARES required under
Ohio law and LEADER's Articles of Incorporation and
Code of Regulations;
(b) All permits, approvals, consents, authorizations,
exemptions or waivers of any federal or state
governmental body or agency necessary for
consummation of the MERGER shall have been obtained
and all notices required to be filed shall have been
filed and any objection or waiting period with
respect to such notice shall have expired;
(c) All waivers, consents and approval of every person,
in addition to those required under subsections (a)
and (b) of this Section 7.01, necessary for the
consummation of the MERGER shall have been obtained;
and
(d) There shall not be in effect any federal or state
law, rule or regulation or any order or decision of a
court of competent jurisdiction which prevents the
consummation of the MERGER.
Section 7.02. Conditions to Obligations of FDFC and FIRST
FEDERAL. In addition to the conditions contained in Section 7.01 of this
AGREEMENT, the obligations of FDFC and FIRST FEDERAL to effect the MERGER shall
also be subject to the fulfillment of each of the following conditions unless
fulfillment is waived by FDFC and FIRST FEDERAL in writing:
(a) The representations and warranties of LEADER
contained in Article Three of this AGREEMENT shall be
true in all material respects at and as of the date
hereof and at and as of the day of the CLOSING as if
made at and as of such time, except where such
representation or warranty is expressly made as of a
specific date;
(b) LEADER shall have duly performed and complied in all
material respects with all agreements, covenants and
conditions required by this AGREEMENT to be performed
or complied with by LEADER before or on the day of
the CLOSING;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of
LEADER after the date of this AGREEMENT, except
changes resulting from action taken by LEADER
pursuant to Section 5.03 of this AGREEMENT and
changes resulting from or attributable to expenses
incurred in connection with the transactions
contemplated by this AGREEMENT;
(d) LEADER shall have delivered to FDFC (i) a certificate
dated the day of the CLOSING and signed by the
President and the chief financial officer of LEADER
to the effect set forth in subsections (a), (b) and
(c) of this Section 7.02, and (ii) a certificate
dated the day of the CLOSING and signed by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, the majority shareholder of LEADER, to the
effect that, to his knowledge, the representations
and warranties set forth in Sections 3.06, 3.07,
3.08, 3.09, 3.16, 3.18, 3.20, 3.22, 3.23 and 3.26 of
this AGREEMENT are true in all material respects as
of the CLOSING;
(e) FDFC shall have received an opinion of Silver,
▇▇▇▇▇▇▇▇ & Taff, L.L.P. dated the date of the CLOSING
in the form on Exhibit E hereto;
(f) There shall not be any action or proceeding commenced
by or before any court or governmental agency or
authority in the United States, or threatened by any
governmental agency or authority in the United
States, that challenges or seeks to prevent or delay
the consummation of the MERGER or seeks to impose
material limitations on the ability of FDFC or FIRST
FEDERAL to exercise full rights of ownership of the
assets or business of LEADER;
(g) There shall not have been proposed, nor shall there
be in effect, any federal or state law, rule,
regulation, order or statement of policy that, in the
reasonable judgment of FDFC, would: (i) prevent or
delay the consummation of the MERGER or interfere
with the reasonable operation of the business of
LEADER, including but not limited to the ability of
FIRST FEDERAL to own LEADER as an operating
subsidiary, (ii) materially adversely affect the
ability of FDFC to enjoy the economic or other
benefits of the MERGER or (iii) impose any material
adverse condition, limitation or requirement on FDFC
in connection with the MERGER;
(h) LEADER shall not have incurred any damage,
destruction or similar loss, not covered by
insurance, materially affecting its businesses or
properties;
(i) Immediately prior to the EFFECTIVE TIME no more than
five percent (5.0%) of the outstanding LEADER SHARES
shall have qualified as DISSENTING SHARES;
(j) The uncombined shareholders' equity of LEADER on the
last day of the calendar month prior to the CLOSING,
as calculated in accordance with GAAP, shall not be
less than $15.6 million, without giving effect to (x)
reserves, accruals and charges taken or established
by LEADER at the request of FDFC in accordance with
Section 5.03 of this AGREEMENT and (y) expenses
incurred by LEADER in connection with the MERGER, not
to exceed $652,500;
(k) The aggregate principal amount of loans covered by
SERVICING AGREEMENTS on the last day of the calendar
