EXHIBIT 99.2
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REORGANIZATION AND MERGER AGREEMENT
By and Among
COMMERCIAL FEDERAL CORPORATION
AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK
And
MID CONTINENT BANCSHARES, INC.
AND
MID-CONTINENT FEDERAL SAVINGS BANK
Dated as of September 2, 1997
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TABLE OF CONTENTS
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ARTICLE I THE MERGER AND RELATED MATTERS................................................................2
1.1 Merger: Surviving Institution.................................................................2
1.2 Effective Time of the Merger..................................................................2
1.3 Conversion of Shares..........................................................................3
1.4 Surviving Corporation in the Merger...........................................................4
1.5 Authorization for Issuance of Commercial Common Stock;
Exchange of Certificates...............................................................5
1.6 No Fractional Shares..........................................................................7
1.7 Shareholders' Meetings........................................................................7
1.8 Company Stock Options.........................................................................8
1.9 Registration Statement; Prospectus/Proxy Statement............................................9
1.10 Cooperation; Regulatory Approvals............................................................11
1.11 Closing......................................................................................11
1.12 Closing of Transfer Books....................................................................11
1.13 Bank Merger..................................................................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY
AND SAVINGS...........................................................................12
2.1 Organization, Good Standing, Authority, Insurance, Etc.......................................12
2.2 Capitalization...............................................................................13
2.3 Ownership of Subsidiaries....................................................................13
2.4 Financial Statements and Reports.............................................................13
2.5 Absence of Changes...........................................................................15
2.6 Prospectus/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......................................................................17
2.13 Employee Benefits............................................................................18
2.14 Information Furnished........................................................................20
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............................................................22
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2.22 Derivatives Contracts........................................................................23
2.23 Insurance....................................................................................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMMERCIAL
AND THE BANK..........................................................................23
3.1 Organization, Good Standing, Authority, Insurance, Etc.......................................23
3.2 Capitalization...............................................................................24
3.3 Ownership of Subsidiaries....................................................................24
3.4 Financial Statements and Reports.............................................................24
3.5 Absence of Changes...........................................................................25
3.6 Prospectus/Proxy Statement...................................................................26
3.7 No Broker's or Finder's Fees.................................................................26
3.8 Compliance With Law..........................................................................26
3.9 Corporate Actions............................................................................27
3.10 Authority....................................................................................27
3.11 Information Furnished........................................................................27
3.12 Litigation and Other Proceedings.............................................................28
3.13 Agreements and Instruments...................................................................28
3.14 Tax Matters..................................................................................28
3.15 Property and Assets..........................................................................28
3.16 Derivatives Contracts........................................................................29
3.17 Insurance....................................................................................29
ARTICLE IV COVENANTS....................................................................................29
4.1 Investigations; Access and Copies............................................................29
4.2 Conduct of Business of the Company and the Company Subsidiaries..............................30
4.3 No Solicitation..............................................................................31
4.4 Shareholder Approvals........................................................................32
4.5 Filing of Holding Company and Merger Applications............................................33
4.6 Consents.....................................................................................33
4.7 Resale Letter Agreements.....................................................................33
4.8 Publicity....................................................................................33
4.9 Cooperation Generally........................................................................34
4.10 Additional Financial Statements and Reports..................................................34
4.11 Stock Listing................................................................................34
4.12 Allowance for Loan and Real Estate Owned Losses..............................................34
4.13 D&O Indemnification and Insurance............................................................35
4.14 Tax Treatment................................................................................35
4.15 Update Disclosure............................................................................35
4.16 Company's Employee Plans and Benefit Arrangements............................................36
4.17 Amendment of Savings' Federal Stock Charter..................................................37
4.18 Commercial Goodwill Claim....................................................................37
4.19 Environmental Reports........................................................................37
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ARTICLE V CONDITIONS TO THE MERGER; TERMINATION
OF AGREEMENT..........................................................................38
5.1 General Conditions...........................................................................38
5.2 Conditions to Obligations of Commercial and Bank.............................................39
5.3 Conditions to Obligations of Company and Savings.............................................41
5.4 Termination of Agreement and Abandonment of Merger...........................................42
ARTICLE VI TERMINATION OF OBLIGATIONS; PAYMENT
OF EXPENSES...........................................................................43
6.1 Termination; Lack of Survival of Representations and
Warranties.................................................................................43
6.2 Payment of Expenses..........................................................................44
ARTICLE VII CERTAIN POST-MERGER AGREEMENTS...............................................................45
7.1 Reports to the SEC...........................................................................45
7.2 Employees....................................................................................45
ARTICLE VIII GENERAL......................................................................................46
8.1 Amendments...................................................................................46
8.2 Confidentiality..............................................................................46
8.3 Governing Law................................................................................47
8.4 Notices......................................................................................47
8.5 No Assignment................................................................................48
8.6 Headings.....................................................................................48
8.7 Counterparts.................................................................................48
8.8 Construction and Interpretation..............................................................48
8.9 Entire Agreement.............................................................................48
8.10 Severability.................................................................................48
8.11 No Third Party Beneficiaries.................................................................48
8.12 Enforcement of Agreement.....................................................................49
Schedules:
Schedule I Disclosure Schedule for the Company and Savings..................................................
Schedule II Disclosure Schedule for Commercial and the Bank..................................................
Schedule 4.2.....................................................................................................
Schedule 4.7.....................................................................................................
Schedule 4.16....................................................................................................
Schedule 5.1(e)..................................................................................................
Schedule 7.2.....................................................................................................
Schedule 8.9.....................................................................................................
Exhibits:
Exhibit 1.1(a) Acquisition Plan of Merger.......................................................................
Exhibit 1.1(b) Bank Plan of Merger..............................................................................
Exhibit 5.2(a) Form of Opinion of Counsel for the Company.......................................................
Exhibit 5.3(a) Form of Opinion of Counsel for Commercial........................................................
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REORGANIZATION AND MERGER AGREEMENT
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THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is dated as of
September 2, 1997, by and among COMMERCIAL FEDERAL CORPORATION, a Nebraska
corporation ("Commercial"), and COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK,
a Federally chartered savings bank and wholly-owned subsidiary of Commercial
("Bank"); and MID CONTINENT BANCSHARES, INC., a Kansas corporation ("Company"),
and Mid- Continent Federal Savings Bank, a Federally chartered savings bank and
wholly-owned subsidiary of Company ("Savings").
WHEREAS, Commercial, a non-diversified, unitary savings and loan
holding company, with principal offices in Omaha, Nebraska, owns all of the
issued and outstanding capital stock of Bank, with its principal offices in
Omaha, Nebraska.
WHEREAS, Company, a non-diversified, unitary savings and loan holding
company, with principal offices in El Dorado, Kansas, owns all of the issued and
outstanding capital stock of Savings, with principal offices in El Dorado,
Kansas;
WHEREAS, Commercial and Company desire to combine their respective
holding companies through a tax-free exchange so that the respective
shareholders of both Commercial and Company will have an equity ownership in the
combined holding company;
WHEREAS, following the combination of Commercial and Company, it is
intended that Bank and Savings will be merged such that the resulting holding
company will retain the advantage of a unitary savings and loan holding company
status and that the resulting savings institution will achieve certain economies
of scale and efficiencies as a result of such subsequent merger;
WHEREAS, it is intended that to accomplish this result, the Company
will be acquired by means of a merger (the "Acquisition Merger") of the Company
with and into Commercial, followed by the merger of Savings with and into the
Bank (the "Bank Merger"). The Acquisition Merger and the Bank Merger are
collectively referred to as the "Merger";
WHEREAS, it is intended that for federal income tax purposes, the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code") and this Agreement
shall constitute a plan of reorganization pursuant to Section 368 of the Code;
and
WHEREAS, the Boards of Directors of Commercial and the Company (at
meetings duly called and held) have determined that this Agreement and the
transactions contemplated hereby are in the best interests of Commercial and the
Company, respectively, and their respective stockholders and have approved this
Agreement. Consummation of the Merger is subject to the
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prior approval of the Office of Thrift Supervision ("OTS") and the stockholders
of the Company, among other conditions specified herein.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger: Surviving Institution. Subject to the terms and conditions
of this Agreement, and pursuant to the provisions of the Nebraska Business
Corporation Act ("NBCA"), the Kansas General Corporation Code ("KGCC"), the Home
Owners Loan Act, as amended ("HOLA"), and the rules and regulations promulgated
thereunder (the "Thrift Regulations"), (a) at the Acquisition Merger Effective
Time (as hereinafter defined), the Company shall be merged with and into
Commercial pursuant to the terms and conditions set forth herein and in the Plan
of Merger to be set forth as Exhibit 1.1(a) attached hereto (the "Acquisition
Plan of Merger"), (b) the separate corporate existence of the Company shall
cease, and (c) thereafter, at the Bank Merger Effective Time (as hereinafter
defined) Savings shall be merged with and into the Bank pursuant to the terms
and conditions set forth herein and in a plan of merger set forth in Exhibit
1.1(b) (the "Bank Plan of Merger"). The Acquisition Merger shall have the
effects specified in the NBCA and the KGCC, Section 1.4(e) hereof and the
Acquisition Plan of Merger. Upon the consummation of the Acquisition Merger, the
separate corporate existence of the Company shall cease and Commercial shall
continue as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation"). Upon consummation of the Bank Merger, the separate
existence of Savings shall cease and the Bank shall continue as the surviving
institution of the Bank Merger. The name of the Bank, as the surviving
institution of the Bank Merger, shall remain "Commercial Federal Bank, a Federal
Savings Bank". From and after the Bank Merger Effective Time, the Bank, as the
surviving institution of the Bank Merger, shall possess all of the properties
and rights and be subject to all of the liabilities and obligations of the Bank
and Savings, all as more fully described in the Thrift Regulations, Section 1.13
hereof and the Bank Plan of Merger. Commercial may at any time change the method
of effecting the Merger if and to the extent it deems such change to be
desirable, provided, however, that no such change shall (A) alter or change the
amount or kind of consideration to be issued to holders of Company common stock
as provided for in this Agreement, (B) adversely affect the tax treatment to
Company shareholders as a result of receiving the consideration described in
Section 1.3 herein or (C) materially impede or delay the consummation of the
transactions contemplated by this Agreement.
1.2 Effective Time of the Merger. As soon as practicable after each of
the conditions set forth in Article V hereof have been satisfied or waived, but
in no event later than thirty (30) days following such satisfaction or waiver
(unless otherwise agreed by the parties hereto) Commercial and the Company will
file, or cause to be filed, an agreement, certificate or articles
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of merger with appropriate authorities of Kansas and Nebraska for the
Acquisition Merger and articles of combination with the OTS for the Bank Merger,
which agreement, certificate, articles of merger and articles of combination
shall in each case be in the form required by and executed in accordance with
applicable provisions of law and the Thrift Regulations, respectively. The
Acquisition Merger shall become effective at the latest to occur of the time (i)
the Nebraska articles of merger are filed with the appropriate authorities of
Nebraska or (ii) the agreement or certificate of merger is filed with the
appropriate authorities of Kansas (the "Acquisition Merger Effective Time"),
which shall be immediately following the Closing (as defined in Section 1.11
herein) and on the same day as the Closing if practicable. The Bank Merger shall
become effective at the time the articles of combination for such merger are
endorsed by the OTS pursuant to Section 552.13(k) of the Thrift Regulations (the
"Bank Merger Effective Time"). The parties shall cause the Acquisition Merger to
become effective prior to the Bank Merger.
1.3 Conversion of Shares.
(a)(i) At the Acquisition Merger Effective Time, by virtue of
the Merger and without any action on the part of Commercial or Company or the
holders of shares of Commercial or Company common stock, each outstanding share
of Company common stock issued and outstanding at the Acquisition Merger
Effective Time shall be converted into and represent solely the right to receive
without any action by the holder, shares of Commercial Common Stock, in the
manner provided in Section 1.5 hereof, according to the following Exchange
Ratios (which shall be subject to adjustment as provided in clause (a)(iv) of
this Section (the "Merger Consideration"):
(A) If the Average NYSE Closing Price (as defined below) shall be
equal to or greater than $36.00 but equal to or less than
$44.00, then the Exchange Ratio shall be such number of shares
of Commercial Common Stock equal to the quotient (carried to
four digits and rounded down) that results by dividing $38.25
by the Average NYSE Closing Price of Commercial Common Stock
(a maximum of 1.0625 and a minimum of 0.8693 shares of
Commercial Common Stock);
(B) If the Average NYSE Closing Price (as defined below) shall be
greater than $44.00, the Exchange Ratio shall be 0.8693 shares
of Commercial Common Stock;
(C) If the Average NYSE Closing Price (as defined below) shall be
less than $36.00, then the Exchange Ratio shall be 1.0625
shares of Commercial Common Stock; provided, however, that in
the event the Exchange Ratio is adjusted pursuant to the
proviso contained in Section 5.4(e) hereof, the Exchange Ratio
shall be the Exchange Ratio as so adjusted.
(ii) Any shares of Company common stock which are
owned or held by Company or any of its subsidiaries (except shares held in any
401(k) plan of the Company or any of its subsidiaries or otherwise held in a
fiduciary capacity, including the Savings Employee Stock Ownership Plan and the
Management Stock Ownership Plan awards whether vested or not) or by Commercial
or any of Commercial's subsidiaries (other than in a fiduciary capacity) at the
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Acquisition Merger Effective Time shall cease to exist, and the certificates for
such shares shall as promptly as practicable be canceled and no shares of
capital stock of Commercial shall be issued or exchanged therefor.
(iii) At the Acquisition Merger Effective Time, the
holders of certificates
representing shares of Company common stock shall cease to have any rights as
stockholders of the Company, except the right to receive the Merger
Consideration as provided herein.
(iv) If the holders of Commercial Common Stock shall
have received or
shall have become entitled to receive, without payment therefor, during the
period commencing on the date hereof and ending with the Acquisition Merger
Effective Time, additional shares of common stock or other securities for their
stock by way of a stock split, stock dividend, reclassification, combination of
shares, spinoff or similar corporate rearrangement ("Stock Adjustment"), then
the amount of Commercial Common Stock to be exchanged at the Acquisition Merger
Effective Time for Company Common Stock shall be proportionately adjusted to
take into account such Stock Adjustment. In addition, the Average NYSE Closing
Price, as defined below, shall be proportionately adjusted to compensate for any
such Stock Adjustment.
