EXHIBIT 2
-----------------------------------------------------
AGREEMENT AND PLAN OF MERGER
By and Between
Avondale Financial Corp.
And
Coal City Corporation
Dated as of October 12, 1998
-----------------------------------------------------
TABLE OF CONTENTS
----------------------------------------------------------------------------------------------------------------
ARTICLE I
THE MERGER AND RELATED MATTERS............................................................................3
1.1 Merger..............................................................................................3
1.2 Effective Times.....................................................................................3
1.3 Conversion of Shares................................................................................4
1.4 Surviving Corporation in the Company Merger.........................................................5
1.5 Authorization for Issuance of Avondale Common Stock;
Exchange of Certificates............................................................................6
1.6 No Fractional Shares................................................................................8
1.7 Stockholders' Meetings..............................................................................8
1.8 Coal City Stock Options.............................................................................9
1.9 Registration Statement; Prospectus/Joint Proxy
Statement...........................................................................................9
1.10 Cooperation; Regulatory Approvals..................................................................11
1.11 Closing............................................................................................11
ARTICLE II
REPRESENTATIONS AND WARRANTIES...........................................................................12
2.1 Organization, Good Standing, Authority, Insurance, Etc.
..................................................................................................12
2.2 Capitalization.....................................................................................12
2.3 Ownership of Subsidiaries..........................................................................13
2.4 Financial Statements and Reports...................................................................13
2.5 Absence of Changes.................................................................................15
2.6 Prospectus/Joint Proxy Statement...................................................................15
2.7 No Broker's or Finder's Fees.......................................................................15
2.8 Litigation and Other Proceedings...................................................................16
2.9 Compliance with Law................................................................................16
2.10 Corporate Actions..................................................................................16
2.11 Authority..........................................................................................17
2.12 Employment Arrangements............................................................................18
2.13 Employee Benefits..................................................................................18
2.14 Information Furnished..............................................................................19
2.15 Property and Assets................................................................................20
2.16 Agreements and Instruments.........................................................................20
2.17 Material Contract Defaults.........................................................................21
2.18 Tax Matters........................................................................................21
2.19 Environmental Matters..............................................................................21
2.20 Loan Portfolio; Portfolio Management...............................................................22
2.21 Real Estate Loans and Investments..................................................................23
2.22 Derivatives Contracts..............................................................................23
2.23 Exceptions to Representations and Warranties.......................................................23
ARTICLE III
COVENANTS................................................................................................24
3.1 Investigations; Access and Copies..................................................................24
3.2 Conduct of Business................................................................................25
3.3 No Solicitation....................................................................................27
3.4 Stockholder Approvals..............................................................................28
3.5 Resale Letter Agreements; Accounting and Tax Treatment
..................................................................................................28
3.6 Publicity..........................................................................................28
i
3.7 Cooperation Generally...............................................................................28
3.8 Additional Financial Statements and Reports.........................................................29
3.9 Stock Exchange Listing..............................................................................29
3.10 Employee Benefits and Agreements....................................................................29
3.11 Minority Interest in Manufacturers National.........................................................31
3.12 Preferred Stock.....................................................................................31
ARTICLE IV
CONDITIONS OF THE COMPANY MERGER;
TERMINATION OF AGREEMENT.................................................................................31
4.1 General Conditions..................................................................................31
4.2 Conditions to Obligations of .......................................................................33
4.3 Conditions to Obligations of .......................................................................34
4.4 Termination of Agreement and Abandonment of Merger..................................................36
ARTICLE V
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES..........................................................37
5.1 Termination; Lack of Survival of Representations and
Warranties..........................................................................................37
5.2 Payment of Expenses.................................................................................38
ARTICLE VI
CERTAIN POST-MERGER AGREEMENTS...........................................................................38
6.1 Indemnification.....................................................................................38
6.2 Directors and Officers of the Surviving Corporation and
Coal City Bank......................................................................................39
ARTICLE VII
GENERAL..................................................................................................42
7.1 Amendments..........................................................................................42
7.2 Confidentiality.....................................................................................42
7.3 Governing Law.......................................................................................42
7.4 Notices.............................................................................................42
7.5 No Assignment.......................................................................................43
7.6 Headings............................................................................................43
7.7 Counterparts........................................................................................43
7.8 Construction and Interpretation.....................................................................43
7.9 Entire Agreement....................................................................................44
7.10 Severability........................................................................................44
7.11 No Third Party Beneficiaries........................................................................44
7.12 No Employment Solicitation..........................................................................44
Schedules:
Schedule I Disclosure Schedule for Avondale...................................................................
Schedule II Disclosure Schedule for Coal City..................................................................
Exhibits:
Exhibit A Avondale Stock Option Agreement
Exhibit B Coal City Stock Option Agreement
Exhibit C Form of Avondale Voting Agreement
Exhibit D Form of Coal City Voting Agreement
Exhibit 1.4(c)(A) Amendment to Avondale Certificate
of Incorporation
Exhibit 1.4(c)(B) Amendment to Avondale Bylaws
Exhibit 3.5 Form of Affiliate Agreement
Exhibit 3.10(d) Form of Avondale Employment Agreement
ii
AGREEMENT AND PLAN OF MERGER
--------------------------------------------------------------------------------
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated as of October 12,
1998, by and between Avondale Financial Corp., a Delaware corporation
("Avondale") and Coal City Corporation, an Illinois corporation ("Coal City").
Each of Avondale and Coal City is sometimes individually referred to herein as a
"party," and Avondale and Coal City are sometimes collectively referred to
herein as the "parties."
RECITALS
WHEREAS, Avondale, a unitary savings and loan holding company, with
principal offices in Chicago, Illinois, owns all of the issued and outstanding
capital stock of Avondale Federal Savings Bank, a federally chartered savings
bank ("Avondale Bank"), with principal offices in Chicago, Illinois. As of the
date hereof, Avondale has 10,000,000 authorized shares of common stock, par
value $0.01 per share ("Avondale Common Stock"), of which 2,902,566 shares are
outstanding, and 1,000,000 authorized shares of preferred stock, par value $.01
per share, none of which is outstanding.
WHEREAS, Coal City, a bank holding company, with principal offices in
Chicago, Illinois, owns 96.48% of the issued and outstanding common stock and
all of the issued and outstanding Class A Preferred Stock of Manufacturers
National Corporation, an Illinois corporation ("Manufacturers National"), with
principal offices in Chicago, Illinois, and Manufacturers National owns all of
the issued and outstanding capital stock of Manufacturers Bank, an Illinois
banking corporation ("Coal City Bank"), with principal offices in Chicago,
Illinois. As of the date hereof, Coal City has 200,000 authorized shares of
common stock, par value $10.00 per share ("Coal City Common Stock"), of which
48,957 shares are outstanding, 100 authorized shares of Class A preferred stock,
par value $100,000 per share ("Coal City Class A Preferred Stock"), of which no
shares are outstanding and 100 authorized shares of Class B preferred stock, par
value $150,000 per share ("Coal City Class B Preferred Stock, and together with
the Coal City Class A Preferred Stock, the "Coal City Preferred Stock"), of
which 68 shares are outstanding.
WHEREAS, Avondale and Coal City desire to combine their respective holding
companies through a tax-free, stock-for-stock merger so that the respective
stockholders of Avondale and Coal City will have an equity ownership in the
combined holding company.
WHEREAS, neither the Board of Directors of Avondale nor the Board of
Directors of Coal City seeks to sell its respective holding company at this time
but both Boards desire to merge their respective holding companies in a
transaction structured as a merger of equals.
1
WHEREAS, it is intended that to accomplish this result, Coal City will be
merged with and into Avondale, with Avondale as the surviving corporation. Such
merger is referred to herein as the "Company Merger." Avondale after the Company
Merger is sometimes referred to herein as the "Surviving Corporation."
WHEREAS, following consummation of the Company Merger, all of the issued and
outstanding capital stock of Avondale Bank may be contributed to Manufacturers
National. Such transaction is referred to herein as the "Contribution."
Following consummation of the Contribution, either (i) Avondale Bank will be
merged with and into Coal City Bank, with Coal City Bank as the surviving
institution (such transaction referred to herein as the "Bank Merger"), or (ii)
Coal City Bank will purchase and assume all of the assets and liabilities of
Avondale Bank, other than a deposit taking office, deposits located thereat, and
certain assets and liabilities relating to the mortgage banking business of
Avondale Bank to be determined by the parties (such transaction referred to
herein as the "Bank Purchase and Assumption"). The Bank Merger and the Bank
Purchase and Assumption are sometimes collectively referred to herein as the
"Avondale Bank Acquisition." The Company Merger, the Contribution and the
Avondale Bank Acquisition are sometimes collectively referred to herein as the
"Merger."
WHEREAS, it is intended that for federal income tax purposes the Company
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and
this Agreement shall constitute a plan of reorganization pursuant to Section 368
of the Internal Revenue Code.
WHEREAS, as an inducement to and condition of Avondale's willingness to
enter into this Agreement and the Avondale Stock Option Agreement, Coal City
will grant to Avondale concurrently with the execution and delivery of this
Agreement an option pursuant to the Coal City Stock Option Agreement, and as an
inducement to and condition of Coal City's willingness to enter into this
Agreement and the Coal City Stock Option Agreement, Avondale will grant to Coal
City concurrently with the execution and delivery of this Agreement an option
pursuant to the Avondale Stock Option Agreement. The Avondale Stock Option
Agreement and the Coal City Stock Option Agreement are attached hereto as
Exhibits A and B, respectively. References herein to the "Stock Option
Agreement" shall refer in the case of Avondale to the Avondale Stock Option
Agreement and in the case of Coal City to the Coal City Stock Option Agreement,
and collectively such agreements shall be referred to as the "Stock Option
Agreements."
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as an inducement to and condition of the parties' willingness to enter into this
Agreement, Coal City and each of the directors of Avondale and Avondale and each
of the directors of Coal City and certain of their affiliates, have entered into
voting
2
agreements in the forms attached hereto as Exhibits C and D, respectively.
WHEREAS, the Boards of Directors of Avondale and Coal City (at meetings duly
called and held) have determined that this Agreement and the transactions
contemplated hereby are in the best interests of Avondale and Coal City,
respectively, and their respective stockholders and have approved this Agreement
and the Stock Option Agreements.
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter set forth, the parties hereby
agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger. Subject to the terms and conditions of this Agreement and
pursuant to applicable law, at the Company Merger Effective Time (as hereinafter
defined), (i) Coal City shall be merged with and into Avondale pursuant to the
terms and conditions set forth herein, (ii) the separate corporate existence of
Coal City shall cease, and (iii) Avondale as the Surviving Corporation shall
continue to be governed by the laws of the State of Delaware. After the Company
Merger, subject to the terms and conditions of this Agreement and pursuant to
applicable law, at the Contribution Time (as hereinafter defined) all of the
issued and outstanding capital stock of Avondale Bank shall be contributed to
Manufacturers National pursuant to the terms and conditions set forth herein and
in a contribution agreement (the "Contribution Agreement"). After the
Contribution, subject to the terms and conditions of this Agreement and pursuant
to applicable law, either (i) at the Bank Merger Effective Time (as hereinafter
defined) (A) Avondale Bank shall be merged with and into Coal City Bank pursuant
to the terms and conditions set forth herein and in a bank merger agreement (the
"Bank Merger Agreement"), (B) the separate existence of Avondale Bank shall
cease, and (C) Coal City Bank shall continue as the surviving institution of the
Bank Merger, or (ii) at the Purchase and Assumption Time (as hereinafter
defined) (A) Coal City Bank shall purchase and assume all of the assets and
liabilities of Avondale Bank, other than a deposit taking office, deposits
located thereat, and certain assets and liabilities relating to the mortgage
banking business of Avondale Bank to be identified by the parties, pursuant to
the terms and conditions set forth herein and in a purchase and assumption
agreement (the "Purchase and Assumption Agreement") and (B) the separate
existence of Avondale Bank shall continue.
1.2 Effective Times. As soon as practicable after each of the
conditions set forth in Article IV hereof has been satisfied or waived, Avondale
and Coal City will file, or cause to be filed, a certificate of merger and
articles of merger with the appropriate authorities of Delaware and Illinois,
respectively, for the Company
3
Merger, which certificate of merger and articles of merger shall in each case be
in the form required by and executed in accordance with the applicable
provisions of law. The Company Merger shall become effective at the time and
date which is the later of the time at which (i) the Delaware certificate of
merger is filed with the appropriate authorities of Delaware and (ii) the
Illinois articles of merger is filed with the appropriate authorities of
Illinois ("Company Merger Effective Time"), which shall be immediately following
the Closing (as defined in Section 1.11 hereof) and on the same day as the
Closing if practicable, or at such other date and time as may be agreed to by
the parties and specified in the certificate of merger and articles of merger in
accordance with applicable law. The Contribution shall become effective at such
time as shall be provided in the Contribution Agreement (the "Contribution
Time"). The Bank Merger, as and if applicable, shall become effective at the
time as shall be provided in the Bank Merger Agreement (the "Bank Merger
Effective Time"). The Bank Purchase and Assumption, as and if applicable, shall
become effective at such time as shall be provided in the Purchase and
Assumption Agreement (the "Purchase and Assumption Time"). The parties shall
cause the Company Merger to become effective before the Contribution. The
parties shall cause the Contribution to become effective before the Avondale
Bank Acquisition.
1.3 Conversion of Shares.
(a) At the Company Merger Effective Time, by virtue of the
Company Merger and without any action on the part of Avondale or Coal City or
the holders of shares of Avondale or Coal City Common Stock:
(i) Each outstanding share of Coal City Common Stock
issued and outstanding at the Company Merger Effective Time (except for
Dissenting Shares, if applicable, as defined in clause (a)(ii) of this Section),
subject to clause (a)(iii) of this Section and Section 1.6 hereof, shall cease
to be outstanding, shall cease to exist and shall be converted into and
represent solely 83.5 shares of Avondale Common Stock and shall no longer be a
share of Coal City Common Stock.
(ii) Any shares of Coal City Common Stock held by a holder
who dissents from the Company Merger in accordance with Section 5/11.65 of the
Illinois Business Corporation Act (the "IBCA") shall be referred to herein as
"Dissenting Shares." Notwithstanding any other provision of this Agreement, any
Dissenting Shares shall not, after the Company Merger Effective Time, be
entitled to vote for any purpose or receive any dividends or other distributions
and shall be entitled only to such rights as are afforded in respect of
Dissenting Shares pursuant to the IBCA.
(iii) Any shares of Coal City Common Stock which are owned
or held by either party hereto or any of their respective Subsidiaries (as
defined in Section 2.1 hereof) (other than in a
4
fiduciary capacity) at the Company Merger Effective Time shall cease to exist,
the certificates for such shares shall as promptly as practicable be cancelled,
such shares shall not be converted into or represent any shares of Avondale
Common Stock, and no shares of capital stock of Avondale shall be issued or
exchanged therefor.
(iv) Each share of Avondale Common Stock issued and
outstanding immediately before the Company Merger Effective Time shall remain an
outstanding share of Common Stock of Avondale as the Surviving Corporation.
(v) The holders of certificates representing shares of
Coal City Common Stock shall cease to have any rights as stockholders of Coal
City, except such rights, if any, as they may have pursuant to the IBCA.
1.4 Surviving Corporation in the Company Merger.
(a) The name of the Surviving Corporation in the Company
Merger shall be "MB Financial, Inc." The headquarters of the Surviving
Corporation shall be located in Chicago, Illinois.
(b) At the Company Merger Effective Time, the Certificate of
Incorporation of Avondale as then in effect shall be amended (subject to the
requisite approval of Avondale stockholders) as set forth in Exhibit 1.4(c)(A),
and such Certificate of Incorporation as so amended (or the Certificate of
Incorporation of Avondale immediately prior to the Company Merger Effective Time
if such amendment is not approved by the Avondale stockholders) shall be the
Certificate of Incorporation of Avondale as the Surviving Corporation until
amended as provided therein or as otherwise permitted by the Delaware General
Corporation Law (the "DGCL").
(c) At the Company Merger Effective Time, the Bylaws of
Avondale as then in effect shall be amended as set forth in Exhibit 1.4(c)(B),
and such Bylaws as so amended shall be the Bylaws of Avondale as the Surviving
Corporation until amended as provided therein or as otherwise permitted by the
DGCL.
(d) The directors and certain executive officers of Avondale
as the Surviving Corporation following the Company Merger shall be as provided
in Section 6.2 herein until such directors or officers are replaced or
additional directors or officers are elected or appointed in accordance with the
provisions of this Agreement and the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
(e) From and after the Company Merger Effective Time:
(i) Avondale 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,
5
of a public as well as of a private nature, of each of Avondale and Coal City,
and all obligations belonging or due to each of Avondale and Coal City, all of
which shall vest in Avondale as the Surviving Corporation without further act or
deed. Title to any real estate or any interest in the real estate vested in
Avondale or Coal City shall not revert or in any way be impaired by reason of
the Company Merger.
(ii) Avondale as the Surviving Corporation will be liable for
all the obligations of each of Avondale and Coal City. Any claim existing, or
action or proceeding pending, by or against Avondale or Coal City, may be
prosecuted to judgement, with right of appeal, as if the Company Merger had not
taken place, or Avondale as the Surviving Corporation may be substituted in its
place.
(iii) All the rights of creditors of each of Avondale and Coal
City will be preserved unimpaired, and all liens upon the property of Avondale
and Coal City will be preserved unimpaired only on the property affected by such
liens immediately before the Company Merger Effective Time.
1.5 Authorization for Issuance of Avondale Common Stock;
Exchange of Certificates.
(a) Avondale shall reserve for issuance a sufficient
number of shares of its common stock for the purpose of issuing its shares to
Coal City's stockholders in accordance with this Article I.