month prior to the CLOSING shall not be less than
$4.4 billion, except as otherwise agreed to by FDFC;
(l) The fair value of LEADER's mortgage servicing rights
shall not be less than $66.6 million as of the date
of the most recent appraisal of such rights performed
in the ordinary course by an appraisal firm
acceptable to FDFC;
(m) LEADER shall have complied with Section 5.03 hereof
to the reasonable satisfaction of FDFC;
(n) The persons listed on Schedule 7.02(n) shall have
signed and delivered the NONCOMPETE AGREEMENTS;
(o) The LEADER OPTIONS shall have been approved in a
manner required by Section 280G of the CODE to the
reasonable satisfaction of FDFC, or the LEADER
OPTIONS, the payments described in Section 2.03(a) of
this AGREEMENT and any other payments that could be
considered "parachute payments" within the meaning of
Section 280G of the CODE shall be exempt from Section
280G of the CODE;
(p) LEADER shall have obtained the consent of (i) GNMA,
FNMA and FHLMC required under the GUIDELINES or any
law, rule, regulation or agreement with GNMA, FNMA or
FHLMC; (ii) any agreement with an INVESTOR which
covers servicing of loans having a principal balance
of $25 million per INVESTOR and $250 million in the
aggregate for all INVESTORS whose consent is not
obtained; (iii) any other party under any MATERIAL
CONTRACT;
(q) LEADER shall be in compliance with its plan to render
LEADER's computer systems (excluding its accounting
systems) compatible with Year 2000 processing
requirements;
(r) Each of the persons listed on Schedule 6.03 shall
have executed and delivered his respective EMPLOYMENT
CONTRACT;
(s) LEADER shall have obtained a release from MATRIX of
any claims arising out of the letter of intent
between MATRIX and LEADER dated February 18, 1998, as
subsequently revised.
Section 7.03. Conditions to Obligations of LEADER.. In
addition to the conditions contained in Section 7.01 of this AGREEMENT, the
obligations of LEADER to effect the MERGER shall also be subject to the
fulfillment of each of the following conditions:
(a) The representations and warranties of FDFC and FIRST
FEDERAL contained in Article Four of this AGREEMENT
shall be true in all material respects at and as of
the date hereof and at and as of the date of the
CLOSING as if made at and as of such time, except
where such representation or warranty is expressly
made as of a specific date;
(b) FDFC and FIRST FEDERAL shall have duly performed and
complied in all material respects with all
agreements, covenants and conditions required by this
AGREEMENT to be performed or complied with by them
before or on the day of the CLOSING;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of
FDFC or FIRST FEDERAL after the date of this
AGREEMENT;
(d) FDFC and FIRST FEDERAL shall have delivered to LEADER
a certificate dated the day of the CLOSING and signed
by the President and the chief financial officer of
each of FDFC and FIRST FEDERAL to the effect set
forth in subsections (a), (b) and (c) of this Section
7.03; and
(e) LEADER shall have received an opinion of FDFC's
counsel dated the date of the CLOSING in form
reasonably acceptable to LEADER's counsel opining
with respect to matters listed on Exhibit F hereto.
ARTICLE EIGHT
TERMINATION
Section 8.01. Termination. This AGREEMENT may be terminated at
any time prior to the date of the CLOSING, whether before or after approval by
the shareholders of LEADER:
(a) By mutual consent of the Boards of Directors of
LEADER and FDFC; or
(b) By the Board of Directors of LEADER or FDFC if:
(i) The MERGER shall not have been consummated
on or before December 31, 1998; provided,
however, that a party who is then in breach
of any of its representations, warranties,
covenants or agreements under this AGREEMENT
in any material respect may not exercise
such right of termination if it has received
notice from the non-breaching party that the
non-breaching party is seeking specific
performance of the breaching party's
obligations under this AGREEMENT; provided
further, however, that no such termination
shall relieve the breaching party from
liability for a breach that occurs prior to
such termination; or
(ii) Any event occurs which, in the reasonable
opinion of either Board, would preclude
satisfaction of any of the conditions set
forth in Section 7.01 of this AGREEMENT; or
(c) By the Board of Directors of FDFC if any event occurs
which, in the reasonable opinion of such Board, would
preclude compliance with any of the conditions set
forth in Section 7.02 of this AGREEMENT; or
(d) By the Board of Directors of LEADER if any event
occurs which, in the reasonable opinion of such
Board, would preclude compliance with any of the
conditions set forth in Section 7.03 of this
AGREEMENT.