(b) The term "NYSE Closing Price" shall mean the closing price
per share (carried to four decimal places and rounded down) of the Commercial
Common Stock on the New York Stock Exchange. The term "Average NYSE Closing
Price" shall mean the arithmetic mean of the NYSE Closing Prices of the
Commercial Common Stock for the twenty-fifth through the sixth trading day,
inclusive, immediately preceding the business day prior to the later of (A) the
date on which all requisite federal and state regulatory approvals required to
consummate the transactions contemplated by this Agreement are obtained (and
Commercial shall notify the Company of the date when all such approvals are
obtained), including for this purpose the period of any requisite waiting
periods in respect thereof, (B) the date of the Company's meeting of
shareholders to be held pursuant to Section 1.7(a) herein or (C) the 25th day of
the month immediately preceding the month in which the parties have scheduled in
writing the Closing to occur, or the next succeeding business day (the
"Determination Period").
(c) Each share of Commercial Common Stock to be issued to the
Company's shareholders pursuant to this Section 1.3 shall include the
corresponding number of rights associated with the Commercial Common Stock
pursuant to the Rights Agreement dated as of December 19, 1988 by and between
Commercial and Manufacturers Hanover Trust Company, as Rights Agent ("Commercial
Rights Agreement").
1.4 Surviving Corporation in the Merger.
(a) The name of the Surviving Corporation in the Acquisition
Merger shall be Commercial Federal Corporation.
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(b) The Articles of Incorporation of Commercial as in effect
immediately prior to the Acquisition Merger Effective Time shall be the Articles
of Incorporation of the Surviving Corporation as the Surviving Corporation.
(c) The bylaws of Commercial, together with all amendments
thereto, if any, as in effect immediately prior to the Acquisition Merger
Effective Time, shall thereafter be the bylaws of the Surviving Corporation,
until amended as provided therein or by law.
(d) The directors and officers of Commercial in office
immediately prior to the Acquisition Merger Effective Time shall be the
directors and officers of the Surviving Corporation following the Acquisition
Merger, until their successors shall be duly elected and qualified.
(e) From and after the Acquisition Merger Effective Time:
(i) The Surviving Corporation shall possess all
assets and property of every description, and every interest in the assets and
property, wherever located, and the rights, privileges, immunities, powers,
franchises, and authority, of a public as well as of a private nature, of each
of Commercial and Company, and all obligations belonging or due to each of
Commercial and Company, all of which are vested in the Surviving Corporation
without further act or deed. Title to any real estate or any interest in the
real estate vested in Commercial or the Company shall not revert or in any way
be impaired by reason of the Acquisition Merger.
(ii) The Surviving Corporation shall be liable for
all the obligations of each of Commercial and Company. Any claim existing, or
action or proceeding pending, by or against the Company or Commercial, may be
prosecuted to judgement, with right of appeal, as if the Acquisition Merger had
not taken place, or the Surviving Corporation may be substituted in its place.
(iii) All the rights of creditors of each of Company
and Commercial are preserved unimpaired, and all liens upon the property of
Company and Commercial are preserved unimpaired, on only the property affected
by such liens immediately prior to the Acquisition Merger Effective Time.
1.5 Authorization for Issuance of Commercial Common Stock;
Exchange of Certificates.
(a) Commercial shall reserve or will at Closing have available
for issuance a sufficient number of shares of its common stock for the purpose
of issuing its shares to the Company's shareholders in accordance with this
Article I, including Section 1.8(a). Immediately prior to the Acquisition Merger
Effective Time, Commercial shall make available for exchange or conversion, by
transferring to an exchange agent appointed by Commercial and reasonably
satisfactory to Company (the "Exchange Agent") for the benefit of the holders of
Company common stock: (i) such number of whole shares of Commercial Common Stock
as shall be
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issuable in connection with the payment of the aggregate Stock Consideration,
and (ii) such funds as may be payable in lieu of fractional shares of Commercial
Common Stock.
(b) After the Acquisition Merger Effective Time, holders of
certificates theretofore evidencing outstanding shares of Company common stock
(other than as provided in Section 1.3(a)(ii)), upon surrender of such
certificates to the Exchange Agent, shall be entitled to receive certificates
representing the number of whole shares of Commercial Common Stock into which
shares of Company common stock theretofore represented by the certificates so
surrendered shall have been converted, as provided in Section 1.3 hereof and
cash payments in lieu of fractional shares as provided in Section 1.6 hereof. As
soon as practicable after the Acquisition Merger Effective Time but not later
than ten (10) business days thereafter, the Exchange Agent will send a notice
and transmittal form to each Company shareholder of record at the Acquisition
Merger Effective Time whose Company stock shall have been converted into
Commercial Common Stock advising such shareholder of the effectiveness of the
Acquisition Merger and the procedure for surrendering to the Exchange Agent
outstanding certificates formerly evidencing Company common stock in exchange
for new certificates for Commercial Common Stock and for cash in lieu of any
fractional interest. Upon surrender, each certificate evidencing Company common
stock shall be canceled.
(c) Until surrendered as provided in this Section 1.5, each
outstanding certificate which, prior to the Acquisition Merger Effective Time,
represented Company common stock (other than shares canceled at the Acquisition
Merger Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed for
all purposes to evidence ownership of the number of shares of Commercial Common
Stock into which the shares of Company common stock formerly represented thereby
were converted and the right to receive cash in lieu of any fractional interest.
However, until such outstanding certificates formerly representing Company
common stock are so surrendered, no dividend or distribution payable to holders
of record of Commercial 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 Commercial Common Stock, but not paid to such holder, and which
dividends or distribution had a record date occurring on or subsequent to the
Acquisition Merger Effective Time and the amount of any cash, without interest,
payable to such holder in lieu of fractional shares pursuant to Section 1.6
hereof. After the Acquisition Merger Effective Time, there shall be no further
registration of transfers on the records of the Company of outstanding
certificates formerly representing shares of Company common stock and, if a
certificate formerly representing such shares is presented to Commercial, it
shall be forwarded to the Exchange Agent for cancellation and exchange for
certificates representing shares of Commercial Common Stock as herein provided.
(d) All shares of Commercial Common Stock and cash in lieu of
any fractional shares issued and paid upon the surrender for exchange of Company
common stock in accordance with the above terms and conditions shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company common stock.
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(e) If any new certificate for Commercial Common Stock is to
be issued in the 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, if any, required
by reason of the issuance of a new certificate for shares of Commercial 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.
(f) In the event any certificate for Company 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 Commercial Common
Stock and cash in lieu of fractional shares, if any, as may be required pursuant
hereto; provided, however, that Commercial may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Commercial, the Company, the Exchange Agent or any other party 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 Commercial Common Stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in exchange for
any shares of Company common stock; no dividend or distribution with respect to
Commercial Common Stock shall be payable on or with respect to any fractional
share interests; and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a shareholder of Commercial. In lieu
of such fractional share interest, any holder of Company common stock who would
otherwise be entitled to a fractional share of Commercial Common Stock will,
upon surrender of his certificate or certificates representing Company common
stock outstanding immediately prior to the Acquisition Merger Effective Time, be
paid the applicable cash value of such fractional share interest, which shall be
equal to the product of the fraction multiplied by the Average NYSE Closing
Price. For the purposes of determining any such fractional share interests, all
shares of Company common stock owned by a Company shareholder shall be combined
so as to calculate the maximum number of whole shares of Company common stock
issuable to such Company shareholder in the Acquisition Merger.
1.7 Shareholders' Meetings.
(a) The Company shall, at the earliest practicable date but
not sooner than January 26, 1998, hold a meeting of its shareholders (the
"Company Shareholders' Meeting") to submit for shareholder approval (i) an
amendment to Article 12 of the Company's Articles of Incorporation to permit the
acquisition of more than 10% of the outstanding shares of Company common stock
by Commercial pursuant to this Agreement (the "Articles Amendment") and (ii)
this Agreement and the Acquisition Merger and all related matters necessary to
the consummation of the transactions contemplated hereby. The affirmative vote
of the holders of 80% of the
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outstanding shares of Company common stock shall be required to approve the
Articles Amendment. The affirmative vote of the holders of at least a majority
of the issued and outstanding shares of Company common stock shall be required
for approval of the Acquisition Merger and all such related matters. Upon the
approval of the Articles Amendment, Savings shall take all necessary actions to
approve and effectuate a similar amendment to its Federal Stock Charter (the
"Charter Amendment").
(b) Commercial shall, at its 1997 annual meeting of
shareholders, submit for shareholder approval an amendment to Article IV of
Commercial's Articles of Incorporation increasing the number of authorized
shares of Commercial Common Stock. The affirmative vote of the holders of at
least a majority of the votes cast shall be required for approval of such
amendment to Commercial's Articles of Incorporation.
1.8 Company Stock Options.
(a) Subject to Section 1.8(b) hereof, immediately prior to the
Acquisition Merger Effective Time, each option outstanding under the Company's
1994 Stock Option Plan (the "Company Option Plan") shall continue outstanding as
an option to purchase, in place of the purchase of each share of Company common
stock, the number of shares (rounded down to the nearest whole share) of
Commercial Common Stock that would have been received by the optionee in the
Merger had the option been exercised in full (without regard to any limitations
contained therein on exercise) for shares of Company common stock immediately
prior to the Acquisition Merger upon the same terms and conditions under the
relevant option as were applicable immediately prior to the Acquisition Merger
Effective Time, except for appropriate pro rata adjustments as to the relevant
option price for shares of Commercial common stock substituted therefor so that
the aggregate option exercise price of shares subject to an option immediately
following the assumption and substitution shall be the same as the aggregate
option exercise price for such shares immediately prior to such assumption and
substitution. It is intended that the foregoing assumption shall be undertaken
consistent with and in a manner that will not constitute a "modification" under
Section 424 of the Code as to any stock option which is an "incentive stock
option." Commercial and Company agree to take such actions as shall be necessary
to give effect to the foregoing.
At all times after the Acquisition Merger Effective Time, Commercial
shall reserve for issuance such number of shares of Commercial Common Stock as
are necessary so as to permit the exercise of options granted under the Company
Option Plan in the manner contemplated by this Agreement and the instruments
pursuant to which such options were granted. Commercial shall make all filings
required under federal and state securities laws so as to permit the exercise of
such options and the sale of the shares received by the option holder upon such
exercise.
(b) In the event Commercial advises Company in writing no less
than 45 days prior to the Closing that the Merger will not be accounted for as a
pooling of interests, then each holder of an outstanding option under the
Company Option Plan shall, in cancellation of such option (such cancellation to
be reflected in a written agreement), receive from the Company,
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immediately prior to the Acquisition Merger Effective Time, in lieu of the
Commercial stock option referred to in Section 1.8(a), a cash payment in the
amount of the per share value of the Merger Consideration, less the exercise
price of such option, net of any cash which must be withheld under federal and
state income tax requirements. Immediately thereafter, the Company shall cancel
each such option. At least ten (10) business days prior to the Closing and then
immediately prior to the Closing, Company shall afford Commercial the right to
review the cash amounts proposed to be paid to optionees hereunder.
1.9 Registration Statement; Prospectus/Proxy Statement.
(a) For the purposes (i) of registering the Commercial Common
Stock to be issued to holders of Company common stock in connection with the
Merger and the shares issuable under the Company Option Plan pursuant to Section
1.8(a) hereof with the Securities and Exchange Commission ("SEC") and with
applicable state securities authorities, and (ii) of holding the Company
Shareholders' Meeting, the parties hereto shall cooperate in the preparation of
an appropriate registration statement (such registration statement, together
with all and any amendments and supplements thereto, being herein referred to as
the "Registration Statement"), including the prospectus/proxy statement
satisfying all applicable requirements of applicable state laws, and of the
Securities Act of 1933, as amended (the "1933 Act") and the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the rules and regulations
thereunder (such prospectus/proxy statement, together with any and all
amendments or supplements thereto, being herein referred to as the
"Prospectus/Proxy Statement"). At the election of the Company, such
Prospectus/Proxy Statement may also include information necessary to conduct the
annual meeting of shareholders of the Company.
(b) Commercial shall furnish such information concerning
Commercial and the Commercial Subsidiaries (as defined in Section 3.1 hereof) as
is necessary in order to cause the Prospectus/Proxy Statement, insofar as it
relates to such corporations, to comply with Section 1.9(a) hereof. Commercial
agrees promptly to advise the Company if at any time prior to the Company
Shareholders' Meeting any information provided by Commercial in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy or
omission. Commercial shall promptly file such supplemental information as may be
necessary in order to cause such Prospectus/Proxy Statement, insofar as it
relates to Commercial and the Commercial Subsidiaries, to comply with Section
1.9(a).
(c) The Company shall furnish Commercial with such information
concerning the Company and the Company Subsidiaries (as defined in Section 2.1
hereof) as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to such corporations, to comply with Section 1.9(a)
hereof. The Company agrees promptly to advise Commercial if at any time prior to
the Company Shareholders' Meeting any information provided by the Company in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide Commercial with the information needed to correct such
inaccuracy or omission. The Company shall furnish Commercial with such
supplemental information as may be necessary in
9
order to cause the Prospectus/Proxy Statement, insofar as it relates to the
Company and the Company Subsidiaries, to comply with Section 1.9(a).
(d) Commercial shall promptly file the Registration Statement
with the SEC and applicable state securities agencies. Commercial shall use all
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and applicable state securities laws at the earliest practicable
date. The Company authorizes Commercial to utilize in the Registration Statement
the information concerning the Company and the Company Subsidiaries provided to
Commercial for the purpose of inclusion in the Prospectus/Proxy Statement. The
Company shall have the right to review and approve the form of proxy statement
included in the Registration Statement prior to its filing with the SEC and
prior to its mailing to Company shareholders. Commercial shall advise the
Company promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Commercial shall furnish Company with
copies of all such documents. Prior to the Acquisition Merger Effective Time or
the termination of this Agreement, each party shall consult with the other with
respect to any material (including the Prospectus/Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the 1933
Act.
(e) The Company shall consult with Commercial in order to
determine whether any directors, officers or shareholders of the Company may be
deemed to be "affiliates" of the Company ("affiliated persons") within the
meaning of Rule 145 of the SEC promulgated under the 1933 Act. In the event that
Commercial, within 45 days of the Acquisition Merger Effective Time, advises
Company in writing that the Acquisition Merger shall qualify for pooling of
interests accounting treatment (and attaches an opinion of Deloitte & Touche LLP
addressed to Commercial to that effect), then Commercial and the Company shall
each take such action as may be necessary or appropriate to ensure that their
respective affiliated persons are aware of and comply with the guidelines of the
SEC with respect to the sale by affiliates of stock of companies engaging in a
business combination transaction to be accounted for as a pooling of interests
as set forth in Topic 2-E of the SEC staff accounting bulletin series. All
shares of Commercial common stock issued to such Company affiliated persons (i)
in connection with the Merger or (ii) upon exercise of options received pursuant
to Section 1.8 hereof subsequent to the Acquisition Merger Effective Time, shall
bear a legend upon the face thereof stating that transfer of the securities is
or may be restricted by the provisions of the 1933 Act and, if applicable,
pooling of interests accounting requirements, and notice shall be given to
Commercial's transfer agent of such restriction. Such legend shall be removed
(i) by delivery of a substitute certificate without such legend if such Company
affiliated person shall have delivered to Commercial upon request an affidavit
in form and substance satisfactory to Commercial necessary to enable counsel to
Commercial to furnish a legal opinion or other document requested by the
transfer agent, to the effect that such legend is not required for purposes of
the 1933 Act, or (ii) after the expiration of two years from the Acquisition
Merger Effective Time unless, in the opinion of the counsel for Commercial, such
person was an "affiliate" of Commercial within the meaning of Rule 145 within
three months prior to the expiration of such two year period. Commercial shall
use its best efforts to provide the transfer agent in a timely manner with any
required legal opinion or other documentation necessary for the sale or transfer
of any Commercial Common Stock received in
10
the Merger. So long as shares of such Commercial common stock bear such legend,
no transfer of such Commercial common stock shall be allowed unless and until
the transfer agent is provided with such information as may reasonably be
requested by counsel for Commercial to assure that such transfer will not
violate applicable provisions of the 1933 Act, or rules, regulations or policies
of the SEC.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate and
use reasonable best efforts to complete the transactions contemplated hereunder
at the earliest practicable date but the parties do not anticipate the Closing
to occur prior to April 1, 1998. Each party shall cause each of their affiliates
and subsidiaries to cooperate in the preparation and submission by them, as
promptly as reasonably practicable, of such applications, petitions, and other
documents and materials as any of them may reasonably deem necessary or
desirable to the OTS, Federal Trade Commission ("FTC"), Department of Justice
("DOJ"), SEC, applicable Secretary of State, other regulatory authorities,
holders of the voting shares of common stock of the Company, and any other
persons for the purpose of obtaining any approvals or consents necessary to
consummate the transactions contemplated by this Agreement. At the date hereof,
none of the parties is aware of any reason that the regulatory approvals
required to be obtained by it would not be obtained.
1.11 Closing. If (i) the Articles Amendment and this Agreement have
been duly approved by the shareholders of the Company, 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 Commercial at which the parties hereto 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
as soon as practicable as agreed by the parties, provided, however, that the
Closing shall be no more than sixty (60) days after the satisfaction or waiver
of all conditions and/or obligations contained in Article V of this Agreement.
1.12 Closing of Transfer Books. At the Acquisition Merger Effective
Time, the transfer books for Company common stock shall be closed, and no
transfer of shares of Company common stock shall thereafter be made on such
books.
1.13 Bank Merger.
(a) At the Bank Merger Effective Time, each share of Savings
common stock issued and outstanding immediately prior thereto shall, by virtue
of the Bank Merger, be canceled. No new shares of the capital stock or other
securities or obligations of the Bank shall be issued or be deemed issued with
respect to or in exchange for such canceled shares, and such canceled shares of
Savings Common Stock shall not be converted into any shares or other securities
or obligations of the Bank.
(b) The charter and bylaws of the Bank, as in effect
immediately prior to the Bank Merger Effective Time, shall be the charter and
bylaws of the Bank, as the surviving institution of the Bank Merger, and may
thereafter be amended in accordance with applicable law.
11
(c) Except as otherwise provided herein, the directors and
officers of the Bank immediately prior to the Bank Merger Effective Time shall
be the directors and officers of the Bank, as the surviving institution of the
Bank Merger, and shall continue in office until their successors are duly
elected or otherwise duly selected.
(d) The liquidation account established by Savings pursuant to
the plan of conversion adopted in connection with its conversion from mutual to
stock form shall continue to be maintained by the Bank after the Bank Merger
Effective Time for the benefit of those persons and entities who were savings
account holders of Savings on the eligibility record date for such conversion
and who continue from time to time to have rights therein. If required by the
rules and regulations of the OTS, the Bank shall amend its charter to
specifically provide for the continuation of the liquidation account established
by Savings.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SAVINGS
Company and Savings represent and warrant to Commercial and the Bank
that, except as disclosed in Schedule I attached hereto and except that Savings
makes no representations or warranties regarding Company:
2.1 Organization, Good Standing, Authority, Insurance, Etc. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Kansas. Section 2.1 of Schedule I lists each "subsidiary"
of the Company and Savings within the meaning of Section 10(a)(1)(G) of HOLA,
(individually a "Company Subsidiary" and collectively the "Company
Subsidiaries") (unless otherwise noted herein all references to a "Company
Subsidiary" or to the "Company Subsidiaries" shall include Savings). Each of the
Company Subsidiaries is duly organized, validly existing, and in good standing
under the laws of the respective jurisdiction under which it is organized, as
set forth in Section 2.1 of Schedule I. The Company and each Company Subsidiary
has all requisite power and authority and is duly qualified and licensed to own,
lease and operate its properties and conduct its business as it is now being
conducted. The Company has delivered to Commercial a true, complete and correct
copy of the articles of incorporation, charter, or other organizing document and
of the bylaws, as in effect on the date of this Agreement, of Company and each
Company Subsidiary. To the Company's best knowledge, the Company and each
Company Subsidiary is qualified to do business as a foreign corporation and is
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 the business, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole. Savings is a member in good standing of the Federal Home Loan
Bank of Topeka and all eligible accounts issued by Savings are insured by the
Savings Association Insurance Fund ("SAIF") to the maximum extent permitted
under applicable law. Savings is a "domestic building and loan association" as
defined in Section 7701(a)(19) of the Code and is a "qualified thrift lender" as
defined in Section 10(m) of the HOLA and the Thrift Regulations. The Company is
registered as a savings and loan holding company under the HOLA.
12
The minute books of the Company and the Company's Subsidiaries contain
complete and accurate records of all meetings and other corporate actions held
or taken by their respective shareholders and Boards of Directors (including the
committees of such Boards).
2.2 Capitalization. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of common stock, par value $.10 per share, of
which 1,958,250 shares were issued and outstanding as of the date of this
Agreement, and (ii) 10,000,000 shares of Preferred Stock, no par value, of which
no shares were outstanding as of the date of this Agreement. All outstanding
shares of Company common stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except for outstanding options to
purchase 165,476 shares of Company common stock under the Company Option Plan,
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 the Company's capital stock from the Company and no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any kind
(collectively, "Stock Contract") to which the Company or any of its affiliates
is subject with respect to the issuance, voting or sale of issued or unissued
shares of the Company's capital stock. A true and complete copy of the Company
Option Plan, as in effect on the date of this Agreement, is attached as Section
2.2 of Schedule I. Except as disclosed at Schedule 2.2, neither the Company nor
Savings is aware of any event or circumstance (excluding actions or events by
Commercial) which could disqualify the Merger from being accounted for as a
pooling of interests.
2.3 Ownership of Subsidiaries. All the outstanding shares of the
capital stock of the Company Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by the Company or a Company
Subsidiary free and clear of any lien, claim, charge, restriction or encumbrance
(collectively, "Encumbrance"). All of the outstanding capital stock or other
ownership interests in all of the Company Subsidiaries is owned either by the
Company or Savings. Except as set forth in Section 2.3 of Schedule I, there are
no options, convertible securities, warrants, or other rights (preemptive or
otherwise) to purchase or acquire any capital stock of any Company Subsidiary
and no contracts to which the Company or any of its affiliates is subject with
respect to the issuance, voting or sale of issued or unissued shares of the
capital stock of any of the Company Subsidiaries. Neither the Company nor any
Company Subsidiary owns any material investment of the capital stock or other
equity securities (including securities convertible or exchangeable into such
securities) of or profit participations in any "company" (as defined in Section
10(a)(1)(C) of the HOLA) other than the Federal Home Loan Bank of Topeka or
except as set forth in Section 2.3 of Schedule I.
2.4 Financial Statements and Reports.
(a) No registration statement, proxy statement, schedule or
report filed by the Company or any Company Subsidiary with the SEC or the OTS
under the 1933 Act or the 1934 Act ("SEC Reports"), on the date of 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 omitted
to state a
13
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. The Company and the Company Subsidiaries have timely filed all
reports and documents required to be filed by them with the SEC, the OTS, or the
Federal Deposit Insurance Corporation (the "FDIC") under various securities and
banking laws and regulations for the last five years (or such shorter period as
they may have been subject to such filing requirements), except to the extent
that all failures to so file, in the aggregate, would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and the Company Subsidiaries, taken as a whole. 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 and,
with respect to the SEC Reports, 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 and, with respect to reports and documents
filed with banking regulatory agencies, were accurate in all material respects.
Except to the extent stated therein, all financial statements and schedules
included in the documents referred to in the preceding sentences (or to be
included in similar documents to be filed after the date hereof) (i) are or will
be (with respect to financial statements in respect of periods ending after
September 30, 1996) in accordance with the Company's books and records and those
of any of the Company Subsidiaries, and (ii) present (and in the case of
financial statements in respect of periods ending after September 30, 1996, will
present) fairly the consolidated statement of financial condition and the
consolidated statements of income, changes in stockholders' equity and cash
flows of the Company and the Company Subsidiaries as of the dates and for the
periods 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, year end adjustments to interim results and
changes to generally accepted accounting principles). The consolidated financial
statements of the Company at September 30, 1996 and for the three years 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 their respective dates,
of the Company and the Company Subsidiaries required to be reflected in such
financial statements according to generally accepted accounting principles and
contain or will contain, in the opinion of management, 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. There exists no set of circumstances that could
reasonably be expected to result in any liability or obligation material to the
Company or the Company Subsidiaries, taken as a whole, except as disclosed in
such consolidated financial statements at September 30, 1996 or for transactions
effected or actions occurring or omitted to be taken after September 30, 1996
(i) in the ordinary course of business, or (ii) as permitted by this Agreement.
(b) The Company has delivered to Commercial each SEC Report
filed, used or circulated by it with respect to periods since June 27, 1994
through the date of this Agreement and will promptly deliver each such SEC
Report filed, used or circulated after the date hereof, each in the form
(including exhibits and any amendments thereto) filed with the SEC or the OTS
(or,
14
if not so filed, in the form used or circulated), including, without limitation,
its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
2.5 Absence of Changes.
(a) Since September 30, 1996, there has been no material
adverse change in the business, properties, financial condition, results of
operations or assets of the Company and the Company Subsidiaries, taken as a
whole. Since September 30, 1996 and through the date hereof, there is no
occurrence, event or development of any nature existing or, to the best
knowledge of the Company, threatened, which may reasonably be expected to have a
material adverse effect upon the business, properties, financial condition,
operations or assets of the Company or any Company Subsidiary other than the
effects of any such change attributable to or resulting from any change in law,
regulation or generally accepted accounting principles or regulatory accounting
principles, which impairs both the Company and Commercial in a substantially
similar manner and other than the effects of any change attributable to or
resulting from changes in economic conditions applicable to depository
institutions generally or in general levels of interest rates affecting both the
Company and Commercial to a similar extent and in a similar manner.
(b) Since September 30, 1996, each of the Company and the
Company Subsidiaries has owned and operated their respective assets, properties
and businesses in the ordinary course of business and consistent with past
practice.
2.6 Prospectus/Proxy Statement. At the time the Prospectus/ Proxy
Statement is mailed to the shareholders of the Company for the solicitation of
proxies for the approvals referred to in Section 1.7(a) hereof and at all times
subsequent to such mailings up to and including the times of such approval, such
Prospectus/Proxy Statement (including any supplements thereto), with respect to
all information set forth therein relating to the Company (including the Company
Subsidiaries), its shareholders and representatives, Company common stock and
all other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions
of the 1934 Act and the rules and regulations under such Act; 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 the Company or any of the
Company 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 the Company has
engaged RP Financial, LC to provide financial advisory services and to deliver
an opinion to the effect that the consideration to be received by the Company
shareholders in the
15
Merger is fair to the Company shareholders from a financial point of view. A
copy of the engagement agreement with RP Financial, LC. is attached to Section
2.7 of Schedule I.
2.8 Litigation and Other Proceedings. Except as set forth in Section
2.8 of Schedule I and except for matters which would not have a material adverse
effect on the business, financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole, neither the Company nor
any Company Subsidiary is a defendant in, nor is any of its property subject to,
any pending, or, to the best knowledge of the management of the Company,
threatened, claim, action, suit, investigation, or proceeding, or subject to any
judicial order, judgment or decree.
2.9 Compliance with Law.
(a) To the best knowledge of the Company, the Company and the
Company Subsidiaries are in compliance in all material respects with all
material laws and regulations applicable to their respective business or
operations or with respect to which compliance is a condition of engaging in the
business thereof, and neither the Company nor any Company Subsidiary 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) To the best knowledge of the Company, the Company and each
of its Subsidiaries have all material permits, licenses, certificates of
authority, orders and approvals of, and have made all material 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 business as they are presently conducted.
2.10 Corporate Actions.
(a) The Boards of Directors of the Company and Savings have
duly authorized their respective officers to execute and deliver (as applicable)
this Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger and
to take all action necessary to consummate the Merger and the other transactions
contemplated hereby. The Board of Directors of the Company has authorized and
directed the submission for shareholders' approval of the Articles Amendment and
this Agreement, together with the Merger and any other action requiring such
approvals. All corporate authorization by the Board of Directors of the Company
required for the consummation of the Merger has been obtained or will be given
when required by applicable law.
(b) Subject to the Articles Amendment and the approval thereof
by the Company's shareholders, the Company's Board of Directors has taken or
will take all necessary action to exempt this Agreement, the Acquisition Plan of
Merger, the Bank Plan of Merger and the transactions contemplated hereby and
thereby from, (i) any applicable state takeover laws, (ii) any Kansas laws
limiting or restricting the voting rights of shareholders, (iii) any Kansas laws
requiring a shareholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
shareholder" or person or entity of
16
similar type, and (iv) any provision in its or any of the Company Subsidiaries'
articles/certificate of incorporation, charter or bylaws requiring a shareholder
approval vote in excess of the vote normally required in transactions of similar
type not involving a "related person," interested shareholder" or person or
entity of similar type.
2.11 Authority. The execution, delivery and performance of its
obligations under this Agreement by the Company and Savings does not violate any
of the provisions of, or constitute a default under or give any person the right
to terminate or accelerate payment or performance under (i) subject to the
effectiveness of the Articles Amendment and of the amendment to Savings' Federal
Stock Charter referred to in Section 4.17 hereof (the "Charter Amendment"), the
articles of incorporation or bylaws of the Company, the articles of
incorporation, charter or bylaws of any Company Subsidiary, (ii) any regulatory
restraint on the acquisition of the Company or Savings 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 the
Company Subsidiaries is subject or (iv) any other material agreement, material
lease, material contract, note, mortgage, indenture, arrangement or other
obligation or instrument ("Contract") to which the Company or any of the Company
Subsidiaries is a party or is subject or by which any of their properties or
assets is bound. The parties acknowledge that the consummation of the Merger and
the other transactions contemplated hereby is subject to various regulatory
approvals. Subject to the approval and effectiveness of the Articles Amendment
and the Charter Amendment, the Company and Savings, as applicable, have all
requisite corporate power and authority to enter into this Agreement and the
Acquisition Plan of Merger and to perform their respective obligations hereunder
and thereunder, except, with respect to this Agreement, and the Acquisition
Merger, the approval of the Company's shareholders of the Articles Amendment and
this Agreement required under applicable law and the effectiveness of the
Charter Amendment. Other than the receipt of Governmental Approvals (as defined
in Section 5.1(c)), the approval of shareholders of the Articles Amendment and
this Agreement, and the consents specified in Schedule I with respect to the
Contracts, no consents or approvals are required on behalf of Company in
connection with the consummation of the transactions contemplated by this
Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger. This
Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger constitute
the valid and binding obligation of the Company and Savings, as applicable, and
each is enforceable in accordance with its 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 disclosed in Section 2.12 of
Schedule I, there are no employment, severance or other agreements, plans or
arrangements with any current or former directors, officers or employees of
Company or any Company Subsidiary which may not be terminated without penalty
(including any augmentation or acceleration of benefits) on 30 days or less
notice to such person. No payments to directors, officers or employees of the
Company or the Company Subsidiaries resulting from the transactions contemplated
hereby will cause the imposition of excise taxes under Section 4999 of the Code
or the disallowance of a deduction to the Company or any Company Subsidiary
pursuant to Sections 162 or 280G of the Code. No later than thirty (30) days
prior to consummation of the Merger, the Company shall
17
furnish Commercial for its review (i) a computation of the amounts expected to
be payable under the employment and severance agreements disclosed in Section
2.12 of Schedule I as a result of the Merger, and (ii) a schedule reasonably
satisfactory to Commercial demonstrating that no "disqualified individual"
within the meaning of Section 280G of the Code will be receiving payments in
contravention of the representation in the preceding sentence.
2.13 Employee Benefits.
(a) Neither the Company nor any of the Company Subsidiaries
maintains any funded deferred compensation plans (including profit sharing,
pension, 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 Schedule I (true
and correct copies of which have been delivered to Commercial). None of Company
or any of the Company 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 Code are so
qualified, and Company 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 Schedule
I, neither the Company nor any of the Company Subsidiaries (a) provides health,
medical, death or survivor benefits to any 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, 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"). With respect to each Employee Plan and
Benefit Arrangement of the Company or any Company Subsidiary, Section 2.13 of
Schedule I sets forth as of the date of this Agreement: (i) any and all payments
more than 30 days past due, (ii) the actuarial present value, determined and
prepared in accordance with GAAP (based, where applicable, on the same actuarial
assumptions as those previously used for funding purposes, other than turnover
assumptions, and computed on the basis of a terminated plan), of any accrued
benefits or other obligations not listed elsewhere in this schedule, including
without limitation, premiums and contributions for which the Company or any
Company Subsidiary is or may be directly or indirectly liable to present or
former employees, officers, directors, and their beneficiaries, (iii) the net
fair market value of the assets held in any fund, policy, or other arrangement,
and (iv) the amount of any contribution or other obligation paid, accrued, or
payable, or reasonably expected to be payable between the date of this Agreement
and the Closing, including contributions by Savings to its Employee Stock
Ownership Plan (the "Savings ESOP") to repay its loan in accordance with past
practices (pro rated through the Closing), subject to applicable tax law
limitations. Neither the Company nor any Company Subsidiary will make any
contribution, or undertake any obligation to contribute any amount to any
Employee Plan or Benefit Arrangement other than the amounts listed in Schedule
2.13 of Schedule I and other than immaterial amounts in the ordinary course of
business and in accordance with past practice.
18
(b) Except as set forth in Section 2.13 of Schedule I, all
Employee Plans and Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1996 and there has been no material amendment
thereof (other than amendments required to comply with applicable law) or no
material increase in the cost thereof or benefits payable thereunder on or after
January 1, 1997.
(c) To the best knowledge of the Company, each Employee Plan
and Benefit Arrangement (i) has been administered to date, and will be
administered until the Closing, in accordance with their terms and in compliance
with the Code, ERISA, and all other applicable rules and regulations, (ii) has,
in a timely, accurate, and proper manner, both filed all required government
reports and made all required employee communications, and (iii) between the
date of this Agreement and the Closing, will complete and file all such required
reports. To the best knowledge of the Company, 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 Code, has occurred with respect to any Employee Plan, or any
other employee benefit plan maintained by Company or any Company Subsidiary
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 Code nor has any Employee Plan subject to Part III of Subtitle B of
Title I of ERISA or Section 412 of the Code, or both, incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code, whether or not
waived; nor has Company or any Company Subsidiary 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 the best knowledge of the Company,
neither Company nor any Company Subsidiary 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 Commercial, or any of its affiliates at or after the
Acquisition Merger Effective Time.
(d) On or before 15 days after execution hereof, the Company
will provide Commercial with true and complete copies of the following documents
where applicable to any Employee Plan or Benefit Arrangement: (i) each plan
document or agreement, and any amendments thereto, and related trust agreements,
insurance contracts and policies, annuity contracts, and any other funding
arrangement; (ii) the most recent summary plan description and summary of
material modifications, along with disclosure of the date of their distribution
to participants and filing with the Department of Labor; (iii) for the three
most recent plan years, Form 5500 Annual Return/Report and all actuarial and
financial reports and appraisals; (iv) the most recent determination letter
received from the Internal Revenue Service, plus any open requests and all other
rulings received from any governmental agency; and (v) with respect to any
action taken within the current and three preceding plan years, a certified copy
of all Board of Directors resolutions. Within 60 days of the date hereof, the
Company or Savings shall provide Commercial with documentation, reasonably
satisfactory to Commercial, demonstrating that the requirements of Sections
401(k), 401(m), 404, 410, 412, 415, and 416 of the Code have been satisfied by
each Employee Plan that is intended to qualify under Section 401 of the Code.
(e) The assets of Savings' defined benefit pension plan do not
include equity securities.
19
2.14 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of Company
to Commercial pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. No information material
to the Merger and which is necessary to make the representations and warranties
not misleading, to the best knowledge of the Company, has been withheld from
Commercial.
2.15 Property and Assets. To the best knowledge of the Company, the
Company and the Company Subsidiaries have marketable title to all of their real
property reflected in the financial statements at September 30, 1996, 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 title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Company and the Company
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 Company nor any
Company Subsidiary is in default in any material respect under any such lease.
No consent of the lessor of any material real property or material personal
property lease is required for consummation of the Merger except as set forth in
Section 2.15 of Schedule I. There has been no material physical loss, damage or
destruction, whether or not covered by insurance, affecting the real properties
of Company and the Company Subsidiaries since September 30, 1996, except such
loss, damage or destruction which does not have a material adverse effect on the
Company and the Company Subsidiaries, taken as a whole. All property and assets
material to their business and currently used by Company and the Company
Subsidiaries are, in all material respects, in good operating condition and
repair, normal wear and tear excepted.
2.16 Agreements and Instruments. Except as set forth in Section 2.16 of
Schedule I, neither the Company nor any Company Subsidiary 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 the Company or any Company Subsidiary or the guarantee by
the Company or any Company Subsidiary 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 Company or any Company Subsidiary and any
director or officer of Company or Savings, or any member of the immediate family
or affiliate of any of the foregoing, (d) any agreements with or concerning any
labor or employee organization to which Company or any Company Subsidiary is a
party, (e) any agreements between Company or any Company Subsidiary and any five
percent or more shareholder of Company, and (f) any agreements, directives,
orders, or similar arrangements between or involving the Company or any Company
Subsidiary and any state or federal savings institution regulatory authority.
20
2.17 Material Contract Defaults. Neither the Company nor any Company
Subsidiary 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 the Company or a Company Subsidiary 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,
and which default is reasonably expected to have either individually or in the
aggregate a material adverse effect on the Company and any Company Subsidiary,
taken as a whole, 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) The Company and each of the Company Subsidiaries have duly
and properly filed all federal, state, local and other tax returns 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 by the
Internal Revenue Service ("IRS") and other applicable agencies is as set forth
in Section 2.18 of Schedule I; and there is no agreement by the Company or any
Company Subsidiary for the extension of time or for the assessment or payment of
any taxes payable. Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Company, threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is the Company aware of any basis for any such asser
tion or claim. The Company and each of the Company Subsidiaries have complied in
all material respects with applicable IRS backup withholding requirements and
have filed all appropriate information reporting returns for all tax years for
which the statute of limitations has not closed. The Company and each Company
Subsidiary have complied in all material respects with all applicable state law
sales and use tax collection and reporting requirements.
(b) Adequate provision for any federal, state, local, or
foreign taxes due or to become due for the Company or any of the Company
Subsidiaries for any period or periods through and including September 30, 1996,
has been made and is reflected on the September 30, 1996 audited Company
consolidated financial statements and has been or will be made in accordance
with generally accepted accounting principles with respect to periods ending
after September 30, 1996.
2.19 Environmental Matters. Except as set forth on Schedule 2.19
hereto, to the best knowledge of the Company, neither the Company nor any
Company Subsidiary owns or leases any properties affected by toxic waste, radon
gas or other hazardous conditions or constructed in part with the use of
asbestos. Neither the Company nor any Company Subsidiary has knowledge of, nor
has the Company or any Company Subsidiary received written notice from any
governmental or regulatory body of, any conditions, activities, practices or
incidents which is reasonably likely to interfere with or prevent compliance or
continued compliance with hazardous substance 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
21
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 or 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 Company's knowledge, threatened against Company or any Company
Subsidiary 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 the
consolidated balance sheet of Company as of December 31, 1996, or acquired since
such date, are (except with respect to those assets which are no longer assets
of the Company or any Company Subsidiary) binding obligations of the respective
obligors named therein except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding may be 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 which have been threatened or asserted against the
Company or any Company Subsidiary. To the best knowledge of the Company, 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. To the best knowledge of the Company, all loans originated or
purchased by Savings were at the time entered into and at all times since have
been in compliance in all material respects with all applicable laws (including,
without limitation, all consumer protection laws) and regulations. Savings
administers its loan and investment portfolios (including, but not limited to,
adjustments to adjustable mortgage loans) in all material respects in accordance
with all applicable laws and regulations and the terms of applicable
instruments. The records of Savings regarding all loans outstanding on its books
are accurate in all material respects and the risk classification system has
been established in accordance with the requirements of the OTS.
(b) Section 2.20 of Schedule I sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of loans, extensions
of credit and other assets of Savings and its subsidiaries that have been
adversely designated, criticized or classified by it as of June 30, 1997,
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 government entity 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 the
Company 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 the Company or any
22
Company Subsidiary which exist which 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 the Company or any Company Subsidiary (either
individually or in the aggregate with other loans and investments).
2.22 Derivatives Contracts. Neither the Company 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 on its Balance Sheet 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 Schedule I, including a list, as applicable, of any
of its or any of its Subsidiaries' assets pledged as security for a Derivatives
Contract.
2.23 Insurance. The Company and the Company Subsidiaries have in effect
insurance coverage which, in respect to amounts, types and risks insured, is
reasonably adequate for the business in which the Company and the Company
Subsidiaries are engaged. A schedule of all insurance policies in effect as to
the Company and the Company Subsidiaries (the "Insurance Policies") is as set
forth on Section 2.23 of Schedule I (other than policies pertaining to mortgage
loans made in the ordinary course of business). All Insurance Policies are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date of this Agreement have been paid, such premiums
covering all periods from the date hereof up to and including the Acquisition
Merger Effective Date shall have been paid on or before the Acquisition Merger
Effective Date, to the extent then due and payable (other than retrospective
premiums which may be payable with respect to worker's compensation insurance
policies, adequate reserves for which are reflected in the Company's financial
statements). The Insurance Policies are valid, outstanding and enforceable in
accordance with their respective terms and will not in any way be affected by,
or terminated or lapsed solely by reason of, the transactions contemplated by
this Agreement. Neither the Company nor any Company Subsidiary has been refused
any insurance with respect to any material properties, assets or operations, nor
has any coverage been limited or terminated by any insurance carrier to which it
has applied for any such insurance or with which it has carried insurance during
the last three years.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Commercial and the Bank represent and warrant to Company and Savings
that, except as disclosed in Schedule II attached hereto, and except that Bank
makes no representations or warranties regarding Commercial:
3.1 Organization, Good Standing, Authority, Insurance, Etc. Commercial
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nebraska. Each of the subsidiaries of Commercial within
the meaning of Section 10(a)(1)(G) of
23
HOLA (individually a "Commercial Subsidiary" and collectively the "Commercial
Subsidiaries") is duly organized, validly existing, and in good standing under
the laws of the respective jurisdiction under which it is organized. Commercial
and each Commercial Subsidiary has all requisite power and authority and is duly
qualified and licensed to own, lease and operate its properties and conduct its
business as it is now being conducted. Commercial and each Commercial Subsidiary
is qualified to do business as a foreign corporation and is 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 the business, financial condition
or results of operations of Commercial and the Commercial Subsidiaries, taken as
a whole. The Bank is a member in good standing of the Federal Home Loan Bank of
Topeka, and all eligible accounts issued by the Bank are insured by the SAIF to
the maximum extent permitted under applicable law. The Bank is a "domestic
building and loan association" as defined in Section 7701(a)(19) of the Code,
and is a "qualified thrift lender" as defined in Section 10(m) of the HOLA and
the Thrift Regulations. Commercial is duly registered as a savings and loan
holding company under the HOLA.
3.2 Capitalization. The authorized capital stock of Commercial consists
of 25,000,000 shares of Commercial common stock, par value $.01 per share, of
which 21,572,168 shares were issued and outstanding as of the date of this
Agreement and 10,000,000 shares of serial preferred stock, par value of $.01 per
share, of which no shares were outstanding as of the date of this Agreement. All
outstanding shares of Commercial common stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
3.3 Ownership of Subsidiaries. All the outstanding shares of the
capital stock of the Commercial Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by Commercial or a Commercial
Subsidiary free and clear of any Encumbrance. The outstanding capital stock or
other ownership interests in all of the Commercial Subsidiaries is owned either
by Commercial or the Bank. There are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase or acquire any
capital stock of any Commercial Subsidiary and no contracts to which Commercial
or any of its affiliates is subject with respect to the issuance, voting or sale
of issued or unissued shares of the capital stock of any of the Commercial
Subsidiaries.
3.4 Financial Statements and Reports.
(a) No registration statement, proxy statement, schedule or
report filed by Commercial or any Commercial Subsidiary with the SEC or the OTS
under the 1933 Act, or the 1934 Act, on the date of 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 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, Commercial and the Commercial
Subsidiaries have timely filed all documents required to be filed by them with
the SEC, the OTS, or the FDIC under various securities and financial institution
laws and
24
regulations, except to the extent that all failures to so file, in the
aggregate, would not have a material adverse effect on the business, financial
condition or results of operations of Commercial and the Commercial
Subsidiaries, taken as a whole; 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 documents
referred to in the preceding sentences (or to be included in similar documents
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, 1996) in accordance with
Commercial's books and records and those of any of its Subsidiaries, and (ii)
present (and in the case of financial statements in respect of periods ending
after June 30, 1996 will present) fairly the consolidated statement of financial
condition and the consolidated statements of operations, stockholders' equity
and cash flows of Commercial and the Commercial Subsidiaries as of the dates and
for the periods indicated in accordance with generally accepted accounting
principles (except for the omission of notes to unaudited statements, year end
adjustments to interim results and changes in generally accepted accounting
principles). The consolidated financial statements of Commercial as of June 30,
1996 and for the three years then ended and the consolidated financial
statements for all periods thereafter up to the Closing disclose or will
disclose, as the case may be, all liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or due to become due and
regardless of when asserted), as of their respective dates, of Commercial and
the Commercial Subsidiaries required to be reflected in such financial
statements according to generally accepted accounting principles, other than
liabilities which are not, in the aggregate, material to Commercial and the
Commercial Subsidiaries, taken as a whole, and contain or will contain in the
opinion of management 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. There exists no set of circumstances that could reasonably be
expected to result in any liability or obligation material to Commercial or the
Commercial Subsidiaries, taken as a whole, except as disclosed in such
consolidated financial statements at June 30, 1996, or for transactions effected
or actions occurring or omitted to be taken after June 30, 1996, (i) in the
ordinary course of business, or (ii) as permitted by this Agreement.
(b) Commercial has delivered to the Company all periodic
reports filed with the SEC under the 1934 Act for periods since June 30, 1996
through the date hereof and will through Closing upon written request promptly
deliver copies of 1934 Act reports for future periods.
3.5 Absence of Changes. Since June 30, 1996, there has been no material
adverse change in the business, properties, financial condition, results of
operations or assets of Commercial and the Commercial Subsidiaries, taken as a
whole. Since June 30, 1996 and through the date hereof, there is no occurrence,
event or development of any nature existing or, to the best knowledge of
Commercial, threatened which may reasonably be expected to have a material
adverse effect upon the business, properties, financial condition, operations or
assets of Commercial or any Commercial Subsidiary, other than any such change
attributable to or resulting
25
from any change in law, regulation or generally accepted accounting principles
or regulatory accounting principles, which impairs both the Company and
Commercial in a substantially similar manner and other than the effects of any
change attributable to or resulting from changes in economic conditions
applicable to depository institutions generally or in general levels of interest
rates affecting both the Company and Commercial to a similar extent and in a
similar manner.
Since June 30, 1996 and through the date hereof, each of
Commercial and the Commercial Subsidiaries has owned and operated their
respective assets, properties and businesses in the ordinary course of business
and consistent with past practice.
3.6 Prospectus/Proxy Statement. At the time the Registration Statement
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of the Company for the solicitation of proxies for the approval
referred to in Section 1.7(a) hereof and at all times subsequent to such
mailings up to and including the times of such approval, such Registration
Statement and Prospectus/Proxy Statement (including any amendments or
supplements thereto), with respect to all information set forth therein relating
to Commercial (including the Commercial Subsidiaries) and its shareholders,
Commercial Common Stock, this Agreement, the Merger and all other transactions
contemplated hereby, will:
(a) comply in all material respects with applicable provisions
of the 1933 Act, the 1934 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.
3.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf or under authority of Commercial or any of the
Commercial 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 Commercial has
engaged ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., an investment banking firm, to provide financial
advisory services to Commercial.
3.8 Compliance With Law.
(a) To the best knowledge of Commercial, Commercial and the
Commercial Subsidiaries are in compliance in all material respects with all
material laws and regulations applicable to their respective business or
operations or with respect to which compliance is a condition of engaging in the
business thereof, and neither Commercial nor any Commercial Subsidiary 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) To the best knowledge of Commercial, Commercial and each
of it Subsidiaries have all material permits, licenses, certificates of
authority, orders and approvals of,
26
and have made all material filings, applications and registrations with, all
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its respective business as it is
presently conducted.
3.9 Corporate Actions. The Boards of Directors of Commercial and the
Bank have duly authorized their respective officers to execute and deliver (as
applicable) this Agreement, the Acquisition Plan of Merger, the Bank Plan of
Merger and to take all action necessary to consummate the Merger and the other
transactions contemplated hereby. All corporate authorizations by the Board of
Directors of Commercial required for the consummation of the Merger have been
obtained.
3.10 Authority. The execution, delivery and performance of this
Agreement by Commercial and the Bank does not violate any of the provisions of,
or constitute a default under or give any person the right to accelerate payment
or performance under (i) the articles of incorporation or bylaws of Commercial,
the charter or bylaws of the Bank, or the articles of incorporation or bylaws of
any other Commercial Subsidiary, (ii) any regulatory restraint on the
acquisition of the Company or Savings 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 Commercial or any of the Commercial
Subsidiaries is subject or (iv) any other Contract to which Commercial or any of
the Commercial Subsidiaries is a party or is subject to or by which any of their
properties or assets is bound which default, termination or acceleration would
have a material adverse effect on the financial condition, business or results
of operations of Commercial and the Commercial Subsidiaries, taken as a whole.
The parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals.
Commercial and the Bank have all requisite corporate power and authority to
enter into this Agreement and to perform their obligations hereunder. Other than
the receipt of Governmental Approvals and the approval of its shareholders of
the increase in the number of authorized shares of Commercial Common Stock, no
consents or approvals are required on behalf of Commercial or any Commercial
Subsidiary in connection with the consummation of the transactions contemplated
by this Agreement or the Acquisition Plan of Merger. This Agreement, the
Acquisition Plan of Merger and the Bank Plan of Merger constitute the valid and
binding obligations of Commercial and the Bank, and are 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.
3.11 Information Furnished. No statement contained in any schedule,
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of
Commercial to Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or any material omission. No information
material to the Merger and which is necessary to make the representations and
warranties not misleading, to the best knowledge of Commercial, has been
withheld from the Company.
27
3.12 Litigation and Other Proceedings. Except for matters which would
not have a material adverse effect on the business, financial condition or
results of operations of Commercial and the Commercial Subsidiaries taken as a
whole, neither Commercial nor any Commercial Subsidiary is a defendant in, nor
is any of its property subject to, any pending, or, to the best knowledge of the
management of Commercial, threatened, claim, action, suit, investigation, or
proceeding, or subject to any judicial order, judgment or decree.
3.13 Agreements and Instruments. As of the date of this Agreement,
there are no agreements, directives, orders or similar arrangements between or
involving Commercial or any Commercial Subsidiary and any state or federal
savings institution regulatory authority.
3.14 Tax Matters. Commercial and each of the Commercial Subsidiaries
have duly and properly filed all federal, state, local and other tax returns
required to be filed by them and have made timely payments of all taxes due and
payable, whether disputed or not; there is no agreement by Commercial or any
Commercial Subsidiary for the extension of time or for the assessment or payment
of any taxes payable. Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Commercial, threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is Commercial aware of any basis for any such
assertion or claim. Commercial and each of the Commercial Subsidiaries have
complied in all material respects with applicable IRS backup withholding
requirements and have filed all appropriate information reporting returns for
all tax years for which the statute of limitations has not closed. Commercial
and each Commercial Subsidiary have complied in all material respects with all
applicable state law sales and use tax collection and reporting requirements.
3.15 Property and Assets. To the best knowledge of Commercial,
Commercial and the Commercial Subsidiaries have marketable title to all of their
real property reflected in the financial statements at June 30, 1996, referred
to in Section 3.4 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 title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Commercial and the Commercial
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 Commercial nor
any Commercial Subsidiary is in default in any material respect under any such
lease. There has been no material physical loss, damage or destruction, whether
or not covered by insurance, affecting the real properties of Commercial and the
Commercial Subsidiaries since June 30, 1996, except such loss, damage or
destruction which does not have a material adverse effect on Commercial and
Commercial Subsidiaries, taken as a whole. All property and assets material to
their business and currently used by Commercial and Commercial Subsidiaries are,
in all material respects, in good operating condition and repair, normal wear
and tear excepted.
28
3.16 Derivatives Contracts Neither Commercial nor any of the Commercial
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 on its Balance Sheet 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 3.16 of Schedule II, including a list, as applicable, of
any of its or any of its Subsidiaries' assets pledged as security for a
Derivatives Contract.
3.17 Insurance. Commercial and Commercial Subsidiaries have in effect
insurance coverage which, in respect to amounts, types and risks insured, is
reasonably adequate for the business in which Commercial and Commercial
Subsidiaries are engaged. All insurance policies in effect as to Commercial and
the Commercial Subsidiaries are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of this
Agreement have been paid, such premiums covering all periods from the date
hereof up to and including the Acquisition Merger Effective Date shall have been
paid on or before the Acquisition Merger Effective Date, to the extent then due
and payable (other than retrospective premiums which may be payable with respect
to workers' compensation insurance policies, adequate reserves for which are
reflected in Commercial's financial statements). The insurance policies are
valid, outstanding and enforceable in accordance with their respective terms and
will not in any way be affected by, or terminated or lapsed solely by reason of,
the transactions contemplated by this Agreement. Neither Commercial nor any
Commercial Subsidiary has been refused any insurance with respect to any
material properties, assets or operations, nor has any coverage been limited or
terminated by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last three years.
ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies. Between the date of this
Agreement and the Acquisition 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, upon not less than three days'
prior notice, 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 Articles II or III 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
business 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. Each party will also give prompt written notice to the
other party of any event or development (x)
29
which, had it existed or been known on the date of this Agreement, would have
been required to be disclosed under this Agreement, (y) which would cause any of
its representations and warranties contained herein to be inaccurate or
otherwise materially misleading, or (z) which materially relate to the
satisfaction of the conditions set forth in Article V of this Agreement. All
requests of Company and Savings shall be directed to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
4.2 Conduct of Business of the Company and the Company Subsidiaries.
Between the date of this Agreement and the Acquisition Merger Effective Time,
the Company and Savings agree:
(a) That the Company and the Company Subsidiaries shall
conduct their business only in the ordinary course, and maintain their books and
records in accordance with past practices and not to take any action that would
(i) adversely affect the ability to obtain the Governmental Approvals or (ii)
adversely affect the Company's ability to perform its obligations under this
Agreement;
(b) That the Company shall not, without the prior written
consent of Commercial: (i) declare, set aside or pay any dividend or make any
other distribution with respect to Company's capital stock, except for the
declaration and payment of regular quarterly cash dividends in an amount not to
exceed $.10 per share of Company common stock with respect to any full calender
quarter after the date hereof; provided, however, that in the event the Closing
occurs on or before March 31, 1998, then Company shareholders shall be entitled
to receive Commercial's regular quarterly cash dividend for the March 31, 1998
quarter and shall not be entitled to receive a dividend from Company for such
quarter to be paid during April 1998; (ii) reacquire any of Company's
outstanding shares of capital stock; (iii) issue or sell or buy any shares of
capital stock of the Company or any Company Subsidiary, except shares of Company
common stock issued pursuant to the Company Option Plan; (iv) effect any stock
split, stock dividend or other reclassification of Company's common stock; or
(v) grant any options or issue any warrants exercisable for or securities
convertible or exchangeable into capital stock of Company or any Company
Subsidiary or grant any stock appreciation or other rights with respect to
shares of capital stock of Company or of any Company Subsidiary;
(c) That Company and the Company Subsidiaries shall not,
without the prior written consent of Commercial: (i) sell or dispose of any
significant assets of the Company or of any Company Subsidiary other than in the
ordinary course of business consistent with past practices; (ii) merge or
consolidate the Company or any Company Subsidiary with or otherwise acquire any
other entity, or file any applications or make any contract with respect to
branching by Savings (whether de novo, purchase, sale or relocation) or acquire
or construct, or enter into any agreement to acquire or construct, any interest
in real property (other than with respect to security interests in properties
securing loans and properties acquired in settlement of loans in the ordinary
course) or improvements to real property; (iii) change the articles or
certificate of incorporation, charter documents or other governing instruments
of the Company or any Company Subsidiary, except as provided in this Agreement;
(iv) grant to any executive officer, director or employee of the Company or any
Company Subsidiary any increase in annual compensation, or
30
any bonus type payment, except in accordance with existing compensation
guidelines of the Company (described in Schedule 4.2(c) hereof) and except as
otherwise set forth on Schedule 4.2(c) hereof or as determined in accordance
with the Company's existing bonus plan (as in effect on the date hereof, but pro
rated to the date of Closing and calculated without regard to expenses incurred
as a result of the Merger), a copy of which plan is attached to Schedule 4.2(c);
(v) adopt any new or amend or terminate any existing Employee Plans or Benefit
Arrangements of any type except as set forth at Schedule 4.2(c); (vi) except as
set forth on Schedule 4.2(c) hereof, authorize severance pay or other benefits
for any officer, director or employee of Company or any Company Subsidiary;
(vii) incur any material indebtedness or obligation or enter into or extend any
material agreement or lease, except in the ordinary course of business
consistent with past practices; (viii) engage in any lending activities other
than in the ordinary course of business consistent with past practices; (ix)
form any new subsidiary or cause or permit a material change in the activities
presently conducted by any Company Subsidiary or make additional investments in
subsidiaries; (x) purchase any debt securities or derivative securities,
including CMO or REMIC products, that are defined as "high risk mortgage
securities" under OTS Thrift Bulletin No. 52 dated January 10, 1992 as revised
or purchase any Derivatives Contracts or Structured Notes; (xi) purchase any
equity securities other than Federal Home Loan Bank stock; (xii) make any
investment which would cause Savings to not be a qualified thrift lender under
Section 10(m) of the HOLA, or not to be a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Code; (xiii) make any loan
with a principal balance of $750,000 or more; (xiv) authorize capital
expenditures other than in the ordinary course of business; (xv) adopt or
implement any change in its accounting principles, practices or methods other
than as may be required by generally accepted accounting principles or by a
regulatory authority or adopt or implement any change in its methods of
accounting for Federal income tax purposes; or (xvi) make any loan in which
participation interests therein are to be sold to other persons or entities or
acquire a participation interest in a loan originated by another person or
entity in excess of $200,000. The limitations contained in this Section 4.2(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 4.2(c).
Notwithstanding the foregoing, Savings may engage in any of the foregoing
activities exclusively with the Bank.
4.3 No Solicitation. The Company will not authorize any officer,
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of Company or any Company Subsidiary,
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 under applicable law of the
Company Board of Directors may otherwise require (as determined in consultation
with Company legal counsel), the Company will not authorize any officer,
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of the Company or any Company Subsidiary,
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. The Company will promptly give written notice to Commercial upon
becoming aware of any
31
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 and any information requested
or discussions sought to be initiated. As used in this Agreement with respect to
the Company, "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger or other business combination
involving the Company or Savings or for the acquisition of a ten percent (10%)
or greater equity interest in Company or Savings, or for the acquisition of a
substantial portion of the assets of Company or Savings (other than loans or
securities sold in the ordinary course).
4.4 Shareholder Approvals.
(a) Subject to Section 1.7(a) herein, the Company shall call
the meeting of its shareholders to be held for the purpose of voting upon the
Articles Amendment, the Acquisition Merger and related matters, as referred to
in Section 1.7(a) hereof, as soon as practicable, but in no event later than
sixty (60) days after the Registration Statement becomes effective under the
1933 Act, provided that Company shall receive an opinion dated within five (5)
days of mailing the Prospectus/Proxy Statement that the Merger is fair to
Company shareholders from a financial point of view. In connection with such
meeting, the Company Board of Directors shall recommend approval of the Articles
Amendment and the Merger, except as the fiduciary duties of the Company's Board
of Directors may otherwise require. The Company shall use its best efforts to
solicit from its shareholders proxies in favor of approval and to take all other
action necessary or helpful to secure a vote of the holders of the shares of
Company common stock in favor of the Articles Amendment and the Merger, except
as the fiduciary duties of the Boards of Directors may otherwise require.
Immediately following receipt of approval of the Articles Amendment by the
Company's shareholders, the Company shall take all other actions necessary to
effectuate such amendment, including filing articles of amendment with the
proper authorities of the State of Kansas.
(b) Notwithstanding the foregoing at Section 4.4(a), the Board
of Directors of the Company, to the extent required by its fiduciary obligations
under applicable law, as determined in good faith by the Board of Directors
based on the advice of independent counsel, may (subject to the following
sentences) withdraw or modify its approval or recommendation of this Agreement
or the Merger or approve or recommend any superior proposal (as defined below),
or enter into an agreement with respect to such superior proposal, in each case
at any time after the second business day following Commercial's receipt of
written notice (in addition to the notice specified in Section 4.3 herein)
advising Commercial that the Board of Directors of the Company has received a
superior proposal, specifying the material terms and conditions of such superior
proposal and identifying the person making such superior proposal (it being
understood that any amendment to a superior proposal shall necessitate an
additional two business day period). For purposes of this Agreement, "superior
proposal" means any bona fide takeover proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of Company common stock then outstanding
or all or substantially all the assets of the Company and otherwise on terms
which the Board of Directors of the Company determines in its good faith
judgment (based on the advice of its financial advisor)
32
to be more favorable to the Company's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good faith
judgment of such Board of Directors, is reasonably capable of being financed by
such third party.
(c) Nothing contained in Sections 4.3 or 4.4 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the 1934 Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company based on the recommendation of independent
counsel, failure to do so would be inconsistent with applicable laws.
4.5 Filing of Holding Company and Merger Applications. Commercial shall
use its best efforts promptly to prepare, submit and file within ninety (90)
days of the date hereof a holding company application to the OTS pursuant to 12
C.F.R. ss.574.3 for acquisition of control of Company and Savings and a merger
application to the OTS pursuant to the Bank Merger Act and 12 C.F.R. 563.22(a)
for the Bank Merger and any other applications required to be filed in
connection with the transactions contemplated hereby.
4.6 Consents. Company and Savings will use their best efforts to obtain
the consent or approval of each person whose consent or approval shall be
required in order to permit Company or Savings, as the case may be, to
consummate the Acquisition Merger and the Bank Merger.
4.7 Resale Letter Agreements. After execution of this Agreement, (i)
Company shall use its best efforts to cause to be delivered to Commercial from
each person who may be deemed to be an "affiliate" of Company within the meaning
of Rule 145 under the 1933 Act, a written letter agreement in the form attached
at Schedule 4.7 regarding restrictions on resale of the shares of Commercial
Common Stock received by such persons in the Merger and upon exercise of options
received under Section 1.8 hereof subsequent to the Acquisition Merger Effective
Time to ensure compliance with applicable resale restrictions imposed under the
federal securities laws and, to the extent applicable, to ensure pooling of
interest accounting treatment and (ii) neither Commercial nor the Company
(including the Company Subsidiaries) shall take any action which would
materially impede or delay consummation of the Merger, or prevent the
transactions contemplated hereby from (A) qualifying for accounting treatment as
a "pooling of interests" (if applicable) or (B) qualifying as a reorganization
within the meaning of Section 368 of the Code.
4.8 Publicity. Between the date of this Agreement and the Acquisition
Merger Effective Time, neither Commercial, Company or any of their subsidiaries
shall, without the prior approval of the other, issue or make, or authorize 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 transactions contemplated hereto, except as required by law.
The parties shall cooperate when issuing or making any press release, disclosure
or statement with respect to Merger or the transactions contemplated hereby,
except as required by law.
33
4.9 Cooperation Generally. Between the date of this Agreement and the
Acquisition Merger Effective Time, Commercial, Company and their subsidiaries
shall use their best efforts, and take all actions necessary or appropriate, to
consummate the Merger and the other transactions contemplated by this Agreement
at the earliest practicable date. Commercial and the Bank, on one hand, and the
Company and the Company Subsidiaries, on the other hand, agree not to knowingly
take any action that would (i) adversely effect their respective ability to
obtain the Governmental Approvals or (ii) adversely affect their respective
ability to perform their obligations under this Agreement.
4.10 Additional Financial Statements and Reports. As soon as reasonably
practicable after they become publicly available, the Company shall furnish to
Commercial and Commercial shall furnish to the Company, respectively, its
balance sheet and related statements of operations, cash flows and stockholders'
equity for all periods prior to 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 Company or Commercial, as the case may be
(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 in its most recent audited consolidated balance sheet), and all of such
financial statements will be prepared in conformity with the requirements of
Form 10-Q or Form 10-K, as the case may be, under the ▇▇▇▇ ▇▇▇.
4.11 Stock Listing. Commercial agrees to use all reasonable efforts to
cause to be listed on the New York Stock Exchange, subject to official notice of
issuance, the shares of Commercial Common Stock to be issued in the Merger and
the shares issuable in accordance with Section 1.8 hereto.
4.12 Allowance for Loan and Real Estate Owned Losses. At the request of
Commercial and in an amount specified by Commercial, immediately prior to the
Acquisition Merger Effective Time, the Company and Savings shall establish such
additional provisions for loan and real estate owned losses as may be necessary
in the sole determination of Commercial to conform the Company's and Savings'
loan and real estate owned allowance practices and methods to those of
Commercial and the Bank (as such practices and methods are to be applied to
Company and Savings from and after the Acquisition Merger Effective Time);
provided, however, that Company and Savings shall not be required to take such
action until: (i) Company and Savings provide to Commercial a written statement
dated the date of Closing certified by the Chairman of the Board, the President
and the Chief Financial Officer of the Company and Savings, that the conditions
in Sections 5.1 and 5.2 to be satisfied by the Company or Savings or both of
them have been satisfied by either or both of them or, alternatively, setting
forth in detail the circumstances that have prevented such conditions from being
satisfied (the "Reliance Certificate"), and Commercial and Bank provide to
Company and Savings a Reliance Certificate relating to the satisfaction of the
conditions in Sections 5.1 and 5.3; and (ii) Commercial and the Bank, after
reviewing the Reliance Certificate, provide the Company and Savings a written
waiver of any right either entity may have to terminate the Agreement which
waiver shall contain an express condition precedent that
34
Company and Savings have established such additional provisions for loan and
real estate losses as requested by Commercial pursuant to this Section 4.12. No
additional provision for loan and real estate owned losses taken by Savings
pursuant to this Section 4.12 shall be deemed in and of itself to be a breach or
violation of any representation, warranty, covenant, condition or other
provision of this Agreement.
4.13 D&O Indemnification and Insurance. For a period of three (3) years
following the Acquisition Merger Effective Time Commercial and Bank shall
indemnify, and advance expenses in matters that may be subject to
indemnification to, persons who served as directors and officers of Company or
Savings or any Company Subsidiaries on or before the Acquisition Merger
Effective Time with respect to liabilities and claims (and related expenses,
including fees and disbursements of counsel) made against them resulting from
their service as such prior to the Acquisition Merger Effective Time in
accordance with and subject to the requirements and other provisions of the
Articles of Incorporation and Bylaws of Commercial and Bank in effect on the
date of this Agreement and applicable provisions of law to the same extent as
Commercial is obligated thereunder to indemnify and advance expenses to its own
directors and officers with respect to liabilities and claims made against them
resulting from their service for Commercial and Bank. Commercial shall cause the
persons serving as officers and directors of the Company immediately prior to
the Acquisition Merger Effective Time to be covered for a period of 18 months
from the Acquisition Merger Effective Time by the directors' and officers'
liability insurance policy maintained by the Company (provided that Commercial
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not materially less advantageous than
such policy) with respect to acts or omissions occurring prior to the
Acquisition Merger Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event shall
Commercial be required to expend more than 150% of the amount currently expended
by the Company on an annual basis to maintain or procure insurance coverage for
such 18 month period pursuant hereto. This Section 4.13 shall be construed as an
agreement as to which the directors and officers of Company and Savings referred
to herein are intended to be third party beneficiaries and shall be enforceable
by such persons and their heirs and representatives.
4.14 Tax Treatment. Commercial and Company shall use their best efforts
to cause the Merger to qualify as a reorganization under Section 368(a)(1) of
the Code. The Company agrees to consent to the form of representation letter
provided by Deloitte & Touche LLP or other tax advisor for purposes of issuing
its federal tax opinion pursuant to Section 5.1(e) of this Agreement no later
than thirty (30) days prior to the Closing.
4.15 Update Disclosure. From and after the date hereof until the
Acquisition Merger Effective Time, the Company shall promptly, but not less
frequently than monthly, update Schedule I hereto by notice to Commercial to
reflect any matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described therein
and which, in the case of all such updates other than the last such update prior
to the Acquisition Merger Effective Time, reflect a material change from the
information provided in Schedule I as of the date hereof; provided, however,
that no such update shall affect the
35
conditions to the obligation of Company and Savings to consummate the
transactions contemplated hereby, and any and all changes reflected in any such
update shall be considered in determining whether such conditions have been
satisfied.
4.16 Company's Employee Plans and Benefit Arrangements.
(a) Except as otherwise provided in this Section, if
Commercial so requests, the Company and any Company Subsidiary shall develop a
plan and timetable for terminating each Employee Plan and Benefit Arrangement as
of the date of Closing, and, with the advance written consent of Commercial,
shall proceed with the implementation of said termination plan and timetable.
The Company shall be solely responsible for all costs, expenses, and other
obligations whatsoever arising out of or resulting from termination of any
Employee Plan or Benefit Arrangement. Neither the Company nor any Company
Subsidiary will establish any new benefit plan or arrangement for directors,
officers, or employees, or amend (or commit to distribute any assets from) any
Employee Plan or Benefit Arrangement without Commercial's prior written
approval, except as provided at this Section 4.16 or at Section 7.2 hereof.
(b) With respect to any benefit plan that provides for vesting
of benefits, there shall be no discretionary acceleration of vesting, except as
set forth at Schedule 4.16(b), provided that vesting shall accelerate on the
date of Closing (i) pursuant to an amendment to the Savings defined benefit
pension plan, and (ii) in accordance with termination of the Mid-Continent
Federal Savings Bank Management Stock Bonus Plan and the Mid Continent
Bancshares, Inc. 1994 Stock Option Plan.
(c) On or prior to the Closing Date, Savings shall make all
payments due in accordance with the Management Retention Plan and the Retirement
Income Protection Plan as detailed at Schedule 4.16(c). As of the Closing Date,
Savings shall terminate the employment of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and make payment
of sums due and payable in accordance with the Employment Agreement between
Savings and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. On or prior to the Closing Date, Commercial
shall enter into a Consulting Agreement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, to be
effective as of the Closing Date as attached at Schedule 4.16(c).
It is the intention of the parties to terminate Savings'
Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇ and Change in Control Agreement with
▇▇▇▇▇▇ Siemens effective as of the Closing and to provide for such agreements to
be replaced by similar agreements between the Bank and such individuals on
mutually acceptable terms to be negotiated by the parties prior to Closing. In
the event no such replacement agreements have been executed by the 30th day
prior to Closing, then on or prior to the Closing Date, Savings may renew the
Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇ for a period not to exceed thirty-six
months from the Closing Date and shall renew the term of the Change in Control
Agreement with ▇▇▇▇▇▇ Seimens for a term not to exceed twenty-four months from
the Closing Date. Such Board actions to renew such agreements or to enter into
this Agreement shall in no way limit or restrict either employees' rights under
such respective agreements to voluntarily terminate employment and receive
compensation as a result of such actions following a change in control of
Savings, or restrict or limit Savings' right to terminate the
36
employment of such employees on or before the Closing Date and to make such
payments due under such agreements.
Bank shall give any employee of Savings that the Bank does not
intend to continue to employ for a period of at least one year after the Closing
("Temporary Transitional Employees") written notice of such intention not less
than 30 days prior to the Closing Date, in which case Company shall pay to such
Temporary Transitional Employees as of the Closing any sums to be due under the
Employee Change in Control Severance Plan or Change in Control Severance
Agreements and sums payable for accrued vacation.
(d) On or prior to the date of Closing, Company shall make the
payments specified in Schedule 4.16(d), in connection with terminating the
Mid-Continent Federal Savings Bank Directors Consultation and Retirement Plan
and Directors Change in Control Severance Plan; provided that more than 30 days
before the Closing, Savings agrees to amend the Directors Change in Control
Severance Plan to reduce the term for monthly severance payments from 36 months
to 18 months.
(e) Commercial shall honor in accordance with their terms both
the Change in Control Severance Agreements and the Employee Change in Control
Severance Plan contained at Schedule 4.16(c).
(f) Following the Closing, Commercial shall honor in
accordance with its terms the Mid-Continent Federal Savings Bank Employee Stock
Ownership Plan; provided that Savings shall be entitled to repay the ESOP Note
on a pro rated basis for the period from January 1, 1998 through the Closing
Date, and provided further that the Closing Date shall be treated as the end of
the plan year for purposes of permitting an allocation of benefits based on such
repayments.
4.17 Amendment of Savings' Federal Stock Charter. Company and Savings
will take all actions necessary to effectuate an amendment to Section 8 of
Savings' Federal Stock Charter to make inapplicable to Commercial and Bank the
restrictions therein, provided that Company and Savings may make such amendment
contingent upon consummation of the Merger.
4.18 Commercial Goodwill Claim. Between the date hereof and the
Closing, Commercial and the Bank shall not spin-off or otherwise distribute the
rights to receive payment upon resolution of the claims against the FDIC or
other agency of the Federal government with respect to the confiscation of the
goodwill as capital of the Bank.
4.19 Environmental Reports. Commercial, at its expense, shall undertake
within 15 days of the date hereof to order, and shall within 40 days (subject to
extension with the consent of the Company) after ordering, receive, a Phase I
Environmental Risk Report (as contemplated in OTS Thrift Bulletin #16)
("Report") on (i) all commercial real estate owned by, (ii) all offices and
premises used as facilities by, and (iii) all properties which serve as security
for any commercial real estate loan having an original principal balance of
$1,000,000 or more of, the Company and Savings. Failure to order such Report on
any particular properties within such 15 day period shall
37
constitute a waiver of such condition with respect to such property. In the
event that Commercial believes in good faith that such Report indicates a
reasonable likelihood that the costs to cleanup, remove, remediate, or take any
other action necessary to bring any such property or properties into material
compliance with environmental laws exceed $475,000 in the aggregate, Commercial
shall, within 15 days of its receipt of such Report, provide Company with
written notice to that effect. Commercial shall thereafter undertake to order
within 15 days of receipt of such Report and shall within 30 days of ordering
receive a Phase II Environmental Report (as contemplated in OTS Thrift Bulleting
#16) to confirm such belief. Failure to order such Phase II report ("Phase II
Report") on any particular properties within such 15 day period shall constitute
a waiver of such condition with respect to such property. Commercial shall
within seven days of receipt of such Phase II Report either deliver written
notice to Company of its termination of this Agreement in that the aggregate
costs to cleanup, remove, remediate or take such other action necessary to bring
such properties into material compliance with the environmental laws will exceed
$475,000 determined in good faith and that Commercial shall elect to terminate
this Agreement, or Commercial shall deliver in writing notice of its waiver of
the condition contained at Section 5.2(i) hereof. Failure to deliver such
written notice of its termination of the Agreement shall constitute waiver of
this condition as provided at Section 5.2(i). Commercial shall deliver complete
copies of all Phase I and Phase II reports to Company within five days of
receipt of any such reports. The contents of such reports shall remain
confidential whether or not the Merger is consummated.
ARTICLE V
CONDITIONS TO THE MERGER; TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of Commercial, the Bank, the
Company and Savings to effect the Acquisition Merger and the Bank Merger shall
be subject to the following conditions:
(a) Stockholder Approval and Effectiveness of Articles
Amendment and Charter Amendment. The holders of the outstanding shares of
Company common stock shall have approved the Articles Amendment, this Agreement
and the Acquisition Merger as specified in Section 1.7(a) hereof or as otherwise
required by applicable law, the Articles Amendment shall be effective under the
KGCC and the Charter Amendment shall be effective under applicable law.
(b) No Proceedings. No order, decree or injunction shall have
been entered and remain in force restraining or prohibiting the Merger in any
legal, administrative, arbitration, investigatory or other proceedings
(collectively, "Proceedings").
(c) Government Approvals. To the extent required by applicable
law or regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including without limitation those of
the OTS, the FDIC, the Federal Trade Commission, DOJ, the SEC, and any state
securities or Blue Sky authorities, shall have been obtained or made and any
waiting periods shall have expired in connection with the
38
consummation of the Merger. All other statutory or regulatory requirements for
the valid consummation of the Merger and related transactions 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, if the offer and sale of Commercial Common Stock in the Merger pursuant to
this Agreement is subject to the Blue Sky laws of any state, shall not be
subject to a stop order of any state securities commissioner.
(e) Federal Tax Opinion. Receipt of either an opinion of
Deloitte & Touche LLP, or other tax advisor reasonably acceptable to Commercial
and the Company, or a private letter ruling from the IRS, in form and content
reasonably satisfactory to Commercial and the Company, and upon which Company
shareholders may rely to the effects set forth at Schedule 5.1(e) hereto.
5.2 Conditions to Obligations of Commercial and Bank. The obligations
of Commercial and Bank to effect the Merger and the transactions contemplated
herein shall be subject to the following additional conditions to the extent not
waived:
(a) Opinion of Counsel for Company. Commercial shall have
received from ▇▇▇▇▇▇▇, Spidi, Sloane & ▇▇▇▇▇, P.C., and from a legal counsel
qualified to opine as to Kansas law matters and satisfactory to Commercial, an
opinion dated as of the Closing covering the matters to be set forth in Exhibit
5.2(a).
(b) Required Consents. In addition to Governmental Approvals,
Company and Savings shall have obtained all necessary third party consents or
approvals in connection with the Merger, the absence of which would materially
and adversely affect Company and the Company Subsidiaries, taken as a whole; in
this connection, the Company and Savings shall use its reasonable best efforts
to obtain consents from all lessors to their respective real estate leases that
may be required for consummation of the Merger.
(c) Company Accountants' Letter. Commercial at its expense
shall have received from Deloitte & Touche LLP, letters dated the date of
mailing the Prospectus/Proxy Statement and the date of the Closing to the effect
that: (i) with respect to the Company they are independent accountants within
the meaning of the 1933 Act and 1934 Act and the applicable rules and
regulations thereunder, (ii) it is their opinion that the audited financial
statements of the Company included in or incorporated by reference into the
Prospectus/Proxy Statement comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and 1934 Act and the
applicable published accounting rules and regulations thereunder, (iii) on the
basis of such procedures as are set forth therein but without performing an
examination in accordance with generally accepted auditing standards nothing has
come to their attention which would cause them to believe that (A) any unaudited
interim financial statements appearing in the Prospectus/Proxy Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and 1934 Act and the published rules and
regulations thereunder; (B) said financial statements are not stated on a basis
substantially consistent with that
39
of the audited financial statements; (C) (1) at the date of the latest available
consolidated financial statements of the Company and at a specific date not more
than five (5) business days prior to the date of each such letter there has
been, except as specified in such letter, any increase in the outstanding
capital stock, or indebtedness for borrowed money of the Company (other than
deposits and Federal Home Loan Bank advances with a maturity of one year or
less) or any decrease in the stockholders' equity thereof as compared with
amounts shown in the latest statement of financial condition included in the
Prospectus/Proxy Statement, or (2) for the period from the date of the latest
audited financial statements of the Company included in or incorporated by
reference into the Prospectus/Proxy Statement to a specific date not more than
five (5) business days prior to the date of each such letter, there were, except
as specified in such letter, any decreases, as compared with the corresponding
period in the preceding year, in consolidated net income for Company excluding
expenses associated with the Merger, including those incurred pursuant to
Section 4.16 and 7.2 hereof, or any increase, as compared with the corresponding
period in the preceding year, in the provision for loan losses for Company, (iv)
they have performed certain specific procedures as a result of which they
determined that certain information of an accounting, financial or statistical
nature included in the Prospectus/Proxy Statement and requested by Commercial
and agreed upon by such accountants, which is expressed in dollars (or
percentages obtained from such dollar amounts) and obtained from accounting
records which are subject to the internal controls of the Company's accounting
system or which has been derived directly from such accounting records by
analysis or computation is in agreement with such records or computations made
therefrom (excluding any questions of legal interpretation), and (v) on the
basis of such procedures as are set forth in such letter, nothing came to their
attention with respect to the Company which would cause them to believe that the
pro forma financial statements had not been properly compiled on the pro forma
basis described therein.
(d) No Material Adverse Change. Between the date of this
Agreement and the date of Closing, there shall not have occurred any material
adverse change in the financial condition, business, results of operations or
assets of Company and the Company Subsidiaries, taken as a whole, other than any
such change attributable to or resulting from any change in law, regulation or
generally accepted accounting principles which impairs both the Company and
Commercial in a substantially similar manner, and other than any such change
attributable to or resulting from changes in economic conditions applicable to
depository institutions generally or in general levels of interest rates
affecting both the Company and Commercial to a similar extent and in a similar
manner. No payments made or expenses incurred in accordance with Section 4.16
hereof shall be deemed to constitute a material adverse change under this
Section 5.2(d).
(e) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. The representations and warranties of the Company and
Savings shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Company and Savings
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Company shall have delivered to Commercial a
40
certificate, dated the Acquisition Merger Effective Time and signed by its chief
executive officer and chief financial officer, to such effect.
(f) No Litigation. Neither the Company nor any Company
Subsidiary shall be a party to any pending litigation, reasonably probable of
being determined adversely to the Company or any Company Subsidiary, which would
have a material adverse effect on the business, financial condition or results
of operations of the Company and the Company Subsidiaries, taken as a whole.
(g) Regulatory Approval. All Governmental Approvals required
hereunder to consummate the transactions contemplated hereby shall have been
obtained without the imposition of any conditions (excluding any conditions
relating to or affecting whether the Acquisition Merger qualifies as a pooling
of interests for accounting purposes) which Commercial and the Bank reasonably
and in good faith determine to be unduly burdensome upon the conduct of the
business of Commercial or the Bank and, in the reasonable judgment of
Commercial, substantially diminish the benefits expected to be received by
Commercial from the transactions contemplated hereby.
(h) Affiliates Letters. Commercial shall have received the
letter agreements from all affiliates of the Company as contemplated in Section
4.7(i) herein.
(i) Environmental Reports. Commercial shall not have exercised
its right to terminate this Agreement pursuant to Section 4.19.
(j) Amendment to Commercial Articles of Incorporation.
Commercial shall have received the approval of its shareholders to amend its
Articles of Incorporation to increase the number of authorized shares of
Commercial Common Stock as contemplated in Section 1.7(b).
5.3 Conditions to Obligations of Company and Savings. The obligations
of Company and Savings to effect the Acquisition Merger and the transactions
contemplated herein shall be subject to the following additional conditions:
(a) Opinion of Counsel for Commercial. Company shall have
received from Housley Kantarian & ▇▇▇▇▇▇▇▇▇, P.C., special counsel to
Commercial, and Fitzgerald, Schorr, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, an opinion dated as of
the Closing covering the matters to be set forth in Exhibit 5.3(a).
(b) Representations and Warranties to be True; Fulfillment of
Covenants and Conditions. The representations and warranties of Commercial and
the Bank shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Commercial and the Bank
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Commercial shall have delivered to Company a
41
certificate, dated the Acquisition Merger Effective Time and signed by its chief
executive officer and chief financial officer, to such effect.
(c) Commercial Common Stock. A certificate for the required
number of whole shares of Commercial Common Stock, as determined pursuant to
Section 1.3 hereof, and cash for fractional share interests, as so determined,
shall have been delivered to the Exchange Agent.
(d) Required Consents. In addition to Governmental Approvals,
Commercial and the Bank shall have obtained all necessary third party consents
or approvals in connection with the Merger, the absence of which would
materially and adversely affect Commercial and the Commercial Subsidiaries,
taken as a whole.
(e) NYSE Listing. The shares of Commercial Common Stock
issuable pursuant to this Agreement shall have been approved for listing on the
NYSE, subject to official notice of issuance.
5.4 Termination of Agreement and Abandonment of Merger. This Agreement
and the Acquisition Plan of Merger may be terminated at any time before the
Acquisition Merger Effective Time, whether before or after approval thereof by
shareholders of Company, 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 the Closing shall not have occurred on or before May 1,
1998, 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 5.4(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.
(c) Conditions to Commercial Performance Not Met. By
Commercial upon delivery of written notice of termination to Company if any
event occurs which renders impossible the satisfaction in any material respect
one or more of the conditions to the obligations of Commercial and the Bank to
effect the Merger set forth in Sections 5.1 and 5.2 and noncompliance is not
waived by Commercial, provided, however, that the right to terminate under this
Section 5.4(c) shall not be available to Commercial where Commercial's or Bank's
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.
(d) Conditions to Company Performance Not Met. By the Company
upon delivery of written notice of termination to Commercial if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Company and Savings to effect the Merger
set forth in Sections 5.1 and 5.3 and noncompliance is not waived by Company,
provided, however, that the right to terminate under this Section 5.4(d) shall
not be available to the Company where the Company's or Savings' failure to
perform
42
an obligation hereunder has been the cause of, or has resulted in, the failure
of the Closing to occur on or before such date.
(e) Average NYSE Closing Price. By the Company at any time
during the two business day period commencing on the business day immediately
after the end of the Determination Period, if the Average NYSE Closing Price
shall be less than $33.00 (adjusted as indicated in Section 1.3(a)(iv)),
subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section 5.4(e), it shall give
written notice to Commercial no later than the end of the aforementioned two
business day period. During the two business day period commencing with the
business day after its receipt of such notice, Commercial shall have the option
to increase the consideration to be received by the holders of Company common
stock hereunder, by adjusting the Exchange Ratio to equal the number (calculated
to four decimal places and rounded down) obtained by dividing (A) $35.08 by (B)
the Average NYSE Closing Price. If Commercial so elects within such two day
period, it shall give written notice to the Company no later than the end of the
aforementioned two day period of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section 5.4(e) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified).
For purposes of this Section 5.4, "Average NYSE Closing Price" and
"Determination Period" shall have the meanings specified in Section 1.3(b).
(f) By either party if the shareholders of the Company do not
approve the Articles Amendment at the Company Shareholders' Meeting or
adjournment thereof, in which event Commercial shall be entitled to the fee
referred to in Section 6.2(b) hereof.
(g) By Company in connection with entering into a definitive
agreement in accordance with Section 4.4(b), provided it has complied with all
provisions thereof, in which case Commercial shall be entitled to the fee
specified in Section 6.2(c) hereof.
(h) By either party if the shareholders of Commercial do not
approve the amendment to Commercial's Articles of Incorporation referred to in
Section 1.7(b) hereof by December 30, 1997, in which event Company shall be
entitled to the fee referred to in Section 6.2(b) hereof.
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
6.1 Termination; Lack of Survival of Representations and Warranties. In
the event of the termination and abandonment of this Agreement pursuant to
Section 5.4 of this Agreement, this Agreement shall become void and have no
effect, except that (i) the provisions of Sections 2.7 and 3.7 (Brokers and
Finders), 4.8 (Publicity), 4.19 (Environmental Reports; the last sentence
thereof), 6.2 (Expenses) and 8.2 (Confidentiality) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 5.4(c), 5.4(d) or 5.4(f)
43
of this Agreement shall not relieve the breaching party from liability for an
uncured intentional and willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination.
The representations, warranties and agreements of the parties set forth
in this Agreement shall not survive the Acquisition Merger Effective Time, and
shall be terminated and extinguished at the Acquisition Merger Effective Time,
and from and after the Acquisition Merger Effective Time none of the parties
hereto shall have any liability to the other on account of any breach or failure
of any of those representations, warranties and agreement; provided, however,
that the foregoing clause shall not (i) apply to agreements of the parties which
by their terms are intended to be performed after the Acquisition Merger
Effective Time, and (ii) shall not relieve any person for liability for fraud,
deception or intentional misrepresentation.
6.2 Payment of Expenses.
(a) Except as otherwise provided below, 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; provided, however,
that Commercial shall pay the expenses related to filing the Registration
Statement and Commercial and Company shall equally apportion the expenses for
printing and mailing the Prospectus/Proxy Statement.
(b) Company and Savings shall pay to Commercial a fee of
$200,000 if this Agreement is terminated pursuant to Section 5.4(f) hereof.
Commercial and Bank shall pay to Company a fee of $200,000 if this Agreement is
terminated pursuant to Section 5.4(h).
(c) In order to induce Commercial and the Bank to enter into
this Agreement and as a means of compensating Commercial and the Bank for the
substantial direct and indirect monetary and other costs incurred and to be
incurred in connection with this Agreement and the transactions contemplated
hereby, the Company and Savings agree that if this Agreement is terminated in
accordance with Sections 5.4(a), 5.4(b), 5.4(c) or 5.4(g) hereof and prior to
such termination a Termination Event, as defined in paragraph (d) of this
Section 6.2, shall have occurred, the Company or Savings will upon demand pay to
Commercial or the Bank in immediately available funds $3,000,000, inclusive of
any expense reimbursements that may otherwise be due and payable in accordance
with Section 6.2 hereunder.
(d) For purposes of this Agreement, a Termination Event shall
mean either of the following:
(i) The Company or any Company Subsidiary, without
having received Commercial's prior written consent, shall have entered into a
written agreement to engage in an Acquisition Transaction (as defined below)
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, and the rules and regulations thereunder) other than
Commercial or any affiliate of Commercial (the term "affiliate" for purposes of
this Agreement having the meaning
44
assigned thereto in Rule 405 under the ▇▇▇▇ ▇▇▇) or the Board of Directors of
the Company shall have recommended that the shareholders of the Company approve
or accept any Acquisition Transaction with any person other than Commercial or
any affiliate of Commercial. For purposes of this Agreement "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Company or any Company Subsidiary, (y) a purchase,
lease or other acquisition of all or substantially all of the assets of the
Company or any Company Subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 50% or more of the equity securities of the Company or
any Company Subsidiary; or
(ii) After a bona fide written proposal is made by
any person other than Commercial or any affiliate of Commercial to the Company
or its shareholders to engage in an Acquisition Transaction, either (A) the
Company shall have breached any covenant or obligation contained in this
Agreement and such breach would entitle Commercial to terminate this Agreement
or (B) the holders of Company common stock shall not have approved this
Agreement at the meeting of such shareholders held for the purpose of voting on
this Agreement under circumstances in which the Company's Board of Directors has
failed to make all reasonable efforts to obtain the favorable vote of Company
shareholders on the Merger, including failure to recommend the Merger to Company
shareholders, such meeting shall not have been held in a timely manner or shall
have been postponed, delayed or enjoined prior to termination of this Agreement
except as a result of a judicial or administrative proceeding or the Company's
Board of Directors shall have withdrawn or modified in a manner adverse to
Commercial the recommendation of the Company's Board of Directors with respect
to this Agreement.
ARTICLE VII
CERTAIN POST-MERGER AGREEMENTS
7.1 Reports to the SEC. Commercial shall continue to file all reports
and data with the SEC necessary to permit the shareholders of Company who may be
deemed "underwriters" (within the meaning of Rule 145 under the ▇▇▇▇ ▇▇▇) of
Company common stock to sell the Company common stock received by them in
connection with the Merger pursuant to Rules 144 and 145(d) under such Act if
they would otherwise be so entitled.
7.2 Employees. Employees of the Company or Savings who become employees
of Commercial or the Bank after the Acquisition Merger Effective Time (the
"Continuing Employees") shall be eligible to participate in all benefit plans
sponsored by Commercial or the Bank to the same extent as other similarly
situated Commercial or Bank employees; provided that Commercial shall (i) give
the Continuing Employees full credit for prior service with the Company or
Savings with respect to determination of eligibility to participate, vesting,
and benefit levels under the welfare plans sponsored by Commercial or Bank, and
with respect to determination of eligibility and vesting, but not benefit
accruals under 401(k) plans sponsored by Commercial or Bank, (ii) continue their
employment and regular salary in effect on the date of Closing until the earlier
to occur of their voluntary termination of employment and the date twelve (12)
months after the Closing, and (iii) not subject the Continuing Employees to any
uninsured waiting period or exclusion for pre-existing conditions that was not
in effect, on the Effective Date, under a medical or dental insurance plan
maintained by the Company or Savings, and (iv) have no obligation to
45
provide benefits under any Commercial plan or program that are duplicative of
benefits that employees of the Company or Savings receive under a similar plan
or program maintained by the Company or Savings after the Closing.
Commercial shall honor all accrued vacation and sick leave for the
employees of Company and the Company Subsidiaries following the Closing, to the
extent listed in Schedule 7.2 hereto but subject both to expiration within one
year of the Closing and to Commercial's policies, from the Closing forward,
applicable to the accrual of vacation pay and sick leave. Commercial shall honor
the Management Long Term Retention Plan as attached at Schedule 4.16(c), and
shall make any payment required thereunder. Commercial shall honor Savings
defined benefit pension plan, and shall fulfill all obligations to participants
thereunder in accordance with the terms of such plan.
With the exception of Temporary Transitional Employees (within the
meaning of Section 4.16(c) of this Agreement), Commercial agrees that for a
period of twelve (12) months following the Acquisition Merger Effective Time,
any employee of the Company or Savings who is not, and has not been, a party to
an employment or severance agreement with Company or Savings and whose
employment is involuntarily terminated by Commercial for a reason other than
just cause on or after the Acquisition Merger Effective Time shall be entitled
to receive both payment for accrued vacation time (provided such accrued
vacation time does not exceed five weeks) and continued payment of salary in
effect as of the Closing Date through the remainder of the one year period after
the Closing, but in no event shall such individual receive payments of less than
the benefits payable under the Mid-Continent Federal Savings Bank Change in
Control Severance Plan, which Severance Plan shall become null and void 18
months after the Closing, and the value of all accrued vacation pay for such
employee.
ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this Agreement may be
amended, whether before or after any relevant approval of shareholders, 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 adoption of the Agreement by the shareholders of the
Company, no such amendment without further shareholder approval may reduce the
amount or change the form of the consideration to be received by the Company
shareholders in the Merger.
8.2 Confidentiality. All information disclosed hereafter by any party
to this Agreement to any other party to this Agreement, including, without
limitation, any information obtained pursuant to Section 4.1 hereof, shall be
kept confidential by such other party and shall not be used by such other party
otherwise than as herein contemplated except to the extent that (i) it was known
by such other party when received, (ii) it is or hereafter becomes lawfully
obtainable from other sources, (iii) it is necessary or appropriate to disclose
to the OTS, the FDIC or any other regulatory authority having jurisdiction over
the parties or their subsidiaries or as may otherwise be required by law, or
(iv) to the extent such duty as to confidentiality is waived by the other party.
In the event of the termination of this Agreement, each party shall use all
reasonable efforts
46
to return upon request to the other parties all documents (and reproductions
thereof) received from such other parties (and, in the case of reproductions,
all such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this Section 8.2.
8.3 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 Nebraska without taking into account a provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
8.4 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, if to Commercial or Bank, to
Commercial Federal Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chairman of the Board
and Chief Executive Officer
with a copy to:
Housley Kantarian & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 700
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
and if to Company or Savings, to
Mid Continent Bancshares, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman of the Board
and Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇, Spidi, Sloane & ▇▇▇▇▇, P.C.
One Franklin Square
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
47
or such other address as shall be furnished in writing by any such party, 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.
8.5 No Assignment. This Agreement may not be assigned by any of the
parties hereto, by operation of law or otherwise, without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.6 Headings. The description heading of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be extended 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 of
the parties hereto and delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the context otherwise
requires, (a) all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and (b)
all references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
8.9 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 8.1,
constitutes the entire agreement of the parties, and supersedes any prior
written or oral agreement or understanding among any of the parties hereto
pertaining to the Merger, except for the Confidentiality and Non-Disclosure
Agreement between the Company and Commercial dated July 28, 1997, attached at
Schedule 8.9, which shall remain in full force and effect. This Agreement is not
intended to confer upon any other persons any rights or remedies hereunder
except as expressly set forth herein.
8.10 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, 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.
8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person (other than the Company, Savings, Commercial or the Bank and
their respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise expressly provided
herein.
48
8.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
49
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, all as of the
date set forth above.
COMMERCIAL FEDERAL CORPORATION MID CONTINENT BANCSHARES, INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------- ------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Title: Chairman of the Board and Chief
Operating Officer Executive Officer
COMMERCIAL FEDERAL BANK, A MID-CONTINENT FEDERAL SAVINGS BANK
FEDERAL SAVINGS BANK
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Potterff
---------------------------- ------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Title: Chairman of the Board and Chief
Operating Officer Executive Officer
50