(b) After the Company Merger Effective Time, holders
of certificates theretofore representing outstanding shares of Coal City Common
Stock (other than as provided in Sections 1.3(a)(ii) and (iii) hereof), upon
surrender of such certificates to an exchange agent appointed jointly by
Avondale and Coal City on behalf of Avondale as the Surviving Corporation (the
"Exchange Agent"), shall be entitled to receive certificates for the number of
whole shares of Avondale Common Stock into which shares of Coal City Common
Stock theretofore evidenced by the certificates so surrendered shall have been
converted, as provided in Section 1.3 hereof, and cash payments in lieu of
fractional shares, if any, as provided in Section 1.6 hereof. As soon as
practicable after the Company Merger Effective Time, the Exchange Agent will
send a notice and transmittal form to each Coal City stockholder of record at
the Company Merger Effective Time whose Coal City Common Stock shall have been
converted into Avondale Common Stock advising such stockholder of the
effectiveness of the Company Merger and the procedure for surrendering to the
Exchange Agent outstanding certificates formerly representing Coal City Common
Stock in exchange for new certificates for Avondale Common Stock. Upon
surrender, each certificate representing Coal City Common Stock shall be
cancelled.
(c) Until surrendered as provided in this Section 1.5
hereof, all outstanding certificates of a holder which, before
6
the Company Merger Effective Time, represented Coal City Common Stock (other
than those representing Dissenting Shares and shares cancelled at the Company
Merger Effective Time pursuant to Section 1.3(a)(iii) hereof) will be deemed for
all corporate purposes to represent the number of whole shares of Avondale
Common Stock into which the shares of Coal City Common Stock formerly
represented thereby were converted and the right to receive cash in lieu of a
fractional share interest. However, until such outstanding certificates formerly
representing Coal City Common Stock are so surrendered, no dividend or
distribution payable to holders of record of Avondale Common Stock shall be paid
to any holder of such outstanding certificates, but upon surrender of such
outstanding certificates by such holder there shall be paid to such holder the
amount of any dividends or distribution, without interest, theretofore paid with
respect to such whole shares of Avondale Common Stock, but not paid to such
holder, and which dividends or distribution had a record date occurring on or
after the Company Merger Effective Time and the amount of any cash, without
interest, payable to such holder in lieu of a fractional share interest pursuant
to Section 1.6 hereof. After the Company Merger Effective Time, there shall be
no further registration of transfers on the records of Coal City of outstanding
certificates formerly representing shares of Coal City Common Stock and, if a
certificate formerly representing such shares is presented to Coal City or
Avondale, it shall be forwarded to the Exchange Agent for cancellation and
exchanged for a certificate representing shares of Avondale Common Stock and
cash for any fractional share interest (if any), as herein provided. Following
six months after the Company Merger Effective Time, the Exchange Agent shall
return to Avondale any certificates for Avondale Common Stock and cash remaining
in the possession of the Exchange Agent (together with any dividends in respect
thereof) and thereafter shareholders of Coal City shall look exclusively to
Avondale for shares of Avondale Common Stock and cash to which they are entitled
hereunder.
(d) All shares of Avondale Common Stock and cash in
lieu of any fractional share issued or paid upon the conversion of Coal City
Common Stock in accordance with the above terms and conditions shall be deemed
to have been issued or paid in full satisfaction of all rights pertaining to
such Coal City Common Stock.
(e) If any new certificate for Avondale Common Stock
is to be issued in a name other than that in which the certificate surrendered
in exchange thereof is registered, it shall be a condition of the issuance
therefor that the certificate surrendered in exchange shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of a new certificate representing shares of Avondale
Common Stock in any name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
7
(f) In the event any certificate representing Coal
City Common Stock shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed certificate, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Avondale Common Stock and cash for any fractional share interest, as may be
required pursuant hereto; provided, however, that Avondale as the Surviving
Corporation or Exchange Agent may, in its discretion and as a condition
precedent to the issuance or payment thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such sum as it may direct
as indemnity against any claim that may be made against Avondale as the
Surviving Corporation, Coal City, the Exchange Agent or any other person with
respect to the certificate alleged to have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof,
no fractional shares of Avondale Common Stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued upon the
conversion of or in exchange for any shares of Coal City Common Stock; no
dividend or distribution with respect to Avondale Common Stock shall be payable
on or with respect to any fractional share interest; and no such fractional
share interest shall entitle the owner thereof to vote or to any other rights of
a stockholder of Avondale as the Surviving Corporation. In lieu of such
fractional share interest, any holder of Coal City Common Stock who would
otherwise be entitled to a fractional share of Avondale Common Stock will, upon
surrender of his certificate or certificates representing Coal City Common Stock
outstanding immediately before the Company Merger Effective Time, be paid the
applicable cash value of such fractional share interest, which shall be equal to
the product of the fraction of the share to which such holder would otherwise
have been entitled and the closing price of Avondale Common Stock on the trading
day immediately prior to the date of the Company Merger Effective Time. For the
purposes of determining any such fractional share interest, all shares of Coal
City Common Stock owned by a Coal City stockholder shall be combined so as to
calculate the maximum number of whole shares of Avondale Common Stock issuable
to such Coal City stockholder.
1.7 Stockholders' Meetings.
(a) Avondale shall, at the earliest practicable date,
hold a meeting of its stockholders (the "Avondale Stockholders' Meeting") to
submit this Agreement for adoption by its stockholders. The affirmative vote of
a majority of the issued and outstanding shares of Avondale Common Stock
entitled to vote shall be required for such adoption.
(b) Coal City shall, at the earliest practicable
date, hold a meeting of its stockholders (the "Coal City Stockholders' Meeting")
to submit this Agreement for stockholder approval. The affirmative vote of
two-thirds of the issued and
8
outstanding shares of Coal City Common Stock entitled to vote shall be required
for such approval.
1.8 Coal City Stock Options.
(a) At the Company Merger Effective Time, by virtue
of the Company Merger and without any action on the part of any holder of an
option, each outstanding option under the stock option plans of Coal City (the
"Coal City Option Plans"), whether vested or unvested, shall continue
outstanding as an option to purchase, in place of the purchase of each share of
Coal City Common Stock, the number of shares (rounded to the nearest whole
share) of Avondale Common Stock that would have been received by the optionee in
the Company Merger had the option been exercised in full (without regard to any
limitations contained therein on exercise) for shares of Coal City Common Stock
immediately before the Company Merger upon the same terms and conditions under
the relevant option as were applicable immediately before the Company Merger
Effective Time, except for appropriate pro rata adjustments as to the relevant
option price for shares of Avondale Common Stock substituted therefor so that
the aggregate option exercise price of shares subject to an option immediately
following the substitution shall be the same as the aggregate option exercise
price for such shares immediately before such substitution. It is intended that
the foregoing substitution shall be undertaken consistent with and in a manner
that will not constitute a "modification" under Section 424 of the Internal
Revenue Code as to any stock option which is an "incentive stock option."
(b) At all times after the Company Merger Effective
Time, Avondale as the Surviving Corporation shall reserve for issuance such
number of shares of Avondale Common Stock as necessary so as to permit the
exercise of options granted under the Coal City Option Plans in the manner
contemplated by this Agreement and the instruments pursuant to which such
options were granted. Avondale shall make all filings required under federal and
state securities laws promptly after the Company Merger Effective Time so as to
permit the exercise of such options and the sale of the shares received by the
optionee upon such exercise at and after the Company Merger Effective Time and
Avondale as the Surviving Corporation shall continue to make such filings
thereafter as may be necessary to permit the continued exercise of options and
sale of such shares.
1.9 Registration Statement; Prospectus/Joint Proxy Statement.
(a) For the purposes (i) of holding the Avondale
Stockholders' Meeting, (ii) of registering with the Securities and Exchange
Commission ("SEC") and with applicable state securities authorities the Avondale
Common Stock to be issued to holders of Coal City Common Stock in connection
with the Company Merger and (iii) of holding the Coal City Stockholders'
Meeting, the parties shall cooperate in the preparation of an appropriate
registration
9
statement (such registration statement, together with all and any amendments and
supplements thereto, is referred to herein as the "Registration Statement"),
including the Prospectus/Joint Proxy Statement satisfying all applicable
requirements of applicable state laws, and of the Securities Act of 1933 (the
"Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations thereunder (such Prospectus/Joint Proxy Statement,
together with any and all amendments or supplements thereto, is referred to
herein as the "Prospectus/Joint Proxy Statement").
(b) Avondale shall furnish such information
concerning Avondale and its Subsidiaries as is necessary in order to cause the
Prospectus/Joint Proxy Statement, insofar as it relates to such entities, to
comply with Section 1.9(a) hereof. Avondale agrees promptly to advise Coal City
if at any time before the Coal City or Avondale Stockholders' Meeting any
information provided by Avondale in the Prospectus/Joint Proxy Statement becomes
incorrect or incomplete in any material respect and to provide the information
needed to correct such inaccuracy or omission. Avondale shall furnish Coal City
with such supplemental information as may be necessary in order to cause such
Prospectus/Joint Proxy Statement, insofar as it relates to Avondale and its
Subsidiaries, to comply with Section 1.9(a) hereof.
(c) Coal City shall furnish Avondale with such
information concerning Coal City and its Subsidiaries as is necessary in order
to cause the Prospectus/Joint Proxy Statement, insofar as it relates to such
entities, to comply with Section 1.9(a) hereof. Coal City agrees promptly to
advise Avondale if at any time before the Avondale or Coal City Stockholders'
Meeting any information provided by Coal City in the Prospectus/Joint Proxy
Statement becomes incorrect or incomplete in any material respect and to provide
Avondale with the information needed to correct such inaccuracy or omission.
Coal City shall furnish Avondale with such supplemental information as may be
necessary in order to cause the Prospectus/Joint Proxy Statement, insofar as it
relates to Coal City and its Subsidiaries, to comply with Section 1.9(a).
(d) Avondale shall promptly file the Registration
Statement with the SEC and applicable state securities agencies. Avondale and
Coal City shall use all reasonable efforts to cause the Registration Statement
to become effective under the Securities Act and applicable state securities
laws at the earliest practicable date. Coal City authorizes Avondale to utilize
in the Registration Statement the information concerning Coal City and its
Subsidiaries provided to Avondale for the purpose of inclusion in the
Prospectus/Joint Proxy Statement. Avondale shall advise Coal City promptly when
the Registration Statement has become effective and of any supplements or
amendments thereto, and Avondale shall furnish Coal City with copies of all such
documents. Before the Company Merger Effective Time or the termination of this
Agreement, each party shall consult with the other with respect to any material
10
(other than the Prospectus/Joint Proxy Statement) that might constitute a
"prospectus" relating to the Company Merger within the meaning of the Securities
Act.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate,
and shall cause each of their respective affiliates and Subsidiaries to
cooperate, in the preparation and submission by them, as promptly as reasonably
practicable, of such applications, petitions, and other filings as any of them
may reasonably deem necessary or desirable to or with thrift and bank regulatory
authorities, Federal Trade Commission, Department of Justice, SEC, Secretary of
State of Delaware and Illinois, other regulatory or governmental authorities,
holders of the voting shares of common stock of Avondale and Coal City, and any
other persons for the purpose of obtaining any approvals or consents necessary
to consummate the transactions contemplated hereby. Each party will have the
right to review and comment on such applications, petitions and filings in
advance and shall furnish to the other copies thereof promptly after submission
thereof. Any such materials must be acceptable to both Avondale and Coal City
prior to submission with any regulatory or governmental authority or
transmission to stockholders or other third parties, except to the extent that
Avondale or Coal City is legally required to proceed prior to obtaining the
acceptance of the other party hereto. Each party agrees to consult with the
other with respect to obtaining all necessary consents and approvals, and each
will keep the other apprised of the status of matters relating to such approvals
and consents and the consummation of the transactions contemplated hereby. At
the date hereof, no party is aware of any reason that any regulatory approval
required to be obtained by it would not be obtained or would be obtained subject
to conditions that would have or result in a material adverse effect on Avondale
as the Surviving Corporation or, as and if applicable, Coal City Bank as the
surviving institution in the Bank Merger or, as and if applicable, Coal City
Bank as the acquiror in the Bank Purchase and Assumption.
1.11 Closing. If (i) this Agreement has been duly approved by the
stockholders of Avondale and Coal City, and (ii) all relevant conditions of this
Agreement have been satisfied or waived, a closing (the "Closing") shall take
place as promptly as practicable thereafter at the principal office of Schwartz,
Cooper, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chicago, Illinois, or at such other place as the
parties agree, at which the parties will exchange certificates, opinions,
letters and other documents as required hereby and will make the filings
described in Section 1.2 hereof. Such Closing will take place within 30 days
after the satisfaction or waiver of all conditions and/or obligations precedent
to Closing contained in Article IV of this Agreement, or at such other time as
the parties agree. The parties shall use their respective best efforts to cause
the Closing to occur on or prior to March 31, 1999.
11
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Avondale represents and warrants to Coal City, and Coal City represents
and warrants to Avondale, except as disclosed in the Disclosure Schedule
delivered by each party to the other pursuant to Section 2.23 herein, as
follows:
2.1 Organization, Good Standing, Authority, Insurance, Etc. It is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Section 2.1 of its Disclosure Schedule
lists each "subsidiary" (the term "subsidiary" when used with respect to any
party means any entity (including without limitation any corporation,
partnership, joint venture or other organization, whether incorporated or
unincorporated) which is consolidated with such party for financial reporting
purposes (individually a "Subsidiary" and collectively the "Subsidiaries"). Each
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction under which it is organized, as set forth in
Section 2.1 of its Disclosure Schedule. It and each of its Subsidiaries have all
requisite power and authority and to the extent required by applicable law are
licensed to own, lease and operate their respective properties and conduct their
respective businesses as they are now being conducted. It has delivered or made
available to the other party a true, complete and correct copy of the articles
of incorporation, certificate of incorporation or other organizing document and
of the bylaws, as in effect on the date of this Agreement, of it and each of its
Subsidiaries. It and each of its Subsidiaries are qualified to do business as
foreign corporations or entities and are in good standing in each jurisdiction
in which qualification is necessary under applicable law, except to the extent
that any failures to so qualify would not, in the aggregate, have a material
adverse effect on it. All eligible accounts of each of its Subsidiaries that is
a depositary institution are insured by the Federal Deposit Insurance
Corporation (the "FDIC") to the maximum extent permitted under applicable law.
In the case of the representations and warranties of Avondale, Avondale is duly
registered as a savings and loan holding company under the Home Owners' Loan Act
of 1933, as amended, and the Avondale Common Stock is registered under the
Exchange Act. In the case of the representations and warranties of Coal City,
Coal City is duly registered as a bank holding company registered under the Bank
Holding Company Act of 1956, as amended.
Its minute books and those of each of its Subsidiaries contain complete
and accurate records of all meetings and other corporate actions taken by their
respective stockholders and Boards of Directors (including the committees of
such Boards).
2.2 Capitalization. (a) Its authorized capital stock and the
number of issued and outstanding shares of its capital stock as of
the date hereof are accurately set forth in the recitals in this
12
Agreement. All outstanding shares of its common stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Except
(i) as set forth in Section 2.2 of its Disclosure Schedule or (ii) with respect
to the Stock Option Agreement, as of the date of this Agreement, there are no
options, convertible securities, warrants or other rights (preemptive or
otherwise) to purchase or acquire any of its capital stock from it and no oral
or written agreement, contract, arrangement, understanding, plan or instrument
of any kind to which it or any of its Subsidiaries is subject with respect to
the issuance, voting or sale of issued or unissued shares of its capital stock.
A true and complete copy of each plan and agreement pursuant to which such
options, convertible securities, warrants or other rights have been granted or
issued, as in effect on the date of this Agreement, is included in Section 2.2
of its Disclosure Schedule. Only the holders of its common stock have the right
to vote at meetings of its stockholders on matters to be voted thereat
(including this Agreement).
(b) With respect to the shares of Avondale Common Stock to be
issued in the Company Merger, Avondale represents and warrants that such shares
when so issued in accordance with this Agreement will be duly authorized,
validly issued, fully paid and nonassessable and not subject to any preemptive
rights or other liens.
2.3 Ownership of Subsidiaries. All outstanding shares or ownership
interests of its Subsidiaries are validly issued, fully paid, nonassessable and
owned beneficially and of record by it or one of its Subsidiaries free and clear
of any lien, claim, charge, restriction, rights of third parties, or encumbrance
(collectively, "Encumbrance"), except as set forth in Section 2.3 of its
Disclosure Schedule. There are no options, convertible securities, warrants or
other rights (preemptive or otherwise) to purchase or acquire any capital stock
or ownership interests of any of its Subsidiaries and no contracts to which it
or any of its Subsidiaries is subject with respect to the issuance, voting or
sale of issued or unissued shares of the capital stock or ownership interests of
any of its Subsidiaries. Neither it nor any of its Subsidiaries owns more than
2% of the capital stock or other equity securities (including securities
convertible or exchangeable into such securities) of or more than 2% of the
aggregate profit participations in any entity other than a Subsidiary or as
otherwise set forth in Section 2.3 of its Disclosure Schedule.
2.4 Financial Statements and Reports. (a) No registration statement,
offering circular, proxy statement, schedule or report filed by it or any of its
Subsidiaries under various securities and financial institution laws and
regulations ("Regulatory Reports"), on the date of its effectiveness in the case
of such registration statements, or on the date of filing in the case of such
reports or schedules, or on the date of mailing in the case of such proxy
statements, contained any untrue statement of a material fact or
13
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. For the past five years, it and its Subsidiaries have
timely filed all Regulatory Reports required to be filed by them under various
securities and financial institution laws and regulations except to the extent
that all failures to so file, in the aggregate, would not have a material
adverse effect on it; and all such documents, as finally amended, complied in
all material respects with applicable requirements of law and, as of their
respective date or the date as amended, did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent stated therein, all
financial statements and schedules included in the Regulatory Reports (or to be
included in Regulatory Reports to be filed after the date hereof) (i) are or
will be (with respect to financial statements in respect of periods ending after
June 30, 1998), in accordance with its books and records and those of its
consolidated Subsidiaries, and (ii) present (and in the case of financial
statements in respect of periods ending after June 30, 1998, will present)
fairly the consolidated financial position and the consolidated results of
operations or income, changes in stockholders' equity and cash flows of it and
its Subsidiaries as of the dates and for the period indicated in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods (except for the omission of notes to unaudited statements and in
the case of unaudited statements to normal recurring year-end adjustments normal
in nature and amounts). Its audited consolidated financial statements at
December 31, 1997 and for the year then ended and the consolidated financial
statements for all periods thereafter up to the Closing reflect or will reflect,
as the case may be, all liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due and regardless of when
asserted) as of such date of it and its Subsidiaries required to be reflected in
such financial statements in accordance with generally accepted accounting
principles and contain or will contain (as the case may be) adequate reserves
for losses on loans and properties acquired in settlement of loans, taxes and
all other material accrued liabilities and for all reasonably anticipated
material losses, if any, as of such date in accordance with generally accepted
accounting principles. There exists no set of circumstances that could
reasonably be expected to result in any liability or obligation material to it
or its Subsidiaries, taken as a whole, except as disclosed in such consolidated
financial statements at December 31, 1997 or for transactions effected or
actions occurring or omitted to be taken after December 31, 1997 (i) in the
ordinary course of business, (ii) as permitted by this Agreement or (iii) as
disclosed in its Regulatory Reports filed after December 31, 1997 and before the
date of this Agreement. A true and complete copy of such December 31, 1997
financial statements has been delivered by it to the other party.
14
(b) To the extent permitted under applicable law, it has delivered or
made available to the other party each Regulatory Report filed, used or
circulated by it with respect to periods since January 1, 1992 through the date
of this Agreement and will promptly deliver to the other party each such
Regulatory Report filed, used or circulated after the date hereof, each in the
form (including exhibits and any amendments thereto) filed with the applicable
regulatory or governmental entity (or, if not so filed, in the form used or
circulated).
2.5 Absence of Changes.
(a) Since June 30, 1998, there has been no material adverse
change affecting it. There is no occurrence, event or development of any nature
existing or, to its best knowledge, threatened which may reasonably be expected
to have a material adverse effect upon it.
(b) Except as set forth in Section 2.5 of its Disclosure
Schedule or in its Regulatory Reports filed after December 31, 1997 and before
the date of this Agreement, since December 31, 1997, each of it and its
Subsidiaries has owned and operated its respective assets, properties and
businesses in the ordinary course and consistent with past practice.
2.6 Prospectus/Joint Proxy Statement. At the time the Prospectus/Joint
Proxy Statement is mailed to the stockholders of Avondale and Coal City for the
solicitation of proxies for the approvals referred to in Section 1.7 hereof and
at all times after such mailings up to and including the times of such
approvals, such Prospectus/Joint Proxy Statement (including any supplements
thereto), with respect to all information set forth therein relating to it
(including its Subsidiaries) and its stockholders, its common stock, this
Agreement, the Merger and the other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations under such
Acts; and
(b) Not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which it is made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf or under authority of it or any of its
Subsidiaries is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly in connection with the Merger
or any other transaction contemplated hereby, except as set forth in Section 2.7
of its Disclosure Schedule.
15
2.8 Litigation and Other Proceedings. Except for matters which would
not have a material adverse effect on it, or except as set forth in Section 2.8
of its Disclosure Schedule, neither it nor any of its Subsidiaries is a
defendant in, nor is any of its property subject to, any pending or, to its best
knowledge, threatened claim, action, suit, investigation or proceeding or
subject to any judicial order, judgment or decree.
2.9 Compliance with Law. Except as set forth in Section 2.9 of its
Disclosure Schedule:
(a) It and each of its Subsidiaries are in compliance in all
material respects with all laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to their respective operations or businesses,
including without limitation the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Owners' Disclosure Act and all
other applicable fair lending laws or other laws relating to discrimination.
Neither it nor any of its Subsidiaries has received notice from any federal,
state or local government or governmental agency of any material violation of,
and does not know of any material violations of, any of the above.
(b) It and each of its Subsidiaries have all permits,
licenses, certificates of authority, orders and approvals of, and have made all
filings, applications and registrations with, all federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
them to carry on their respective businesses as they are presently being
conducted.
(c) It and each of its Subsidiaries have received since
January 1, 1995 no notification or communication from any governmental or
regulatory entity or the staff thereof (A) asserting that it or any of its
Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances that such governmental or regulatory entity administers or enforces;
(B) threatening to revoke any license, franchise, permit or authorization; or
(C) threatening or contemplating any enforcement action by or supervisory or
other written agreement with a state or federal banking regulator, or any
revocation or limitation of, or action which would have the effect of revoking
or limiting, the FDIC deposit insurance of any Subsidiary (nor, to the knowledge
of its executive officers, do any grounds for any of the foregoing exist); and
(d) It and each of its Subsidiaries are not required to give
prior notice to any regulatory agency of the proposed addition of an individual
to their respective board of directors or the employment of an individual as a
senior executive officer.
2.10 Corporate Actions.
(a) Its Board of Directors has (i) duly approved the
Company Merger, this Agreement and the Stock Option Agreements, and
16
authorized its officers to execute and deliver this Agreement, the Stock Option
Agreements and to take all action necessary to consummate the Company Merger and
the other transactions contemplated hereby, and (ii) authorized and directed the
submission for stockholders' approval or adoption of this Agreement.
(b) Its Board of Directors has taken all necessary action to
exempt this Agreement, and the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby are exempt from,
(i) any applicable state takeover laws, (ii) any state laws limiting or
restricting the voting rights of stockholders, (iii) any state laws requiring a
stockholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
stockholder" or person or entity of similar type and (iv) any provision in its
or any of its Subsidiaries' articles of incorporation, certificate of
incorporation, charter or bylaws, (A) restricting or limiting stock ownership or
the voting rights of stockholders or (B) requiring a stockholder approval vote
in excess of the vote normally required in transactions of similar type not
involving a "related person," interested stockholder" or person or entity of
similar type.
2.11 Authority. Except as set forth in Section 2.11 of its Disclosure
Schedule, neither the execution and delivery of and performance of its
obligations under this Agreement, the Contribution Agreement, the Bank Merger
Agreement (as and if applicable), the Bank Purchase and Assumption Agreement (as
and if applicable) and the Stock Option Agreement by it or its applicable
Subsidiary nor the consummation of the Merger will violate any of the provisions
of, or constitute a breach or default under or give any person the right to
terminate or accelerate payment or performance under, (i) its articles of
incorporation, certificate of incorporation or bylaws, or the articles of
incorporation, certificate of incorporation, charter or bylaws of any of its
Subsidiaries, (ii) any regulatory restraint on the acquisition of it or control
thereof, (iii) any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which it
or any of its Subsidiaries is subject or (iv) any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation or instrument
("Contract") to which it or any of its Subsidiaries is a party or is subject or
by which any of its or their properties or assets is bound and which provides
for payments by, on behalf of, or to it and/or any of its Subsidiaries in excess
of either $25,000 per annum or $100,000 over the term of such Contract. The
parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals. It
or its applicable Subsidiary has all requisite corporate power and authority to
enter into this Agreement, the Stock Option Agreements, the Contribution
Agreement, the Bank Merger Agreement (as and if applicable) and the Bank
Purchase and
17
Assumption Agreement (as and if applicable), and to perform its obligations
hereunder and thereunder, subject in the case of the Company Merger to the
approval or adoption of this Agreement by its stockholders under applicable law.
Other than the receipt of Governmental Approvals (as defined in Section 4.1(c)),
the approval or adoption of this Agreement by its stockholders and except as set
forth in Section 2.11 of its Disclosure Schedule with respect to any Contract,
no consents or approvals are required on its behalf or on behalf of any of its
Subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement. This Agreement and the Stock Option Agreements
constitute the valid and binding obligations of it, enforceable in accordance
with their terms, except as enforceability may be limited by applicable laws
relating to bankruptcy, insolvency or creditors rights generally and general
principles of equity.
2.12 Employment Arrangements. Except as set forth in Section 2.12 of
its Disclosure Schedule, there are no agreements, plans or other arrangements
with respect to employment, severance or other benefits with any current or
former directors, officers or employees of it or any of its Subsidiaries which
may not be terminated without penalty or expense (including any augmentation or
acceleration of benefits) on 30 days' or less notice to any such person. Except
as set forth in Section 2.12 of its Disclosure Schedule, no payments and
benefits (including any augmentation or acceleration of benefits) to current or
former directors, officers or employees of it or any of its Subsidiaries
resulting from the transactions contemplated hereby or the termination of such
person's service or employment within two years after completion of the Company
Merger will cause the imposition of excise taxes under Section 4999 of the
Internal Revenue Code or the disallowance of a deduction to it, Avondale as the
Surviving Corporation, or any of their respective Subsidiaries pursuant to
Section 162, 280G, or any other section of the Internal Revenue Code.
2.13 Employee Benefits. (a) Neither it nor any of its Subsidiaries
maintains any funded deferred compensation plans (including profit sharing,
pension, retirement savings or stock bonus plans), unfunded deferred
compensation arrangements or employee benefit plans as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
other than any plans ("Employee Plans") set forth in Section 2.13 of its
Disclosure Schedule (true and correct copies of which it has delivered to the
other party). Neither it nor any of its Subsidiaries has incurred or reasonably
expects to incur any liability to the Pension Benefit Guaranty Corporation
except for required premium payments which, to the extent due and payable, have
been paid. The Employee Plans intended to be qualified under Section 401(a) of
the Internal Revenue Code are so qualified, and it is not aware of any fact
which would adversely affect the qualified status of such plans. Except as set
forth in Section 2.13 of its Disclosure Schedule, neither it nor any of its
Subsidiaries (a) provides health, medical, death or survivor benefits to any
18
former employee or beneficiary thereof or (b) maintains any form of current
(exclusive of base salary and base wages) or deferred compensation, bonus, stock
option, stock appreciation right, benefit, severance pay, retirement, employee
stock ownership, incentive, group or individual health insurance, welfare or
similar plan or arrangement for the benefit of any single or class of directors,
officers or employees, whether active or retired (collectively "Benefit
Arrangements").
(b) Except as disclosed in Section 2.13 of its Disclosure
Schedule, all Employee Plans and Benefit Arrangements which are in effect were
in effect for substantially all of calendar year 1997 and there has been no
material amendment thereof (other than amendments required to comply with
applicable law) or increase in the cost thereof or benefits payable thereunder
on or after January 1, 1997.
(c) To its best knowledge, with respect to all Employee Plans
and Benefit Arrangements, it and each of its Subsidiaries are in substantial
compliance with the requirements prescribed by any and all statutes,
governmental or court orders or rules or regulations currently in effect,
including but not limited to ERISA and the Internal Revenue Code, applicable to
such Employee Plans or Benefit Arrangements. To its best knowledge, no condition
exists that could constitute grounds for the termination of any Employee Plan
under Section 4042 of ERISA; no "prohibited transaction," as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code, has occurred with
respect to any Employee Plan, or any other employee benefit plan maintained by
it or any of its Subsidiaries which is covered by Title I of ERISA, which could
subject any person to liability under Title I of ERISA or to the imposition of
any tax under Section 4975 of the Internal Revenue Code; to its best knowledge,
no Employee Plan subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the Internal Revenue Code, or both, has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Internal Revenue Code,
whether or not waived; neither it nor any of its Subsidiaries has failed to make
any contribution or pay any amount due and owing as required by the terms of any
Employee Plan or Benefit Arrangement. To its best knowledge, neither it nor any
of its Subsidiaries has incurred or expects to incur, directly or indirectly,
any liability under Title IV of ERISA arising in connection with the termination
of, or a complete or partial withdrawal from, any plan covered or previously
covered by Title IV of ERISA which could constitute a liability of Avondale as
the Surviving Corporation or any of its Subsidiaries at or after the Company
Merger Effective Time or consummation of the Avondale Bank Acquisition.
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether before, on or after the date of
this Agreement) or to be furnished in writing by or on behalf of it to the other
party pursuant to this Agreement contains or will contain any untrue statement
of a
19
material fact or any material omission. To its best knowledge, no information
which is material to the Merger and necessary to make the representations and
warranties herein not misleading has been withheld from the other party.
2.15 Property and Assets. It and its Subsidiaries have good and
marketable title to all of their real property reflected in the financial
statements at December 31, 1997, referred to in Section 2.4 hereof or acquired
subsequent thereto, free and clear of all Encumbrances, except for (a) such
items shown in such financial statements or in the notes thereto, (b) liens for
current real estate taxes not yet delinquent, (c) customary easements,
restrictions of record and title exceptions that are not material to the value
or use of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements,(e) as otherwise
specifically indicated in its Regulatory Reports filed after December 31, 1997
and before the date of this Agreement or in Section 2.15 of its Disclosure
Schedule. It and its Subsidiaries enjoy peaceful and undisturbed possession
under all material leases for the use of real property under which they are the
lessee; all of such leases are valid and binding and in full force and effect,
and neither it nor any of its Subsidiaries is in default in any material respect
under any such lease. No default will arise under any material real property,
material personal property lease or material intellectual property license by
reason of the consummation of the Merger without the lessor's or licensor's
consent except as set forth in Section 2.15 of its Disclosure Schedule. There
has been no material physical loss, damage or destruction, whether or not
covered by insurance, affecting any of the real properties or material personal
property of it and its Subsidiaries since December 31, 1997. All fixed assets
material to its or any of its Subsidiaries' respective business and currently
used by it or any of its Subsidiaries are, in all material respects, in good
operating condition and repair.
2.16 Agreements and Instruments. Except as set forth in its Regulatory
Reports filed after December 31, 1997 and before the date of this Agreement or
in Section 2.16 of its Disclosure Schedule, neither it nor any of its
Subsidiaries is a party to (a) any material agreement, arrangement or commitment
not made in the ordinary course of business, (b) any agreement, indenture or
other instrument relating to the borrowing of money by it or any of its
Subsidiaries or the guarantee by it or of its Subsidiaries of any such
obligation (other than Federal Home Loan Bank advances with a maturity of one
year or less from the date hereof), (c) any agreements to make loans or for the
provision, purchase or sale of goods, services or property between it or any of
its Subsidiaries and any director or officer of it or any of its Subsidiaries or
any affiliate or member of the immediate family of any of the foregoing, (d) any
agreements with or concerning any labor or employee organization to which it or
any of its Subsidiaries is a party, (e) any agreements between it or any of its
Subsidiaries and any 5% or more stockholder of it and (f) any agreements,
directives, orders
20
or similar arrangements between or involving it or any of its Subsidiaries and
any state or regulatory authority.
2.17 Material Contract Defaults. Neither it or any of its Subsidiaries
nor the other party thereto is in default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it or any Subsidiary of it is a party or by which its respective
assets, business or operations may be bound or affected or under which it or its
respective assets, business or operations receives benefits, which default is
reasonably expected to have either individually or in the aggregate a material
adverse effect on it, and there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute such a default.
2.18 Tax Matters. (a) It and each of its Subsidiaries have duly and
properly filed all federal, state, local and other tax returns and reports
required to be filed by them and have made timely payments of all taxes due and
payable, whether disputed or not; the current status of audits of such returns
or reports by the Internal Revenue Service and other applicable tax authorities
is as set forth in Section 2.18 of its Disclosure Schedule; and, except as set
forth in Section 2.18 of its Disclosure Schedule, there is no agreement by it or
any of its Subsidiaries for the extension of time for the assessment or payment
of any taxes payable. Except as set forth in Section 2.18 of its Disclosure
Schedule, neither the Internal Revenue Service nor any other taxing authority is
now asserting or, to its best knowledge, threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith), nor is it aware of any basis for any such assertion or claim. It and
each of its Subsidiaries have complied in all material respects with applicable
Internal Revenue Service backup withholding requirements. It and each of its
Subsidiaries have complied with all applicable state law tax collection and
reporting requirements.
(b) Adequate provision for any unpaid federal, state, local or
foreign taxes due or to become due from it or any of its Subsidiaries for all
periods through and including June 30, 1998 has been made and is reflected in
its June 30, 1998 financial statements referred to in Section 2.4 and has been
or will be made with respect to periods ending after June 30, 1998.
2.19 Environmental Matters. To its best knowledge, neither it nor any
of its Subsidiaries owns, leases, or otherwise controls any property affected by
toxic waste, radon gas or other hazardous conditions or constructed in part with
the use of asbestos which requires removal or encapsulation. Neither it nor any
of its Subsidiaries is aware of, nor has it or any of its Subsidiaries received
written notice from any governmental or regulatory body of, any past, present or
future conditions, activities, practices or incidents which may interfere with
or prevent compliance or continued compliance with hazardous substance or other
environmental
21
laws or any regulation, order, decree, judgment or injunction, issued, entered,
promulgated or approved thereunder or which may give rise to any common law or
legal liability or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical or industrial, toxic or
hazardous substance or waste. There is no civil, criminal or administrative
claim, action, suit, proceeding, hearing or investigation pending or, to its
knowledge, threatened against it or any of its Subsidiaries relating in any way
to such hazardous substance laws or any regulation, order, decree, judgment or
injunction issued, entered, promulgated or approved thereunder.
2.20 Loan Portfolio; Portfolio Management. (a) All evidences of
indebtedness reflected as assets in its financial statements at December 31,
1997 referred to in Section 2.4 hereof, or originated or acquired since such
date, are (except with respect to those assets which are no longer assets of it
or any of its Subsidiaries) binding obligations of the respective obligers named
therein except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and except
as to the availability of equitable remedies, including specific performance,
which are subject to the discretion of the court before which a proceeding is
brought, and the payment of no material amount thereof (either individually or
in the aggregate with other evidences of indebtedness) is subject to any
defenses or offsets which have been threatened or asserted against it or any
Subsidiary. All such indebtedness which is secured by an interest in real
property is secured by a valid and perfected mortgage lien having the priority
specified in the loan documents. All loans originated or purchased by it or any
of its Subsidiaries were at the time entered into and at all times owned by it
or its Subsidiaries in compliance in all material respects with all applicable
laws and regulations (including, without limitation, all consumer protection
laws and regulations). It and its Subsidiaries (as applicable) administer their
loan and investment portfolios (including, but not limited to, adjustments to
adjustable mortgage loans) in accordance with all applicable laws and
regulations and the terms of applicable instruments. The records of it and any
of its Subsidiaries (as applicable) regarding all loans outstanding on its books
are accurate in all material respects.
(b) Section 2.20 of its Disclosure Schedule sets forth a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit and other assets of it and its Subsidiaries that
have been adversely designated, criticized or classified by it as of August 31,
1998, separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated, classified or criticized as of the date
hereof by any representative of any
22
governmental or regulatory authority as "Special Mention," "Substandard,"
"Doubtful," "Loss" or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans, extensions
of credit or other assets that were charged off by it or any of its Subsidiaries
before the date hereof.
2.21 Real Estate Loans and Investments. Except for properties acquired
in settlement of loans, there are no facts, circumstances or contingencies known
to it which exist and would require a material reduction under generally
accepted accounting principles in the present carrying value of any of the real
estate investments, joint ventures, construction loans, other investments or
other loans of it or any of its Subsidiaries (either individually or in the
aggregate with other loans and investments).
2.22 Derivatives Contracts. Neither it nor any of its Subsidiaries is a
party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract or any
other contract not included in its financial statement as of June 30, 1998 which
is a derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 2.22 of its Disclosure Schedule, including a list, as
applicable, of any of its or any of its Subsidiaries' assets pledged as security
for a Derivatives Contract.
2.23 Exceptions to Representations and Warranties. (a) On or before the
date hereof, Avondale has delivered to Coal City and Coal City has delivered to
Avondale its respective Disclosure Schedule setting forth, among other things,
exceptions to any and all of its representations and warranties in Article II,
provided that each exception set forth in a Disclosure Schedule shall be deemed
disclosed for purposes of all representations and warranties if such exception
is contained in a section of the Disclosure Schedule corresponding to a Section
in Article II and provided further that (i) no such exception is required to be
set forth in a Disclosure Schedule if its absence would not result in the
related representation or warranty being deemed untrue or incorrect under the
standard established by Section 2.23(b) and (ii) the mere inclusion of an
exception in a Disclosure Schedule shall not be deemed an admission by a party
that such exception represents a material fact, event or circumstance or would
result in a material adverse effect or material adverse change.
(b) None of the representations or warranties of Avondale or
Coal City contained in Article II shall be deemed untrue or incorrect, and no
party shall be deemed to have breached its representations or warranties
contained herein, as a consequence of the existence of any fact, circumstance or
event if such fact,
23
circumstance or event, individually or taken together with all other facts,
circumstances or events, would not, or in the case of Section 2.8 is not
reasonably likely to, have a material adverse effect or material adverse change
on such party.
As used in this Agreement, the term "material adverse effect" or
"material adverse change" means an effect or change which (i) is materially
adverse to the financial condition of a party and its respective Subsidiaries
taken as a whole, (ii) significantly and adversely affects the ability of
Avondale or Coal City to consummate the transactions contemplated hereby or to
perform its material obligations hereunder or (iii) enables any person to
prevent the consummation of the transactions contemplated hereby, provided
however that any effect or change resulting from (A) actions or omissions of
Avondale or Coal City contemplated by this Agreement or taken with the prior
consent of the other party in contemplation of the transactions provided for
herein (including, without limitation, conforming accounting adjustments), or
(B) circumstances affecting the financial institutions industry generally
(including changes in laws or regulations, accounting principles or general
levels of interest rates) which do not adversely affect a party and its
Subsidiaries, taken as a whole, in a manner significantly different than the
other party hereto or (C) any adjustments to the value of (x) interest-only
strips owned by Avondale or any of its Subsidiaries, or (y) any mortgage-banking
operations of Avondale or any of its Subsidiaries, shall be deemed not to be or
have a material adverse effect or result in a material adverse change.
ARTICLE III
COVENANTS
3.1 Investigations; Access and Copies. Between the date of this
Agreement and the Company Merger Effective Time, each party agrees to give to
the other party and its respective representatives and agents full access (to
the extent lawful) to all of the premises, books, records and employees of it
and its Subsidiaries at all reasonable times and to furnish and cause its
Subsidiaries to furnish to the other party and its respective agents or
representatives access to and true and complete copies of such financial and
operating data, all documents with respect to matters to which reference is made
in Article II of this Agreement or on any list, schedule or certificate
delivered or to be delivered in connection herewith and such other documents,
records, or information with respect to the businesses and properties of it and
its Subsidiaries as the other party or its respective agents or representative
shall from time to time reasonably request; provided however, that any such
inspection (a) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of the entity inspected and (b)
shall not affect any of the representations and warranties hereunder. One
representative of each party shall be permitted to attend all meetings of the
board of directors of the other party (except for any portion of such meetings
which relates to the transactions contemplated by this
24
Agreement or such other matters deemed confidential). Each party will also give
prompt written notice to the other party of any event or development which, (x)
had it existed or been known on the date of this Agreement, would have been
required to be disclosed under this Agreement, (y) would cause any of its
representations and warranties contained herein to be inaccurate or otherwise
materially misleading or (z) materially relates to the satisfaction of the
conditions set forth in Article IV of this Agreement. Notwithstanding anything
to the contrary herein, neither party hereto nor any of its Subsidiaries shall
be required to provide access to or to disclose information where such access or
disclosure would jeopardize the attorney-client privilege of the entity in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or, in the event of any litigation or
threatened litigation between the parties over the terms of this Agreement,
where access to information may be adverse to the interests of such party. To
the extent reasonably practicable, the parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
3.2 Conduct of Business. Between the date of this Agreement and the
Company Merger Effective Time or the termination of this Agreement, each party
agrees, on behalf of itself and each of its respective Subsidiaries, except
insofar as the President of Avondale or the President of Coal City shall
otherwise consent in writing (which consent shall not be unreasonably withheld):
(a) That it and its Subsidiaries shall (i) except as
contemplated in this Agreement conduct their business only in the ordinary
course consistent with past practices, (ii) maintain their books and records in
accordance with past practices and (iii) use all reasonable efforts to preserve
intact their business organizations and assets, to maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates and to take no action that would (A) adversely affect the
ability of any of them to obtain the Governmental Approvals (as defined in
Section 4.1(c) herein) or which would reasonably be expected to hinder or delay
receipt of the Governmental Approvals or (B) adversely affect its ability to
perform its obligations under this Agreement, the Contribution Agreement, the
Bank Merger Agreement (as and if applicable), the Bank Purchase and Assumption
Agreement (as and if applicable) or the Stock Option Agreement;
(b) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries, it and its Subsidiaries shall not: (i)
declare, set aside or pay any dividend or make any other distribution with
respect to its capital stock, except for dividends or distributions by a wholly
owned Subsidiary of such party to such party; (ii) reacquire or buy any of its
outstanding shares; (iii) issue or sell any shares of capital stock of it or any
of its Subsidiaries, except shares of its common stock issued
25
pursuant to the Stock Option Agreement and shares issued pursuant to exercise of
stock options previously issued and identified in Section 2.2 of its Disclosure
Schedule or as set forth in Section 3.2 of the Avondale Disclosure Schedule;
(iv) effect any stock split, stock dividend, reverse stock split or other
reclassification or recapitalization of its common stock; or (v) except with
respect to the Stock Option Agreement or as set forth in Section 3.2 of the
Avondale Disclosure Schedule, grant any options or issue any warrants
exercisable for or securities convertible or exchangeable into capital stock of
it or any of its Subsidiaries or grant any stock appreciation or other rights
with respect to shares of capital stock of it or of any of its Subsidiaries.
(c) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries, it and its Subsidiaries shall not: (i)
sell, dispose of or pledge any significant assets of it or of any of its
Subsidiaries other than in the ordinary course of business consistent with past
practices or to borrow funds consistent with the provisions hereinafter
contained except as contemplated in Schedule 3.2 of the Avondale Disclosure
Schedule; (ii) merge or consolidate it or any of its Subsidiaries into another
entity or acquire any other entity or except in accordance with its written
business plan in effect on the date hereof, acquire any significant assets;
(iii) sell or pledge or agree to sell or pledge or permit any lien to exist on
any stock of any of its Subsidiaries owned by it; (iv) change the articles of
incorporation or certificate of incorporation, charter, bylaws or other
governing instruments of it or any of its Subsidiaries, except, in the case of
Avondale, with respect to the authorization of additional shares of Avondale
Common Stock, or otherwise as contemplated by this Agreement; (v) engage in any
lending activities other than in the ordinary course of business consistent with
past practices; (vi) form any new subsidiary or cause or permit a material
change in the activities presently conducted by any Subsidiary or make
additional investments in subsidiaries in excess of $100,000 except as
contemplated in Schedule 3.2 of the Avondale Disclosure Schedule; (vii) except
to hedge interest rate risk on certificates of deposits, engage in any off
balance sheet interest rate swap arrangement, (viii) engage in any activity not
contemplated by its written business plan in effect on the date hereof (ix)
purchase any equity securities other than Federal Home Loan Bank stock or incur
or assume any indebtedness except in the ordinary and usual course of business;
(x) authorize capital expenditures other than in the ordinary and usual course
of business; or (xi) implement or adopt any change in its accounting principles,
practices or methods other than as may be required by generally accepted
accounting principles. The limitations contained in this Section 3.2(c) shall
also be deemed to constitute limitations as to the making of any commitment with
respect to any of the matters set forth in this Section 3.2(c).
(d) That except where the provisions herein are limited to a
specific party and/or its Subsidiaries it and its Subsidiaries shall not: (i)
grant any general increase in compensation or
26
benefits to its employees or officers or pay any bonuses to its employees or
officers except in accordance with policies in effect on the date hereof; (ii)
enter into, extend, renew, modify, amend or otherwise change any employment or
severance agreements with any of its directors, officers or employees; (iii)
grant any increase in fees or other increases in compensation or other benefits
to any of its present or former directors in such capacity; or (iv) establish or
sponsor any new Employee Plan or Benefit Arrangement or effect any change in its
Employee Plans or Benefit Arrangements (except, in the case of Avondale, with
respect to the reservation of additional shares of Avondale Common Stock under
its stock option plans or the adoption of a new stock option plan and unless
such change is contemplated by this Agreement or is required by applicable law
or, in the opinion of its counsel, is necessary to maintain continued
qualification of any tax-qualified plan that provides for retirement benefits).
3.3 No Solicitation. Each party agrees, on behalf of itself and each of
its Subsidiaries, that it will not authorize or permit any officer, director,
employee, investment banker, financial consultant, attorney, accountant or other
representative of it or any of its Subsidiaries, directly or indirectly, to
initiate contact with any person or entity in an effort to solicit, initiate or
encourage any "Takeover Proposal" (as such term is defined below). Except as the
fiduciary duties of its Board of Directors may otherwise require (as determined
in good faith after consultation with legal counsel), each party agrees that it
will not authorize or permit any officer, director, employee, investment banker,
financial consultant, attorney, accountant or other representative of it or any
of its Subsidiaries, directly or indirectly, (A) to cooperate with, or furnish
or cause to be furnished any non-public information concerning its business,
properties or assets to, any person or entity in connection with any Takeover
Proposal; (B) to negotiate any Takeover Proposal with any person or entity; or
(C) to enter into any agreement, letter of intent or agreement in principle as
to any Takeover Proposal. Each party agrees that it shall promptly give written
notice to the other upon becoming aware of any Takeover Proposal, such notice to
contain, at a minimum, the identity of the persons submitting the Takeover
Proposal, a copy of any written inquiry or other communication, the terms of any
Takeover Proposal, any information requested or discussions sought to be
initiated and the status of any requests, negotiations or expressions of
interest. As used in this Agreement, "Takeover Proposal" shall mean any
proposal, other than as contemplated by this Agreement or Section 3.2 of the
Avondale Disclosure Schedule, for a merger or other business combination
involving either party or any of their respective financial institution
Subsidiaries or for the acquisition of a 10% or greater equity interest in
either party or any of their respective Subsidiaries, or for the acquisition of
a substantial portion of the assets of either party or any of their respective
Subsidiaries.
27
3.4 Stockholder Approvals. The parties shall call the meetings of their
respective stockholders to be held for the purpose of voting upon this Agreement
and related matters, as referred to in Section 1.7 hereof, as soon as
practicable. In connection with the Avondale and Coal City Stockholders'
Meetings, the respective Boards of Directors shall recommend approval of this
Agreement, and any other matters requiring stockholder action relating to the
transactions contemplated herein (and such recommendation shall be contained in
the Prospectus/Joint Proxy Statement) unless as a result of an unsolicited
Takeover Proposal received by a party after the date hereof, the Board of
Directors of such party determines in good faith after consultation with its
legal counsel and investment banking firm that to do so would constitute a
breach of the fiduciary duties of such Board of Directors to the stockholders of
such party. Each of the parties shall use its best efforts to solicit from its
stockholders proxies in favor of approval and to take all other action necessary
or helpful to secure a vote of the holders of the outstanding shares of its
common stock in favor of this Agreement, except as the fiduciary duties of its
Board of Directors may otherwise require.
3.5 Resale Letter Agreements; Accounting and Tax Treatment. After
execution of this Agreement, (i) Coal City shall use its best efforts to cause
to be delivered to Avondale from each person who may be deemed to be an
"affiliate" of Coal City within the meaning of Rule 145 of the Securities Act, a
written letter agreement as of a date prior to the date of the Coal City
Stockholders' Meeting in the form as set forth in Exhibit 3.5, regarding
restrictions on resale of shares of Avondale Common Stock, to ensure compliance
with applicable restrictions imposed under the federal securities laws and prior
to the Company Merger Effective Time Coal City shall use its best efforts to
secure such written letter agreement from persons who become an affiliate of it
subsequent to the date hereof, and (ii) neither party shall take any action
which would prevent the Company Merger and the other transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the Internal Revenue Code, provided that nothing hereunder shall limit the
ability of either party to exercise its rights under the Stock Option Agreement.
3.6 Publicity. Between the date of this Agreement and the Company
Merger Effective Time, neither party nor any of its Subsidiaries shall, without
the prior approval of the other party, issue or make, or permit any of its
directors, employees, officers or agents to issue or make, any press release,
disclosure or statement to the press or any third party with respect to the
Merger or the other transactions contemplated hereby, except as required by law.
The parties shall cooperate when issuing or making any press release, disclosure
or statement with respect to the Merger or the other transactions contemplated
hereby.
3.7 Cooperation Generally. Between the date of this Agreement and the
Company Merger Effective Time, the parties and their
28
respective Subsidiaries shall in conformance with the provisions of this
Agreement use their best efforts, and take all actions necessary or appropriate,
to consummate the Company Merger and the other transactions contemplated hereby
at the earliest practicable date.
3.8 Additional Financial Statements and Reports. As soon as reasonably
practicable after they become publicly available, each party shall furnish to
the other its statements of financial condition, statements of operations or
statements of income, statements of cash flows and statements of changes in
stockholders' equity at all dates and for all periods before the Closing. Such
financial statements will be prepared in conformity with generally accepted
accounting principles applied on a consistent basis and fairly present the
financial condition, results of operations and cash flows of the respective
parties (subject, in the case of unaudited financial statements, to (a) normal
year-end audit adjustments, (b) any other adjustments described therein and (c)
the absence of notes which, if presented, would not differ materially from those
included with its most recent audited consolidated financial statements), and
all of such financial statements will be prepared in conformity with the
requirements of Form 10-Q or Form 10-K, as and if applicable, under the Exchange
Act. As soon as reasonably practicable after they are filed, each party shall,
to the extent permitted under applicable law, furnish to the other its
Regulatory Reports.
3.9 Stock Exchange Listing. Avondale agrees to use all reasonable
efforts to cause to be listed on the Nasdaq National Market, subject to official
notice of issuance, the shares of Avondale Common Stock to be issued in the
Company Merger.
3.10 Employee Benefits and Agreements.
(a) Following the Company Merger Effective Time and the Bank Merger
Effective Time or the Purchase and Assumption Time, whichever is applicable,
Avondale as the Surviving Corporation, and Coal City Bank as the resulting
financial institution, shall honor in accordance with their terms all Benefit
Arrangements and all provisions for vested benefits or other vested amounts
earned or accrued through such time period under the Employee Plans.
(b) The Employee Plans shall not be terminated by reason of the Merger
but shall continue thereafter as plans of Avondale as the Surviving Corporation
or Coal City Bank as the resulting financial institution until such time as the
Employee Plans are integrated, subject to the terms and conditions specified in
such plans and to such changes therein as may be necessary to reflect the
consummation of the Merger. Avondale as the Surviving Corporation shall take
such steps as are necessary as soon as practicable following the Company Merger
Effective Time to integrate the Employee Plans, with (i) full credit for prior
service with Avondale or Coal City or any of the Avondale or Coal City
Subsidiaries for purposes of vesting and
29
eligibility for participation (but not benefit accruals under any Employee
Plan), and co-payments and deductibles and (ii) waiver of all waiting periods
and pre-existing condition exclusions or penalties.
(c) The Avondale Employee Stock Ownership Plan (the "ESOP") shall be
terminated as of the Company Merger Effective Time or as soon thereafter as is
practicable. In connection with the termination of the ESOP, Avondale shall
promptly apply to the IRS for a favorable determination letter on the ESOP's
tax-qualified status upon termination under Code Section 401(a). The parties
acknowledge that the existing loan between Avondale and the ESOP (the "ESOP
Loan") shall be repaid in full by the ESOP upon such termination or as soon
thereafter as is practicable. The parties further acknowledge that the ESOP has
unallocated assets with a current fair market value exceeding the outstanding
balance (principal and interest) of the ESOP Loan. The parties agree that
participants in the ESOP will benefit from these assets as an allocation of
earnings to the fullest extent permissible under applicable law upon termination
of the ESOP. Avondale may take such actions as it deems necessary or appropriate
to effectuate this intent, including, but not limited to, (1) amending the ESOP
to provide that all participants' accounts shall be fully vested and
nonforfeitable as of the Company Merger Effective Time, (2) amending the ESOP to
provide that each participant's account in the ESOP will not be distributed
after termination of the participant's employment (regardless of the amount of
the account balance) and prior to the liquidation of the ESOP following
termination thereof unless the participant requests such distribution or such
distribution is otherwise required by applicable law, (3) amending the ESOP to
provide that any excess assets contained in the unallocated company stock
account after the repayment in full (principal and interest) of the ESOP Loan
shall be allocated to participants' accounts as earnings of the trust fund, and
(4) amending the ESOP to delete any requirement that a participant complete any
number of hours of service or be employed on any particular day during the plan
year to receive an allocation of earnings under the plan. In addition, Avondale
may take such other actions, including the making of other amendments to the
plan, that it deems necessary or appropriate to preserve the tax-qualified
status of the ESOP or the exempt status of the ESOP Loan. Upon the election of
any participant, his or her account balance in the ESOP upon plan termination
that constitutes an "eligible rollover distribution" (as defined in Section
402(c)(4) of the Code) may be rolled over to any qualified retirement plan of
Avondale or of Coal City Bank or to any eligible individual retirement account,
as elected by the participant.
(d) Employment Agreements and Related Matters. At the time of the
execution of this Agreement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. shall enter into a new
Employment Agreement in the form of Exhibit 3.10(d), to become effective at the
Company Merger Effective Time (at which time his existing Employment Agreement
shall be cancelled). As soon as practicable after the time of the execution
30
of this Agreement, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall enter into an Employment Agreement with
Coal City and Coal City Bank, to become effective at the Company Merger
Effective Time and be assumed by Avondale as the Surviving Corporation at such
time, in such form as shall be reasonably acceptable to the Board of Directors
of Avondale, which contract shall contain such provisions as are normal for a
bank holding company of similar size.
3.11 Minority Interest in Manufacturers National. Coal City agrees to
use its best efforts to cause, prior to the Company Merger Effective Time, all
shares of capital stock of Manufacturers National to be owned by Coal City free
and clear of all Encumbrances.
3.12 Preferred Stock. Coal City shall use its best efforts to redeem
(or cause the conversion of), prior to the Company Merger Effective Time, all of
its issued and outstanding shares of Coal City Class B Preferred Stock.
3.13 Accountants' Letters. Each party agrees to use its respective best
efforts to deliver to the other, and such other party's directors and officers
who sign the Registration Statement, a letter of its independent auditors, dated
(i) the date on which the Registration Statement shall become effective and (ii)
a date on or shortly prior to the date of Closing, and addressed to such other
party, and such directors and officers, in form and substance customary for
"comfort" letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
ARTICLE IV
CONDITIONS OF THE COMPANY MERGER;
TERMINATION OF AGREEMENT
4.1 General Conditions. The obligations of each party to effect the
Company Merger shall be subject to the satisfaction (or written waiver by such
party, to the extent such condition is waivable) of the following conditions
before the Company Merger Effective Time:
(a) Stockholder Approval. The holders of the outstanding
shares of Avondale and Coal City Common Stock shall have approved or adopted
this Agreement as specified in Section 1.7 hereof or as otherwise required by
applicable law.
(b) No Proceedings. No order shall have been entered and
remain in force restraining or prohibiting the Company Merger in any legal,
administrative, arbitration, investigatory or other proceedings by any
governmental or judicial or other authority.
(c) Governmental Approvals. To the extent required by
applicable law or regulation, all approvals of or filings with any governmental
or regulatory authority (collectively, "Governmental
31
Approvals") shall have been obtained or made, and any waiting periods shall have
expired in connection with the consummation of the Company Merger, provided
however that none of the preceding shall be deemed obtained or made if it shall
be conditioned or restricted in a manner that would have or result in a material
adverse effect on Avondale as the Surviving Corporation as the parties hereto
shall reasonably and in good faith agree. All other statutory or regulatory
requirements for the valid consummation of the Company Merger shall have been
satisfied.
(d) Registration Statement. The Registration Statement shall
have been declared effective and shall not be subject to a stop order of the SEC
(and no proceedings for that purpose shall have been initiated or threatened by
the SEC) and, if the offer and sale of the Surviving Corporation Common Stock in
the Company Merger pursuant to this Agreement is subject to the securities laws
of any state, shall not be subject to a stop order of any state securities
authority.
(e) Federal Tax Opinion. Each party shall have received an
opinion of its tax counsel, dated as of the Company Merger Effective Time, to
the effect that for federal income tax purposes:
(i) The Company Merger will qualify as a
"reorganization" under Section 368(a) of the Internal Revenue
Code.
(ii) No gain or loss will be recognized by Avondale
or Coal City by reason of the Company Merger.
(iii) No gain or loss will be recognized by any
stockholder of Coal City upon the exchange of Coal City Common
Stock solely for Avondale Common Stock in the Company Merger.
(iv) The basis of the Avondale Common Stock received
by each stockholder of Coal City who exchanges Coal City
Common Stock for Avondale Common Stock in the Company Merger
will be the same as the basis of the Coal City Common Stock
surrendered in exchange therefor (subject to any adjustments
required as the result of receipt of cash in lieu of a
fractional share of Surviving Corporation Common Stock).
(v) The holding period of the Avondale Common Stock
received by a stockholder of Coal City in the Company Merger
will include the holding period of the Coal City Common Stock
surrendered in exchange therefore, provided that such shares
of Coal City Common Stock were held as a capital asset by such
stockholders at the Company Merger Effective Time.
32
(vi) Cash received by a Coal City shareholder in lieu
of a fractional share interest of Avondale Common Stock as
part of the Company Merger will be treated as having been
received as a distribution in full payment in exchange for the
fractional share interest of Avondale Common Stock which such
stockholder would otherwise be entitled to receive and will
qualify as capital gain or loss (assuming the Coal City stock
was a capital asset in such stockholder's hands at the Company
Merger Effective Time).
(f) Third Party Consents. All consents or approvals of all
persons (other than the Governmental Approvals referenced in Section 4.1(c)
herein) required for the execution, delivery and performance of this Agreement
and the consummation of the Company Merger shall have been obtained and shall be
in full force and effect, unless the failure to obtain any such consent or
approval is not reasonably likely to have, individually or in the aggregate, a
material adverse effect on Avondale as the Surviving Corporation as the parties
hereto shall reasonably and in good faith agree.
(g) Listing. The shares of Avondale Common Stock to be issued
in the Company Merger shall have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance.
4.2 Conditions to Obligations of Avondale. The obligations of Avondale
to effect the Company Merger and the other transactions contemplated hereby
shall be subject to the satisfaction or written waiver by Avondale of the
following additional conditions before the Company Merger Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and the Closing, Coal City shall not have been effected by any event
or change which has had or caused a material adverse effect or material adverse
change on it.
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. (i) The representations and warranties of Coal City
shall be true and correct (subject to Section 2.23 hereof) as of the date hereof
and at the Company Merger Effective Time with the same effect as though made at
the Company Merger Effective Time (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date) except
where the failure to be true and correct would not have, or would not reasonably
be expected to have, a material adverse effect, on Coal City; (ii) Coal City and
its Subsidiaries shall have performed all obligations and complied with each
covenant, in all material respects, and satisfied all conditions under this
Agreement on its part to be satisfied at or before the Company Merger Effective
Time; and (iii) Coal City shall have delivered to Avondale a certificate, dated
the Company Merger Effective Time and signed by its chief executive officer and
chief
33
financial officer, certifying as to the satisfaction of clauses (i) and (ii)
hereof.
(c) No Litigation. Neither Coal City nor any Coal City
Subsidiary shall be subject to any pending litigation which, if determined
adversely to Coal City or any Coal City Subsidiary, would have a material
adverse effect on Coal City.
(d) Affiliate Letters. Avondale shall have received from Coal
City the letter agreements from all affiliates of Coal City as contemplated in
Section 3.5 herein.
(e) Manufacturers National. All of the issued and outstanding
shares of capital stock of Manufacturers National shall be owned by Coal City
free and clear of all Encumbrances (subject to any lien of LaSalle National
Bank).
(f) Coal City Preferred Stock. No shares of Coal City
Preferred Stock shall be issued or outstanding.
(g) Audited Financials. Coal City shall have delivered to
Avondale audited consolidated financial statements at and for the year ended
December 31, 1998, including an unqualified opinion of Coal City's independent
auditors related thereto.
(h) ▇▇▇▇▇▇ Employment Agreement. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have
entered into an Employment Agreement with Coal City and Coal City Bank in such
form as shall be reasonably acceptable to the Board of Directors of Avondale,
which contract shall contain such provisions as are normal for a bank holding
company of similar size.
(i) Accountants' Letters. Coal City shall have delivered to
Avondale, and the Avondale directors and officers who sign the Registration
Statement, a letter of its independent auditors, dated (i) the date on which the
Registration Statement shall become effective and (ii) a date on or shortly
prior to the date of Closing, and addressed to Avondale, and such directors and
officers, in form and substance reasonably satisfactory to Avondale and
customary for "comfort" letters delivered by independent accountants in
connection with registration statements similar to the Registration Statement.
4.3 Conditions to Obligations of Coal City. The obligations of Coal
City to effect the Company Merger and the other transactions contemplated hereby
shall be subject to the satisfaction or written waiver by Coal City of the
following additional conditions before the Company Merger Effective Time:
(a) No Material Adverse Effect. Between the date of this
Agreement and Closing, Avondale shall not have been effected by any event or
change which has had or caused a material adverse effect or material adverse
change on Avondale.
34
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. (i) The representations and warranties of Avondale
shall be true and correct (subject to Section 2.23 hereof) as of the date hereof
and at the Company Merger Effective Time with the same effect as though made at
the Company Merger Effective Time (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date) except
where the failure to be true and correct would not have, or would not reasonably
be expected to have, a material adverse effect on Avondale; (ii) Avondale and
its Subsidiaries shall have performed all obligations and complied with each
covenant, in all material respects, and satisfied all conditions under this
Agreement on its part to be satisfied at or before the Company Merger Effective
Time; and (iii) Avondale shall have delivered to Coal City a certificate, dated
the Company Merger Effective Time and signed by its chief executive officer and
chief financial officer, certifying as to the satisfaction of clauses (i) and
(ii) hereof.
(c) No Litigation. Neither Avondale nor any Avondale
Subsidiary shall be subject to any pending litigation which, if determined
adversely to Avondale or any Avondale Subsidiary, would have a material adverse
effect on Avondale.
(d) Audited Financials. Avondale shall have delivered to Coal
City audited consolidated financial statements at and for the year ended
December 31, 1998, including an unqualified opinion of Avondale's independent
auditors related thereto.
(e) Transferor's Interests. The aggregate present value of the
Transferor's (as defined in the related Pooling and Servicing Agreements)
interests owned by Avondale or any of its Subsidiaries in Avondale Home Equity
Loan Trusts 1996-1, 1997-1, 1997-2 and 1998- 1 (each, a "Heloc Trust") as set
forth in each respective offering circular (the "Securitization Value"), as
calculated below as of the most recent month-end cut-off date at least 20 days
prior to the Closing (the "Calculation Date"), shall not be less than the sum of
(i) $14,935,729, plus (ii) the accounting gain on sale, in the aggregate,
recognized on the transfer of additional loans into Heloc Trust 1998-1 after
June 30, 1998. The Securitization Value shall be calculated from the Heloc Trust
information set forth in the Investor Reports as of the Calculation Date
utilizing (a) a discount rate of 15%, (b) for each Heloc Trust, the average
prepayment rate, computed as a "CPR," for such Heloc Trust during the three
month period ending on the Calculation Date, and (c) for each Heloc Trust, the
average charge-off rate, computed as a "CPR," for such Heloc Trust during the
three month period ending on the Calculation Date.
(f) Accountants' Letters. Avondale shall have delivered to
Coal City a letter of its independent auditors dated (i) the date on which the
Registration Statement shall become effective and (ii) a date on or shortly
prior to the date of Closing, and addressed to Coal City, in form and substance
reasonably satisfactory to Coal
35
City and customary for "comfort" letters delivered by independent accountants in
connection with registration statements similar to the Registration Statement.
4.4 Termination of Agreement and Abandonment of Merger. This Agreement
may be terminated at any time before the Company Merger Effective Time, whether
before or after approval thereof by the stockholders of Avondale or Coal City,
as provided below:
(a) Mutual Consent. By mutual consent of the parties,
evidenced by their written agreement.
(b) Closing Delay. At the election of either party, evidenced
by written notice, if (i) the Closing shall not have occurred on or before June
30, 1999, or such later date as shall have been agreed to in writing by the
parties, provided however that the right to terminate under this Section 4.4(b)
shall not be available to any party whose failure to perform an obligation
hereunder has been the cause of, or has resulted in, the failure of the Closing
to occur on or before such date; (ii) any approval or authorization of any
governmental entity, the lack of which would result in the failure to satisfy
the closing condition set forth in Section 4.1(c) hereof, shall have been denied
by such governmental entity, or such governmental entity shall have requested
the withdrawal of any application therefor or indicated an intention to deny, or
impose a condition of a type referred to in the proviso to Section 4.1(c) with
respect to, such approval or authorization, or (iii) the approval of the
stockholders of Avondale or Coal City referred to in Section 4.1(a) shall not
have been obtained, provided that the electing party is not then in breach of
its obligations under Section 3.4 hereof.
(c) Conditions to Avondale Performance Not Met. By Avondale
upon delivery of written notice of termination to Coal City if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Avondale to effect the Company Merger set
forth in Sections 4.1 and 4.2 and noncompliance is not waived in writing by
Avondale.
(d) Conditions to Coal City Performance Not Met. By Coal City
upon delivery of written notice of termination to Avondale if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Coal City to effect the Company Merger set
forth in Sections 4.1 and 4.3 and noncompliance is not waived in writing by Coal
City.
(e) Breach. By either Avondale or Coal City if there has been
a material breach of the other party's representations and warranties (as
contemplated in this Agreement), covenants or agreements set forth in this
Agreement of which written notice has been given to such breaching party and
which has not been fully cured or cannot be fully cured within the earlier of
(i) 30 days of receipt of such notice or (ii) five days prior to the Closing and
36
which breach would, in the reasonable opinion of the non-breaching party,
individually or in the aggregate, have, or be reasonably likely to have, a
material adverse effect on the breaching party.
(f) Avondale Election. By Avondale if (i) the Board of
Directors of Coal City shall not have publicly recommended in the
Prospectus/Joint Proxy Statement that its stockholders approve and adopt this
Agreement or shall have withdrawn, modified or changed in a manner adverse to
Avondale its approval or recommendation of this Agreement, (ii) the Board of
Directors of Coal City shall have authorized Coal City to enter into any
agreement, letter of intent or agreement in principle with the intent to pursue
or effect a Takeover Proposal or (iii) the Board of Directors of Avondale shall
have failed to recommend to its stockholders the adoption of this Agreement or
shall have withdrawn, modified or changed such recommendation pursuant to the
exercise of its fiduciary obligations under Section 3.4 hereof.
(g) Coal City Election. By Coal City if (i) the Board of
Directors of Avondale shall not have publicly recommended in the
Prospectus/Joint Proxy Statement that its stockholders approve and adopt this
Agreement or withdrawn, modified or changed in a manner adverse to Coal City its
approval or recommendation of this Agreement, (ii) the Board of Directors of
Avondale shall have authorized Avondale to enter into any agreement, letter of
intent or agreement in principle with the intent to pursue or effect a Takeover
Proposal or (iii) the Board of Directors of Coal City shall have failed to
recommend to its stockholders the adoption of this Agreement or shall have
withdrawn, modified or changed such recommendation pursuant to the exercise of
its fiduciary obligations under Section 3.4 hereof.
ARTICLE V
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
5.1 Termination; Lack of Survival of Representations and Warranties. In
the event of the termination and abandonment of this Agreement pursuant to
Section 4.4 hereof, this Agreement shall become void and have no effect, except
(i) the provisions of Sections 2.7 (No Broker's or Finder's Fees), 3.7
(Publicity), 5.2 (Payment of Expenses), 7.2 (Confidentiality) and 7.12 (No
Employment Solicitation) hereof shall survive any such termination and
abandonment, and (ii) a termination pursuant to Section 4.4(e) of this Agreement
shall not relieve the breaching party from liability for any uncured intentional
and willful breach of a representation, warranty, covenant or agreement giving
rise to such termination. Moreover, the aggrieved party without terminating this
Agreement shall be entitled to specifically enforce the terms hereof against the
breaching party in order to cause the Merger to be consummated. Each party
acknowledges that there is not an adequate remedy at law to compensate the other
parties relating to the non-consummation of the Merger. To this end, each party,
to the extent permitted by law, irrevocably waives any defense it might have
based on the
37
adequacy of a remedy at law which might be asserted as a bar to specific
performance, injunctive relief or other equitable relief.
The representations, warranties and agreements set forth in this
Agreement shall not survive the Company Merger Effective Time and shall be
terminated and extinguished at the Company Merger Effective Time, and from and
after the Company Merger Effective Time no party shall have any liability to the
other on account of any breach or failure of any of those representations,
warranties and agreements, provided however that the foregoing clause (i) shall
not apply to agreements of the parties which by their terms are intended to be
performed after the Company Merger Effective Time by the Surviving Corporation
or otherwise and (ii) shall not relieve any party or person for liability for
fraud, deception or intentional misrepresentation.
5.2 Payment of Expenses. Each party shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereby, except that the costs of printing and mailing the
Prospectus/Joint Proxy Statement shall be shared equally by the parties.
ARTICLE VI
CERTAIN POST-MERGER AGREEMENTS
6.1 Indemnification. (a) From and after the Company Merger Effective
Time, Avondale as the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or who has been at any time before the date
hereof or who becomes before the Company Merger Effective Time, an officer or
director of either Avondale or Coal City or any of their respective Subsidiaries
(the "Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorney's fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of
Avondale as the Surviving Corporation, which consent shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each a "Claim"), in
which an Indemnified Party is, or is threatened to be made, a party based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of either Avondale or Coal City or any of
their respective Subsidiaries if such Claim pertains to any matter or fact
arising, existing at or occurring before the Company Merger Effective Time
(including, without limitation, the Merger and the other transactions
contemplated hereby), regardless of whether such Claim is asserted or claimed
before, or at or after, the Company Merger Effective Time (the "Indemnified
Liabilities"), to the fullest extent permitted under applicable state or federal
law in effect as of the date hereof or as amended applicable to a time before
the Company Merger Effective Time and under Avondale's or Coal City's governing
corporation documents (as the case may be), and Avondale as the Surviving
Corporation shall pay expenses in advance of the
38
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by applicable state or federal law in effect as of the
date hereof or as amended applicable to a time before the Company Merger
Effective Time upon receipt of any undertaking required by applicable law. Any
Indemnified Party wishing to claim indemnification under this Section 6.1(a),
upon learning of any Claim, shall notify Avondale as the Surviving Corporation
(but the failure so to notify Avondale as the Surviving Corporation shall not
relieve it from any liability which it may have under this Section 6.1(a) except
to the extent such failure materially prejudices Avondale as the Surviving
Corporation) and shall deliver to Avondale as the Surviving Corporation the
undertaking, if any, required by applicable law. Avondale as the Surviving
Corporation shall insure, to the extent permitted under applicable law, that all
limitations of liability existing in favor of the Indemnified Parties as
provided in Avondale's or Coal City's governing corporation documents (as the
case may be), as in effect as of the date hereof, or allowed under applicable
state or federal law as in effect as of the date hereof or as amended applicable
to a time before the Company Merger Effective Time, with respect to claims or
liabilities arising from facts or events existing or occurring before the
Company Merger Effective Time (including, without limitation, the transactions
contemplated hereby), shall survive the Company Merger.
(b) For a period of six years from and after the Company
Merger Effective Time, Avondale as the Surviving Corporation shall cause to be
maintained in effect the current policies of directors' and officers' liability
insurance maintained by Coal City and the Coal City Subsidiaries (provided that
they may substitute therefor policies from financially capable insurers of at
least the same coverage and amounts and containing terms and conditions that are
carried by Avondale and its Subsidiaries in the ordinary course of business)
with respect to claims arising from facts or events which occurred before the
Company Merger Effective Time. Following consummation of the Company Merger, the
directors and officers of Avondale as the Surviving Corporation shall be covered
by the directors' and officers' liability insurance maintained by the Surviving
Corporation.
(c) The obligations of Avondale as the Surviving Corporation
provided under paragraphs (a) and (b) of this Section 6.1 are intended to be
enforceable against the Surviving Corporation directly by the Indemnified
Parties and shall be binding on all respective successors and permitted assigns
of Avondale as the Surviving Corporation.
6.2 Directors and Officers of the Surviving Corporation and
Coal City Bank
(a) Directors of the Surviving Corporation. The following
provisions, which are reflected in Exhibit 1.4(c), shall, to the
39
greatest extent practicable, apply with respect to the Board of Directors of
Avondale as the Surviving Corporation:
(i) At the Company Merger Effective Time, but subject
to the following sentence, the Board of Directors of Avondale as the
Surviving Corporation shall consist of between 16 and 18 directors who
shall consist of (A) eight persons serving as directors of Avondale
(each, an "Avondale-Related Director") and (B) between eight and ten
persons serving as directors of Coal City(each, a "Coal City-Related
Director"), in each case serving in such capacity immediately prior to
the Company Merger Effective Time. Each of Avondale and Coal City shall
use its best efforts to ensure that they have eight directors and from
eight to ten directors, respectively, immediately prior to the Company
Merger Effective Time consisting of those persons named by them in
regulatory applications for approval of the Merger and in the
Prospectus/Joint Proxy Statement. If at any time during the three year
period following the Company Merger Effective Time any person who
becomes a director of Avondale as the Surviving Corporation at the
Company Merger Effective Time shall for any reason cease to serve as a
director or shall not stand for reelection as a director, it is the
intention of Avondale and Coal City and their respective Boards of
Directors that he or she will be replaced, if an Avondale- Related
Director, by the Avondale-Related Directors, and if a Coal City-Related
Director, by the Coal City-Related Directors. It is also the intention
of Avondale and Coal City and their respective Boards of Directors that
during such three-year period, the Coal City-Related Directors shall
have the right to appoint up to that number of persons equal to the
remainder of ten minus the number of Coal City-Related Directors at the
Company Merger Effective Time. The Avondale- Related Directors hereby
commit to vote in favor of any such nominees of the Coal City-Related
Directors for any such additional new directorships, and shall so vote,
except to the extent that any such vote shall be in violation of their
fiduciary duties under the DGCL.
(ii) The Board of Directors of Avondale as the
Surviving Corporation shall have an Executive Committee and such other
committees as the Board shall establish in accordance with Section 141
of the DGCL, its Certificate of Incorporation and these Bylaws. The
Executive Committee shall consist of six members: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇., who shall be Chairman of the Executive Committee, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
two members selected by the Avondale-Related Directors and two members
selected by the Coal City-Related Directors. The Chairman of the Board,
the President and the Chief Executive Officer of Avondale as the
Surviving Corporation may each call meetings of the Board of Directors
and the Executive Committee. Prior to the Company Merger Effective
Time, Avondale and Coal City shall reasonably agree as to the
40
initial members of each other committee of the Board of Directors of
Avondale as the Surviving Corporation. Each of such committees shall
have an even number of members, and at the Company Merger Effective
Time and for three years thereafter, one-half of the members of each
such other committee shall consist of Avondale-Related Directors and
the other half shall consist of Coal City-Related Directors, unless a
majority of the Avondale-Related Directors and a majority of the Coal
City-Related Directors shall otherwise agree.
(b) Chairman and Certain Officers of the Surviving
Corporation and Coal City Bank.
During the three year period following the Company
Merger Effective Time, as reflected with respect to Avondale as the Surviving
Corporation in Exhibit 1.4(c):
(i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. shall be the Chairman of
the Board of Avondale as the Surviving Corporation.
(ii) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be the President and Chief
Executive Officer of Avondale as the Surviving Corporation and Chairman
of the Board of Coal City Bank as the
resulting financial institution.
(iii) ▇▇▇▇▇▇ Field shall be the President and Chief
Executive Officer of Coal City Bank as the resulting financial
institution.
(iv) ▇▇▇▇▇▇ ▇▇▇▇▇ shall be the Chief Financial
Officer of Avondale as the Surviving Corporation and the Chief
Financial Officer of Coal City Bank as the resulting financial
institution.
(v) ▇▇▇▇▇▇ ▇▇▇▇▇ shall be the Senior Loan Officer of
Coal City Bank as the resulting financial institution.
(c) Amendment. It is the intention of Avondale and Coal City
and their respective Boards of Directors that during the above-referenced
three-year period, that the provisions of the Bylaws reflected in Exhibit 1.4(c)
be amended only upon the affirmative vote of a majority of both the
Avondale-Related Directors and the Coal City-Related Directors.
(d) Directors of Coal City Bank. At the Bank Merger Effective
Time or Purchase and Assumption Time, the Board of Directors of Coal City Bank
shall consist of the persons serving as directors of Coal City Bank immediately
prior to the Bank Merger Effective Time or Purchase and Assumption Time and the
persons serving as directors of Avondale Bank immediately prior to the Company
Merger Effective Time who shall have advised the Chief
41
Executive Officer of Avondale at least 15 days prior to any required regulatory
filing that they desire to serve on the Board of Directors of Coal City Bank.
(e) Survival of Section 6.2. The provisions of Section 6.2(a)
and (b) shall survive the Company Merger Effective Time and remain in effect
until the third anniversary of the Company Merger Effective Time, terminating
thereafter.
ARTICLE VII
GENERAL
7.1 Amendments. Subject to applicable law, this Agreement may be
amended, whether before or after any stockholder approval hereof, by an
agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that after the approval of this Agreement by the stockholders of either
party hereto, no such amendment may change the amount or form of the
consideration to be delivered hereunder pursuant to Section 1.3 herein without
their approval.
7.2 Confidentiality. All information disclosed by any party to any
other party, whether prior or subsequent to the date of this Agreement
including, without limitation, any information obtained pursuant to Section 3.1
hereof, shall be kept confidential by such other party and shall not be used by
such other party otherwise than as herein contemplated, all in accordance with
the terms of the confidentiality agreement between the parties dated May 29,
1998 (the "Confidentiality Agreement"). In the event of the termination of this
Agreement, each party shall use all reasonable efforts to return upon request to
the other party all documents (and reproductions thereof) received from such
other party (and, in the case of reproductions, all such reproductions) that
include information subject to the confidentiality requirement set forth above.
7.3 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Illinois without taking into account any provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
7.4 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, as follows:
If to Avondale, to
Avondale Financial Corp.
▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
42
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
with a copy to:
Silver, ▇▇▇▇▇▇▇▇ & Taff, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, P.C.
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C.
If to Coal City, to
Coal City Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Schwartz, Cooper, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or such other address as shall be furnished in writing by either party to the
other, and any such notice or communication shall be deemed to have been given
two business days after the date of such mailing (except that the notice of
change of address shall not be deemed to have been given until received by the
addressee). Notices may also be sent by telegram, telex, facsimile transmission
or hand delivery and in such event shall be deemed to have been given as of the
date received by the addressee.
7.5 No Assignment. This Agreement may not be assigned by any
party hereto, by operation of law or otherwise, except as
contemplated hereby.
7.6 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to each other party.
7.8 Construction and Interpretation. Except as the context otherwise
requires, all references herein to any state or federal regulatory agency shall
also be deemed to refer to any predecessor or successor agency, and all
references to state and federal statutes or regulations shall also be deemed to
refer to any successor statute or regulation.
43
7.9 Entire Agreement. This Agreement, together with the schedules,
lists, exhibits and certificates required to be delivered hereunder, and any
amendment hereafter executed and delivered in accordance with Section 7.1,
constitutes the entire agreement of the parties and supersedes any prior written
or oral agreement or understanding among any parties pertaining to the Merger,
except that the Confidentiality Agreement shall remain in full force and effect
as contemplated in Section 7.2 herein and except with respect to the applicable
Stock Option Agreement.
7.10 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law then such provision will be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of the Agreement.
7.11 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person (other than the parties hereto and their respective
successors and assigns permitted hereby) to any claim, cause of action, remedy
or right of any kind, except for those provisions which are intended to be for
the benefit of the persons covered thereby and may be enforced by such persons,
including without limitation, as provided in Sections 1.8, 6.1 and 6.2.
7.12 No Employment Solicitation. If this Agreement is terminated, the
parties hereto agree that, for a period of two years subsequent to such
termination (i) none of the parties shall, without first obtaining the prior
written consent of the other, directly or indirectly, actively solicit the
employment of any current director, officer or employee of the other party and
(ii) none of the parties will actively solicit business relationships with
clients of the other party solely as a result of review of the information
contemplated in Section 7.2 herein.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
on its behalf by its duly authorized officers as of the date set forth above.
AVONDALE FINANCIAL CORP. COAL CITY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------- --------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief President
Executive Officer
44
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 12, 1998, between Avondale
Financial Corp., a Delaware corporation ("Grantee"), and Coal City Corporation,
an Illinois corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, and Issuer have entered into an Agreement and Plan of
Merger on even date herewith (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 9742 fully paid and nonassessable shares of the common stock, par
value $10.00 per share, of Issuer ("Common Stock") at a price per share of
$675.00; provided, however, that in the event Issuer issues or agrees to issue
any shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee benefit plan prior to the date
hereof) at a price less than such price per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided, further,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six months following such Subsequent Triggering Event (or such later period as
provided in Section 10). Each of the following shall be an Exercise Termination
Event: (i) the Company Merger Effective Time; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 4.4(e) of the Merger Agreement (but only if the
breach giving rise to the termination was willful) (a "Listed Termination");
(iii) the passage of 15 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a Listed Termination or (iv) the
date on which the shareholders of the Grantee shall have voted and failed to
approve the Company Merger (unless (A) Issuer shall then be in material breach
of its covenants or agreements contained in the Merger Agreement or (B) on or
prior to such date, the stockholders of Issuer shall have also voted and failed
to approve and adopt the Merger Agreement). The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in material breach of the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section 4.4(e) thereof as
a result of a material breach and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement (x) by Issuer
pursuant to Section 4.4(e) thereof as a result of the material breach by
Grantee, or (y) by Issuer or Grantee pursuant to Section 4.4(b)(ii).
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than the Merger. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (other than mergers, consolidations or similar transactions (i)
involving solely Issuer and/or one or more wholly-owned (except for
directors' qualifying shares and a de minimis number of other shares)
Subsidiaries of the Issuer, provided, any such transaction is not entered
into in violation of the terms of the Merger Agreement or (ii) in which
the shareholders of Issuer immediately prior to the completion of such
transaction own at least 65% of the Common Stock of the Issuer (or the
resulting or surviving entity in such transaction) immediately after
completion of such transaction, provided any such
-2-
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any
substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Issuer
Subsidiary and (b) "Subsidiary" shall have the meaning set forth in Rule
12b-2 under the Exchange Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the Exchange Act,
and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
cancelled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the shareholders
of Issuer approve the transactions contemplated by the Merger Agreement,
(y) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or (z) Issuer shall have provided
information to or engaged in negotiations with a third party relating to a
possible Acquisition Transaction.
(v) Any person other than Grantee or any Grantee Subsidiary shall
have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
-3-
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii)Any person other than Grantee or any Grantee Subsidiary other
than in connection with a transaction to which Grantee has given its prior
written consent shall have filed an application or notice with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board")
or other federal or state thrift or bank regulatory or antitrust
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the
-4-
exercise of the Option in immediately available funds by wire transfer to a bank
account designated by Issuer and (ii) present and surrender this Agreement to
Issuer at its principal executive offices, provided that the failure or refusal
of the Issuer to designate such a bank account or accept surrender of this
Agreement shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act") in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the opinion
of Counsel to the Holder; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed, subject to the receipt of any necessary regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
-5-
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended or any state or other federal thrift or banking
law, prior approval of or notice to the Federal Reserve Board or to any state or
other federal regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the Federal Reserve Board or such
state or other federal regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding
-6-
as a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock that remain subject to the Option
shall be increased so that, after such issuance and together with shares of
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Common Stock), it
equals 19.9% of the number of shares of Common Stock then issued and
outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as provided in Section 10) of
such Subsequent Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the Securities Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of all Holders shall
constitute at least 25% of the total number of shares to be sold by the Holders
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the 12-month period referred to in
the first sentence of this section shall be increased to 24 months. Each such
Holder shall provide all information
-7-
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event
-8-
within five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor
or the portion thereof that Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
-9-
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as
-10-
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section 9),
which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
-11-
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute
-12-
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by the
Substitute Option Issuer described in the first sentence of this subsection (c),
or shall be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a
-13-
widely dispersed public distribution on Grantee's behalf or (iv) any other
manner approved by the Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $1,800,000 and,
if it otherwise would exceed such amount, the Grantee, at its sole election,
shall either (a) reduce the number of shares of Common Stock subject to this
Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) any combination thereof, so
that Grantee's actually realized Total Profit shall not exceed $1,800,000 after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) of more than $1,800,000;
provided that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any amount equivalent to the foregoing with respect
to the Substitute Option.
(d) As used herein, the term 'Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
15. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the
-14-
Option (together with any Option Shares issued to and then owned by Grantee) to
Issuer in exchange for a cash fee equal to the Surrender Price; provided,
however, that Grantee may not exercise its rights pursuant to this Section 15 if
Issuer has repurchased the Option (or any portion thereof) or any Option Shares
pursuant to Section 7. The "Surrender Price" shall be equal to $1,800,000 (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
and (ii) minus, if applicable, the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 15 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Event shall be extended to a date six months from the date
on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
-15-
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
-16-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
COAL CITY CORPORATION
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
AVONDALE FINANCIAL CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
17
EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 12, 1998, between Coal City
Corporation, an Illinois corporation ("Grantee"), and Avondale Financial Corp.,
a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee, and Issuer have entered into an Agreement and Plan of
Merger on even date herewith (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 577,610 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of Issuer ("Common Stock") at a price per share of
$7.40; provided, however, that in the event Issuer issues or agrees to issue any
shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee benefit plan prior to the date
hereof) at a price less than such price per share (as adjusted pursuant to
subsection (b) of Section 5), such price shall be equal to such lesser price
(such price, as adjusted if applicable, the "Option Price"); provided, further,
that in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock. The number of
shares of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six months following such Subsequent Triggering Event (or such later period as
provided in Section 10). Each of the following shall be an Exercise Termination
Event: (i) the Company Merger Effective Time; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 4.4(e) of the Merger Agreement (but only if the
breach giving rise to the termination was willful) (a "Listed Termination");
(iii) the passage of 15 months (or such longer period as provided in Section 10)
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a Listed Termination or (iv) the
date on which the shareholders of the Grantee shall have voted and failed to
approve the Company Merger (unless (A) Issuer shall then be in material breach
of its covenants or agreements contained in the Merger Agreement or (B) on or
prior to such date, the stockholders of Issuer shall have also voted and failed
to approve and adopt the Merger Agreement). The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in material breach of the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement pursuant to Section 4.4(e) thereof as
a result of a material breach and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement (x) by Issuer
pursuant to Section 4.4(e) thereof as a result of the material breach by
Grantee, or (y) by Issuer or Grantee pursuant to Section 4.4(b)(ii).
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than the Merger. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (other than mergers, consolidations or similar transactions (i)
involving solely Issuer and/or one or more wholly-owned (except for
directors' qualifying shares and a de minimis number of other shares)
Subsidiaries of the Issuer, provided, any such transaction is not entered
into in violation of the terms of the Merger Agreement or (ii) in which
the shareholders of Issuer immediately prior to the completion of such
transaction own at least 65% of the Common Stock of the Issuer (or the
resulting or surviving entity in such transaction) immediately after
completion of such transaction, provided any such
-2-
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any
substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Issuer
Subsidiary and (b) "Subsidiary" shall have the meaning set forth in Rule
12b-2 under the Exchange Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the Exchange Act,
and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
cancelled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
cancelled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(iv) (x) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the shareholders
of Issuer approve the transactions contemplated by the Merger Agreement,
(y) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or (z) Issuer shall have provided
information to or engaged in negotiations with a third party relating to a
possible Acquisition Transaction.
(v) Any person other than Grantee or any Grantee Subsidiary shall
have made a proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
-3-
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary other
than in connection with a transaction to which Grantee has given its prior
written consent shall have filed an application or notice with the Office
of Thrift Supervision (the "OTS") or other federal or state thrift or bank
regulatory or antitrust authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the OTS or any other
regulatory or antitrust agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify Issuer of such filing, and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated
-4-
by Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive offices, provided that the failure or refusal of the Issuer
to designate such a bank account or accept surrender of this Agreement shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act") in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the opinion
of Counsel to the Holder; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed, subject to the receipt of any necessary regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
-5-
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Savings and
Loan Holding Company Act or any state or other federal thrift or banking law,
prior approval of or notice to the OTS or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the OTS or such state or other federal regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding
-6-
as a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock that remain subject to the Option
shall be increased so that, after such issuance and together with shares of
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Common Stock), it
equals 19.9% of the number of shares of Common Stock then issued and
outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as provided in Section 10) of
such Subsequent Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the Securities Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of all Holders shall
constitute at least 25% of the total number of shares to be sold by the Holders
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the 12-month period referred to in
the first sentence of this section shall be increased to 24 months. Each such
Holder shall provide all information
-7-
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event
-8-
within five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor
or the portion thereof that Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
-9-
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as
-10-
similar as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then Holder
or Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section 9),
which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
-11-
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute
-12-
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by the
Substitute Option Issuer described in the first sentence of this subsection (c),
or shall be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the OTS has approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner approved by the OTS.
-13-
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $1,800,000 and,
if it otherwise would exceed such amount, the Grantee, at its sole election,
shall either (a) reduce the number of shares of Common Stock subject to this
Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) any combination thereof, so
that Grantee's actually realized Total Profit shall not exceed $1,800,000 after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) of more than $1,800,000;
provided that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any amount equivalent to the foregoing with respect
to the Substitute Option.
(d) As used herein, the term 'Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
15. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 15 if Issuer has repurchased the Option (or any
portion
-14-
thereof) or any Option Shares pursuant to Section 7. The "Surrender Price" shall
be equal to $1,800,000 (i) plus, if applicable, Grantee's purchase price with
respect to any Option Shares and (ii) minus, if applicable, the excess of (A)
the net cash amounts, if any, received by Grantee pursuant to the arms' length
sale of Option Shares (or any other securities into which such Option Shares
were converted or exchanged) to any unaffiliated party, over (B) Grantee's
purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 15 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 15 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 15 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Event shall be extended to a date six months from the date
on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or
-15-
invalidated. If for any reason such court or regulatory agency determines that
the Holder is not permitted to acquire, or Issuer is not permitted to repurchase
pursuant to Section 7, the full number of shares of Common Stock provided in
Section l(a) hereof (as adjusted pursuant to Section l(b) or Section 5 hereof),
it is the express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
-16-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
COAL CITY CORPORATION
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
AVONDALE FINANCIAL CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
17
EXHIBIT C
October 12, 1998
Coal City Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Dear Sirs:
The undersigned understands that Avondale Financial Corp.
("Avondale") and Coal City Corporation ("Coal City") are entering into an
Agreement and Plan of Merger (the "Merger Agreement") providing for, among other
things, a merger between Avondale and Coal City (the "Merger"), in which all of
the outstanding shares of capital stock of Coal City will be exchanged for
shares of common stock, par value $.01 per share, of Avondale ( subject to the
issuance of cash in lieu of fractional shares).
The undersigned is a stockholder of Avondale and is entering
into this agreement to induce Coal City to enter into the Merger Agreement and
to consummate the transactions contemplated thereby.
The undersigned confirms its agreement with Coal City as
follows:
1. The undersigned represents, warrants and agrees that
Schedule I annexed hereto sets forth shares of the capital stock of Avondale of
which the undersigned is the record or beneficial owner (the "Shares") and that
the undersigned is on the date hereof the lawful owner of the Shares set forth
in Schedule I, free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed in Schedule I.
Except as set forth in the Schedule, the undersigned does not own or hold any
rights to acquire any additional shares of the capital stock of Avondale (by
exercise of stock options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
2. The undersigned agrees that the undersigned will not,
and will not permit any company, trust or other entity controlled by the
undersigned to, contract to sell, sell or otherwise transfer or dispose of any
of the Shares or any interest therein or securities convertible thereunto or any
voting rights with respect thereto until after the Avondale Stockholders'
Meeting (as defined in the Merger Agreement), other than (i) pursuant to the
Merger or (ii) with Coal City's prior written consent.
3. The undersigned agrees that all of the shares of capital
stock of Avondale
Coal City Corporation
October 12, 1998
Page 2
beneficially owned by the undersigned, or over which the undersigned has voting
power or control, directly or indirectly, at the record date for any meeting of
stockholders of Avondale called to consider and vote to adopt the Merger
Agreement and/or the transactions contemplated thereby will be voted by the
undersigned in favor thereof.
4. The undersigned agrees to, and will cause any company,
trust or other entity controlled by the undersigned to, cooperate fully with
Coal City in connection with the Merger Agreement and the transactions
contemplated thereby. The undersigned agrees that the undersigned will not, and
will not permit any such company, trust or other entity to directly, or
indirectly (including through its officers, directors, employees or other
representatives) initiate, solicit or encourage any discussions, inquiries or
proposals with any third party relating to a Takeover Proposal (as defined in
the Merger Agreement), or provide any such person with information or assistance
or negotiate with any such person with respect to a Takeover Proposal or agree
to or otherwise assist in the effectuation of any Takeover Proposal except as
permitted by the Merger Agreement. Nothing herein is intended to preclude the
undersigned in his or her capacity as a director of Avondale to exercise his or
her fiduciary duties related to a Takeover Proposal (as defined in the Merger
Agreement).
5. The undersigned represents and warrants to Coal City that
(i) the undersigned has all necessary power and authority to enter into this
agreement and (ii) this agreement is the legal, valid and binding agreement of
the undersigned, and is enforceable against the undersigned in accordance with
its terms.
6. The undersigned agrees that damages are an inadequate
remedy for the breach by the undersigned of any term or condition of this
agreement and that Coal City shall be entitled to a temporary restraining order
and preliminary and permanent injunctive relief in order to enforce the
agreements provided herein.
7. This letter agreement may be terminated at the option of
any party at any time after the earlier of (i) termination of the Merger
Agreement and (ii) the day following the Closing (as defined in the Merger
Agreement).
8. This agreement may be amended, modified or supplemented at
any time by the written approval of such amendment, modification or supplement
by the undersigned and Coal City.
9. This agreement evidences the entire agreement among the
parties hereto with respect to the matters provided for herein and there are no
agreements, representations or warranties with respect to the matters provided
for herein other than those set forth herein and in the Merger Agreement.
Coal City Corporation
October 12, 1998
Page 3
10. The parties agree that if any provision of this agreement
shall under any circumstances be deemed invalid or inoperative, this agreement
shall be construed with the invalid or inoperative provisions deleted and the
rights and obligations of the parties shall be construed and enforced
accordingly.
11. This agreement may be executed in two counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
12. The validity, construction, enforcement and effect of this
agreement shall be governed by the internal laws of the State of Illinois.
13. This agreement shall be binding upon and inure to the
benefit of Coal City and its successors, and the undersigned, the undersigned's
respective executors, personal representatives, administrators, heirs, legatees,
guardians and other legal representatives. This agreement shall survive the
death or incapacity of the undersigned.
14. Nothing in this Agreement shall be construed to give Coal
City any rights to exercise or direct the exercise of voting power as owner of
the shares, either beneficially or otherwise, for any purpose.
Coal City Corporation
October 12, 1998
Page 4
Please confirm that the foregoing correctly states the understanding
between the undersigned and Coal City by signing and returning to Coal City a
counterpart hereof.
Very truly yours,
--------------------------
Signature
--------------------------
Name
Accepted as of the ___ day
of October, 1998
Coal City Corporation
By:_______________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
Schedule I
Number of shares of Avondale common
stock beneficially owned.................................. ______
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇ Financial Corp.
▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned understands that Avondale Financial Corp.
("Avondale") and Coal City Corporation ("Coal City") are entering into an
Agreement and Plan of Merger (the "Merger Agreement") providing for, among other
things, a merger between Avondale and Coal City (the "Merger"), in which all of
the outstanding shares of capital stock of Coal City will be exchanged for
shares of common stock, par value $.01 per share, of Avondale ( subject to the
issuance of cash in lieu of fractional shares).
The undersigned is a stockholder of Coal City and is entering
into this agreement to induce Avondale to enter into the Merger Agreement and to
consummate the transactions contemplated thereby.
The undersigned confirms its agreement with Avondale as
follows:
1. The undersigned represents, warrants and agrees that
Schedule I annexed hereto sets forth shares of the capital stock of Coal City of
which the undersigned is the record or beneficial owner (the "Shares") and that
the undersigned is on the date hereof the lawful owner of the Shares set forth
in Schedule I, free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed in Schedule I.
Except as set forth in the Schedule, the undersigned does not own or hold any
rights to acquire any additional shares of the capital stock of Coal City (by
exercise of stock options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
2. The undersigned agrees that the undersigned will not, and
will not permit any company, trust or other entity controlled by the undersigned
to, contract to sell, sell or otherwise transfer or dispose of any of the Shares
or any interest therein or securities convertible thereunto or any voting rights
with respect thereto until after the Coal City Stockholders' Meeting (as defined
in the Merger Agreement), other than (i) as contemplated by the Merger
Agreement, (ii) pursuant to the Merger or (iii) with Avondale 's prior written
consent.
3. The undersigned agrees that all of the shares of capital
stock of Coal City
Avondale Financial Corp
October 12, 1998
Page 2
beneficially owned by the undersigned, or over which the undersigned has voting
power or control, directly or indirectly, at the record date for any meeting of
stockholders of Coal City called to consider and vote to adopt the Merger
Agreement and/or the transactions contemplated thereby will be voted by the
undersigned in favor thereof.
4. The undersigned agrees to, and will cause any company,
trust or other entity controlled by the undersigned to, cooperate fully with
Avondale in connection with the Merger Agreement and the transactions
contemplated thereby. The undersigned agrees that the undersigned will not, and
will not permit any such company, trust or other entity to directly, or
indirectly (including through its officers, directors, employees or other
representatives) initiate, solicit or encourage any discussions, inquiries or
proposals with any third party relating to a Takeover Proposal (as defined in
the Merger Agreement), or provide any such person with information or assistance
or negotiate with any such person with respect to a Takeover Proposal or agree
to or otherwise assist in the effectuation of any Takeover Proposal except as
permitted by the Merger Agreement. Nothing herein is intended to preclude the
undersigned in his or her capacity as a director of Coal City to exercise his or
her fiduciary duties related to a Takeover Proposal (as defined in the Merger
Agreement).
5. The undersigned represents and warrants to Avondale that
(i) the undersigned has all necessary power and authority to enter into this
agreement and (ii) this agreement is the legal, valid and binding agreement of
the undersigned, and is enforceable against the undersigned in accordance with
its terms.
6. The undersigned agrees that damages are an inadequate
remedy for the breach by the undersigned of any term or condition of this
agreement and that Avondale shall be entitled to a temporary restraining order
and preliminary and permanent injunctive relief in order to enforce the
agreements provided herein.
7. This letter agreement may be terminated at the option of
any party at any time after the earlier of (i) termination of the Merger
Agreement and (ii) the day following the Closing (as defined in the Merger
Agreement).
8. This agreement may be amended, modified or supplemented at
any time by the written approval of such amendment, modification or supplement
by the undersigned and Avondale .
9. This agreement evidences the entire agreement among the
parties hereto with respect to the matters provided for herein and there are no
agreements, representations or warranties with respect to the matters provided
for herein other than those set forth herein and in the Merger Agreement.
Avondale Financial Corp
October 12, 1998
Page 3
10. The parties agree that if any provision of this agreement
shall under any circumstances be deemed invalid or inoperative, this agreement
shall be construed with the invalid or inoperative provisions deleted and the
rights and obligations of the parties shall be construed and enforced
accordingly.
11. This agreement may be executed in two counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
12. The validity, construction, enforcement and effect of this
agreement shall be governed by the internal laws of the State of Illinois.
13. This agreement shall be binding upon and inure to the
benefit of Avondale and its successors, and the undersigned, the undersigned's
respective executors, personal representatives, administrators, heirs, legatees,
guardians and other legal representatives. This agreement shall survive the
death or incapacity of the undersigned.
14. Nothing in this Agreement shall be construed to give
Avondale any rights to exercise or direct the exercise of voting power as owner
of the shares, either beneficially or otherwise, for any purpose.
Avondale Financial Corp
October 12, 1998
Page 4
Please confirm that the foregoing correctly states the understanding
between the undersigned and Avondale by signing and returning to Avondale a
counterpart hereof.
Very truly yours,
--------------------------
Signature
--------------------------
Name
Accepted as of the ___ day
of October, 1998
Avondale Financial Corp.
By:
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
Schedule I
Number of shares of Coal City common stock
beneficially owned........................................ ______
Number of shares of Coal City preferred
stock beneficially owned.................................. ______
EXHIBIT 1.4(c)(A)
AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AVONDALE FINANCIAL CORP.
Adopted by the Board of Directors on October 12, 1998
RESOLVED, that Article SIXTH, Section B. of the Certificate of
Incorporation of the Corporation be (subject to the requisite approval of the
stockholders of the Corporation) amended in its entirety as of the Company
Merger Effective Time as follows:
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled, except as otherwise provided in the By-laws
of the Corporation, only by a majority vote of the directors then in office,
though less than a quorum, and directors chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been appointed expires. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
EXHIBIT 1.4(C)(B)
AMENDMENT TO THE BY-LAWS
OF
AVONDALE FINANCIAL CORP.
Adopted by the Board of Directors on October 12, 1998
RESOLVED, that the By-laws of the Corporation be amended as of the
Company Merger Effective Time to add the following Section 10 to Article II of
the By-laws.
SECTION 10. Directors, Executive Officers and Committees. In accordance
with Section 6.2 of the Agreement and Plan of Merger by and between the
Corporation and Coal City Corporation, dated October 12, 1998 (the "Agreement"),
the following provisions shall govern directors, executive officers and
committees to the exclusion of any provision in these By-laws to the contrary.
Terms capitalized but not otherwise defined in this Section shall have the
meaning given to them in the Agreement.
(a) At the Company Merger Effective Time, the Board of Directors of
Avondale as the Surviving Corporation shall consist of between 16 and 18
directors who shall consist of (i) eight persons serving as directors of
Avondale (each, an "Avondale-Related Director") and (ii) between eight and ten
persons serving as directors of Coal City (each, a "Coal City-Related
Director"), in each case serving in such capacity immediately prior to the
Company Merger Effective Time. If at any time during the three year period
following the Company Merger Effective Time any person who becomes a director of
Avondale as the Surviving Corporation at the Company Merger Effective Time shall
for any reason cease to serve as a director or shall not stand for reelection as
a director, it is the intention of Avondale and Coal City and their respective
Boards of Directors that he or she will be replaced, if an Avondale-Related
Director, by the Avondale-Related Directors, and if a Coal City-Related
Director, by the Coal City-Related Directors. It is also the intention of
Avondale and Coal City and their respective Boards of Directors that during such
three year period, the Coal City- Related Directors shall have the right to
appoint up to that number of persons equal to the remainder of ten minus the
number of Coal City-Related Directors at the Company Merger Effective Time to
the Board of Directors of Avondale as the Surviving Corporation. The
Avondale-Related Directors hereby commit to vote in favor of any such nominees
of the Coal City-Related Directors for any such additional new directorships,
and shall so vote, except to the extent that any such vote shall be in violation
of their fiduciary duties under the DGCL.
(b) The Board of Directors of Avondale as the Surviving Corporation
shall have an Executive Committee and such other committees as the Board shall
establish in accordance with Section 141 of the DGCL, its Certificate of
Incorporation and these By-laws. The Executive Committee shall consist of six
members: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., who shall be Chairman of the Executive
Committee, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, two members selected by the Avondale-Related
Directors
and two members selected by the Coal City-Related Directors. The Chairman of the
Board, the President and the Chief Executive Officer of Avondale as the
Surviving Corporation may each call meetings of the Board of Directors and the
Executive Committee. Each other committee shall have an even number of each
members, and at the Company Merger Effective Time and for three years
thereafter, one-half of the members of each such other committee shall consist
of Avondale-Related Directors and the other half shall consist of Coal
City-Related Directors, unless a majority of the Avondale-Related Directors and
a majority of the Coal City-Related Directors shall otherwise agree.
(c) It is the intention of Avondale and Coal City and their respective
Boards of Directors that during the above-referenced three-year period, this
Section 10 be amended only upon the affirmative vote of a majority of both the
Avondale-Related Directors and the Coal City-Related Directors.
(d) During the three year period following the Company Merger Effective
Time: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. shall be the Chairman of the Board of Avondale as
the Surviving Corporation; ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be the President and Chief
Executive Officer of Avondale as the Surviving Corporation; and ▇▇▇▇▇▇ ▇▇▇▇▇
shall be the Chief Financial Officer of Avondale as the Surviving Corporation.
EXHIBIT 3.5
October 12, 1998
Avondale Financial Corp.
▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not
admit that I am, an "affiliate" of Coal City Corporation, an Illinois
corporation ("Coal City"), as that term is defined in Rule 145 promulgated by
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), and/or SEC Accounting Series Releases
130 and 135. I understand that pursuant to the terms of the Agreement and Plan
of Merger, dated as of October 12, 1998 (the "Merger Agreement"), by and between
Avondale Financial Corp. ("Avondale"), a Delaware corporation, and Coal City,
Avondale and Coal City will merge (the "Merger"). I further understand that as a
result of the Merger, I may receive shares of common stock, par value $.01 per
share, of Avondale ("Avondale Common Stock") in exchange for shares of common
stock, par value $10.00 per share, of Coal City ("Coal City Common Stock") and
that each outstanding option to purchase Coal City Common Stock will continue
outstanding as an option to purchase shares of Avondale Common Stock, as
determined under the terms of the Merger Agreement.
I have carefully read this letter and reviewed the Merger
Agreement and discussed their requirements and other applicable limitations upon
my ability to sell, transfer, or otherwise dispose of Avondale Common Stock, to
the extent I felt necessary, with my counsel or counsel for Coal City.
I represent, warrant and covenant with and to Avondale that:
1. I shall not make any sale, transfer, or other disposition of
Avondale Common Stock distributed to me pursuant to the Merger or
received by me upon the exercise of options received in the Merger
unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or
other disposition is made
in conformity with the provisions of Rule 145 under the Securities
Act (as such rule may be amended from time to time), or (iii) in
the opinion of counsel in form and substance reasonably
satisfactory to Avondale, or under a "no-action" letter obtained
by me from the staff of the SEC, such sale, transfer or other
disposition will not violate or is otherwise exempt from
registration under the Securities Act.
2. I understand that Avondale is under no obligation to register the
sale, transfer or other disposition of shares of Avondale Common
Stock by me or on my behalf under the Securities Act or to take
any other action necessary in order to make compliance with an
exemption from such registration available.
3. I understand that stop transfer instructions will be given to
Avondale's transfer agent with respect to shares of Avondale
Common Stock distributed to me pursuant to the Merger or received
by me upon the exercise of options received in the Merger and that
there will be placed on the certificates for such shares, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in
connection with a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares
represented by this certificate may be transferred only in
accordance with the terms of a letter agreement, dated October
12, 1998, between the registered holder hereof and Avondale, a
copy of which agreement is on file at the principal offices of
Avondale."
4. I understand that, unless transfer by me of the Avondale Common
Stock distributed to me pursuant to the Merger or received by me
upon the exercise of options received in the Merger has been
registered under the Securities Act or such transfer is made in
conformity with the provisions of Rule 145(d) under the Securities
Act, Avondale reserves the right, in its sole discretion, to place
the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from
a person who received such shares in connection with a transaction
to which Rule 145 under the Securities Act of 1933 applies. The
shares have been acquired by the holder not with a view to, or for
resale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933 and may not be offered,
sold, pledged or otherwise transferred except in accordance with a
registration under, or an exemption from the registration
requirements of, the Securities Act of 1933."
It is understood and agreed that the legends set forth in
paragraphs 3 and 4 above shall be removed by delivery of substitute certificates
without such legends if I shall have delivered to Avondale (i) a copy of a "no
action" letter from the staff of the SEC, or an opinion of counsel in form and
substance reasonably satisfactory to Avondale, to the effect that such legends
are not required for purposes of the Securities Act, or (ii) evidence or
representations satisfactory to
Avondale that the Avondale Common Stock represented by such certificates is
being or has been sold in conformity with the provisions of Rule 145(d).
2
I further understand and agree that this letter agreement shall
apply to all shares of Avondale Common Stock that I am deemed to beneficially
own pursuant to applicable federal securities law.
Very truly yours,
--------------------------
Name:
Agreed and accepted this _____ day of
October, 1998.
Avondale Financial Corp.
By
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
3
EXHIBIT 3.10(d)(A)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 12 day of October, 1998, by and between Avondale Financial Corp. (the
"Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. (the "Employee").
WHEREAS, pursuant to an agreement dated the same date as this
Agreement, Coal City Corporation ("Coal City") shall merge (the "Holding Company
Merger") into the Company, which shall be the resulting corporation of the
Holding Company Merger, and the Company's wholly owned subsidiary, Avondale
Federal Savings Bank ("Avondale") shall merge (the "Bank Merger") into Coal
City's wholly owned subsidiary, Manufacturers Bank (the "Bank"), which shall be
the resulting bank of the Bank Merger (the "Definitive Agreement");
WHEREAS, prior to the Holding Company Merger and the Bank Merger, the
Employee serves as the President and Chief Executive Officer of the Company and
of Avondale;
WHEREAS, pursuant to Sections 6.2(a) and 6.2(b) of the Definitive
Agreement, after such mergers, the Employee shall be a director and Chairman of
the board of directors of the Company (the "Board of Directors") but not
President or Chief Executive Officer of the Company as the resulting entity of
the Holding Company Merger or President and Chief Executive Officer of the Bank
as the resulting entity of the Bank Merger;
WHEREAS, the Employee has an existing employment agreement with the
Company (the "Prior Employment Agreement") which he is willing to terminate in
consideration of this Agreement's becoming effective;
WHEREAS, the Board of Directors believes it is in the best interests of
the Company and its subsidiaries for the Company to enter into this Agreement
with the Employee in order to assure continuity of management of the Company and
its subsidiaries and to obtain for the Company the benefit of the services that
the Employee consents in this Agreement to perform and the covenant not to
compete provided for herein; and
WHEREAS, the Board of Directors has approved and authorized the
execution of this Agreement with the Employee;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) The term "Covenant Period" means the period commencing on
the Effective Date and concluding on January 31, 2004.
1
(b) The term "Date of Termination" means the date upon which
the Employee's employment with the Company ceases, as specified in a notice
pursuant to Section 8 of this Agreement.
(c) The term "Employment Period" means the period commencing
on the consummation of the Holding Company Merger and concluding on the date of
the annual meeting of stockholders of the Company in the year 2000.
(d) The term "Good Reason" means any of the following without
the Employee's express written consent: (i) a material diminution of or
interference with his duties and responsibilities, compensation or benefits, as
set forth in this Agreement, (ii) a requirement that the Employee be based at
any place other than Chicago, Illinois, or within a radius of 35 miles from the
location of the Company's office as of the date of this Agreement, except for
reasonable travel on Company or Bank business; (iii) a reduction in the
Employee's salary or a material adverse change in the Employee's perquisites,
benefits, contingent benefits or vacation, other than as part of an overall
program applied uniformly and with equitable effect to all members of the senior
management of the Company; (iv) the failure of the shareholders of the Company
to elect him as a director of the Company; and (v) the failure of the Board of
Directors (or a board of directors of a successor of the Company) to elect him
as Chairman of the Board of Directors or any action by the Board of Directors
(or a board of directors of a successor of the Company) removing him from his
position as a director of the Company or as Chairman of the Board of Directors.
(e) The term "SERP" means the Avondale Federal Savings Bank
Supplemental Executive Retirement Plan, including the related Participation
Agreement between Avondale and the Employee dated June 10, 1996.
(f) The term "Termination for Cause" means termination of the
employment of the Employee by the Company prior to the expiration of the
Employment Period because of the Employee's personal dishonesty, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
No act or failure to act by the Employee shall be considered willful unless the
Employee acted or failed to act with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best interest of
the Company. Termination for Cause shall not occur unless and until there shall
have been delivered to the Employee a copy of a resolution stating that in the
good faith opinion of the Board of Directors the Employee has engaged in conduct
described in the preceding sentence, specifying the particulars thereof in
detail and duly adopted by the affirmative vote of not less than 75% of the
entire membership of the Board of Directors at a meeting of the Board duly
called and held for such purpose after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's counsel, to be heard
before the Board.
2
2. Termination of Prior Employment Agreement. The Prior Employment
Agreement shall terminate immediately prior to the consummation of the Holding
Company Merger with no obligation to the Employee thereunder on the part of the
Company, provided that nothing herein is intended to deprive the Employee of his
entitlement to a retirement bonus, which shall be honored under Section 3.10(a)
of the Definitive Agreement.
3. Employment. In addition to the Employee serving as a director of the
Company and as Chairman of the Board of Directors as provided in Sections 6.2(a)
and 6.2(b) of the Definitive Agreement, the Company shall employ the Employee
during the Employment Period to guide its activities in following areas: (i)
integration of the operations of Avondale into the operations of the Bank, (ii)
promoting the services offered by the Bank in the market areas of and
communities served by Avondale prior to the Effective Date, (iii) marketing to
the customers of Avondale, (iv) mergers and acquisitions by the Company and its
affiliates, (v) long term strategic planning for the Company and its affiliates,
and (vi) such additional matters as may be requested from time to time by the
Company. The Employee shall also render similar services to any subsidiary or
subsidiaries of the Company as requested by the Board of Directors from time to
time. The Employee shall devote his best efforts and reasonable time and
attention to the business and affairs of the Company and its affiliates to the
extent necessary to discharge his responsibilities hereunder. During the
Employment Period, the Employee may (i) serve on charitable boards or committees
and, in addition, on such corporate boards as are approved in a resolution
adopted by a majority of the Board of Directors, which approval shall not be
unreasonably withheld, and (ii) manage personal investments, so long as such
activities do not interfere materially with performance of his responsibilities
hereunder.
4. Cash Compensation.
(a) Salary. The Company agrees to pay the Employee during the
Employment Period a salary of $310,000 per year, except as provided in Section
7(b) and Section 7(c) of this Agreement. Such salary shall be paid no less
frequently than the salary payable to the executive officers of the Company
generally and shall be subject to customary tax withholding. Such salary shall
be payable pro rata for any portion of a year during the Employment Period.
(b) Bonuses. The Employee shall be entitled to a bonus of
$150,000 per year during the Employment Period, except as provided in Section
7(b) and Section 7(c) of this Agreement. Such bonus shall be payable pro rata
for any portion of a year during the Employment Period.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under Section 3 of this Agreement during the Employment Period in
accordance with the policies and procedures applicable to the executive officers
of the Company generally.
3
5. Benefits.
(a) Participation in Benefit Plans. The Employee shall be
entitled to participate during the Employment Period, to the same extent as
executive officers of the Company generally, in all plans of the Company and the
Bank relating to pension, retirement, thrift, profit-sharing, savings, group or
other life insurance, hospitalization, medical and dental coverage, travel and
accident insurance, education, cash bonuses, and other retirement or employee
benefits or combinations thereof, except as provided in Section 7(b) and Section
7(c) of this Agreement.
(b) Fringe Benefits. The Employee shall be eligible to
participate during the Employment Period in, and receive benefits under, any
other fringe benefit plans or perquisites which are or may become generally
available to the Company's executive officers generally, including but not
limited to, incentive compensation, supplemental medical or life insurance
plans, company cars, club dues, physical examinations, financial planning and
tax preparation services, but excluding supplemental retirement benefits, except
as provided in Section 7(b) and Section 7(c) of this Agreement.
6. Vacations; Leave. The Employee shall be entitled during the
Employment Period (i) to annual paid vacation in accordance with the policies
established by the Board of Directors for executive officers, and (ii) to
voluntary leaves of absence, with or without pay, from time to time at such
times and upon such conditions as the Board of Directors may determine in its
discretion.
7. Termination of Employment Prior to Expiration of the Employment
Period.
(a) Termination by the Company Other Than For Cause and
Termination for Good Reason. In the event that, prior to the expiration of the
Employment Period, the Company terminates the employment of the Employee other
than Termination for Cause, or the Employee voluntarily terminates his
employment for Good Reason, the Company shall continue during the remainder of
the Employment Period to pay to the Employee the salary and bonus under Section
4 of this Agreement and to provide benefits to the Employee under Section 5 of
this Agreement as if the Employee had continued to be employed.
(b) Voluntary Termination by the Employee. Notwithstanding any
other provision of this Agreement, in the event that prior to the expiration of
the Employment Period, the Employee voluntarily terminates his employment other
than for Good Reason, the Company shall pay him salary and bonus under Section 4
of this Agreement and provide benefits under Section 5 of this Agreement only
through the date on which his employment terminates.
(c) Termination for Cause. In the event of Termination for
Cause, the Company shall pay the Employee salary and bonus under Section 4 of
this Agreement and provide benefits under Section 5 of this Agreement only
through the date on which his employment terminates.
4
(d) Death of the Employee. Notwithstanding any other provision
of this Agreement, in the event of the death of the Employee during the
Employment Period and prior to any Termination for Cause, the Company shall pay
to the Employee's estate, or such person as the Employee may have previously
designated in writing, the amount of salary and bonus which was not previously
paid to the Employee and which he would have earned if he had continued to be
employed under this Agreement through the last day of the calendar month in
which the Employee died and shall have no obligation to him or to his estate
thereafter under this Agreement.
(e) Continued Health Benefits. Notwithstanding any other
provision of this Agreement, upon cessation of the employment of the Employee
for any reason, including expiration of the Employment Period, the Company (or
any successor, directly or through its subsidiaries) shall provide to the
Employee thereafter during his lifetime the same group life insurance,
hospitalization, medical, dental, prescription drug and other health benefits,
and long-term disability insurance (if any), as it provides to the executive
officers of the Company (or any successor) from time to time, for the benefit of
himself and his dependents and beneficiaries who would have been eligible for
such benefits if the Employee were an executive officer of the Company (or any
successor), on terms as favorable to the Employee, including amounts of coverage
and deductibles and other costs to him, as apply to executive officers of the
Company (or any successor) from time to time; provided that the Employee shall
reimburse the Company for the cost of premiums attributable to such coverage for
himself and his dependents and beneficiaries except to the extent, if any, that
Company is obligated to provide such coverage under Section 7(a) of this
Agreement.
(f) Termination of Employment Not to Affect Service as
Chairman. Termination of the employment of the Employee for any reason,
including expiration of the Employment Period, shall not affect the Employee's
right to serve as a director and Chairman of the Board of Directors of the
Company as provided in Sections 6.2(a) and 6.2(b) of the Definitive Agreement.
8. Notice of Termination. In the event that the Company desires to
terminate the employment of the Employee prior to the expiration of the
Employment Period, the Company shall deliver to the Employee a written notice of
termination, specifying the date upon which employment shall terminate. In the
event that the Employee desires to terminate his employment voluntarily prior to
the expiration of the Employment Period, he shall send a written notice to the
Company specifying the date upon which employment shall terminate and whether he
has Good Reason to terminate his employment, and, if so, stating the facts and
circumstances that constitute Good Reason.
9. Covenant Not to Compete.
(a) Covenant. The Employee agrees that during the Covenant
Period he shall not, without the prior written consent of the Board of
Directors, render services, whether or not compensated, as an employee,
independent contractor, director or otherwise, to any depository institution
insured by the Federal Deposit Insurance Corporation, or any affiliate of such
an institution, with respect to activity in the State of Illinois.
5
(b) Compensation for Non-Competition. In consideration of the
Employee's covenant in Section 9(a) of this Agreement, after expiration of the
Employment Period, the Company shall pay to the Employee $310,000 per year for
so long as he lives during the Covenant Period. Such amount shall be payable in
regular increments no less frequently than the salary payable to the executive
officers of the Company generally. Such amount shall be paid pro rata for any
portion of a year during the Covenant Period.
10. SERP. The Covenant Period shall constitute a period of employment
by the Company for purposes of the SERP.
11. Attorneys' Fees. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Employee as a result of (i) the Employee's contesting or disputing any
termination of employment, or (ii) the Employee's seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company (or its successors) or any of its
subsidiaries under which the Employee is or may be entitled to receive benefits;
provided that the Company's obligation to pay such fees and expenses is subject
to the Employee's prevailing with respect to the matters in dispute in any
action initiated by the Employee or the Employee's having been determined to
have acted reasonably and in good faith with respect to any action initiated by
the Company.
12. No Assignments.
(a) This Agreement is personal to each of the parties hereto,
and neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided that the Company shall require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
13. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Company at its home
office, to the attention of the Board of Directors with a copy to the Secretary
of the Company, or, if to the Employee, to such home or other address as the
Employee has most recently provided in writing to the Company.
14. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
6
15. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Governing Law. This Agreement shall be governed by the laws of the
State of Illinois.
18. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: Avondale Financial Corp.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------- ----------------------------------
Secretary By: ▇▇▇▇▇▇ ▇▇▇▇▇
Its: Executive Vice President
Employee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
8