Section 8.02. Written Notice of Termination. In order to
terminate this AGREEMENT pursuant to Section 8.01(a), (b), (c) and (d), the
party so acting shall give written notice of such termination to the other
party. This AGREEMENT shall terminate on the date such notice is given.
Section 8.03. Effect of Termination. In the event of the
termination of this AGREEMENT, the provisions of this AGREEMENT shall become
void and have no effect; provided, however, that (a) the provisions set forth in
Sections 6.06 and 6.07 of this AGREEMENT shall survive such termination and
shall remain in full force and effect and (b) a termination of this AGREEMENT
shall not affect the liability of any party for an uncured breach of any term or
condition of this AGREEMENT.
Section 8.04. Amendment. This AGREEMENT may be amended at any
time before or after approval of this AGREEMENT by the shareholders of LEADER,
but after such approval no amendment shall be made which materially and
adversely affects the rights of such shareholders without the further approval
of such shareholders. This AGREEMENT may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 8.05. Waiver. Any term or provision of this AGREEMENT
(other than the requirement for shareholder and regulatory approval) may be
waived in writing at any time by the party which is, or whose shareholders are,
entitled to the benefits thereof.
ARTICLE NINE
MISCELLANEOUS
Section 9.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If addressed to FDFC or FIRST FEDERAL:
▇▇. ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
First Defiance Financial Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
If addressed to LEADER:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
The Leader Mortgage Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇, P.C.
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C.
Silver, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Section 9.02. Entire Agreement. This AGREEMENT (including the
exhibits, documents and instruments referred to herein or therein) (a)
constitutes the entire agreement of the parties and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof; (b) is not intended to and
shall not confer any rights or remedies hereunder upon any person other than
FDFC, FIRST FEDERAL and LEADER; (c) shall not be assigned by operation of law or
otherwise; and (d) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Ohio, except to the
extent that federal law may be applicable.
Section 9.03. Execution In Counterparts. This AGREEMENT may be
executed in two or more counterparts which together shall constitute a single
AGREEMENT.
Section 9.04. Headings. The headings of articles and sections
herein are for convenience of reference only, do not constitute a part of this
AGREEMENT and shall not be deemed to limit or affect any of the provisions
hereof.
Section 9.05. Liabilities and Specific Performance. The
termination fee provided for in Section 6.07 shall be the exclusive fee and
remedy for a termination of this AGREEMENT with respect to the matters described
in Section 6.07. Other than with respect to such specific remedy, each party to
this AGREEMENT recognizes that, if it fails to perform, observe or discharge any
of its obligations under this AGREEMENT, remedies at law may not provide
adequate relief to the other party or parties. Therefore, each party is hereby
authorized to demand specific performance of this AGREEMENT, and is entitled to
temporary and permanent injunctive relief, in a court of competent jurisdiction
at any time when any other party fails to comply with any of the provisions of
this AGREEMENT applicable to it, in addition to any other remedy that may be
available in law or equity. To the extent permitted by applicable law, each
party hereby irrevocably waives any defense that it might have based on the
adequacy of a remedy at law that might be asserted as a bar to such remedy of
specific performance or injunctive relief. FDFC and FIRST FEDERAL shall have no
claim against ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ for executing the certificate under Section
7.02(d).
Section 9.06. Non-Survival of Representations, Warranties.
Except as set forth in Section 6.13 of this AGREEMENT, the representations and
warranties or agreements and covenants in this AGREEMENT will terminate at the
EFFECTIVE TIME or the earlier termination of this AGREEMENT pursuant to Section
8.01, as the case may be; provided, however, that if the MERGER is consummated,
those agreements and covenants contemplated to be performed after the EFFECTIVE
TIME shall survive the EFFECTIVE TIME.
IN WITNESS WHEREOF, FDFC, FIRST FEDERAL and LEADER have caused
this AGREEMENT to be signed by their respective duly authorized officers on the
date first above written.
ATTEST: FIRST DEFIANCE FINANCIAL CORP.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
-------------------- ----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
Secretary President, Chief Executive Officer and
Chairman of the Board
ATTEST: FIRST FEDERAL SAVINGS AND LOAN
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. Small
-------------------- --------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. Small
Secretary President and Chief Operating Officer
ATTEST: THE LEADER MORTGAGE COMPANY
/s/ J. Hook By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------- -------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President Chairman and Chief Executive Officer
By: /s/ ▇. ▇▇▇▇▇▇▇
--------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice President