AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EAGLE FINANCIAL CORP.,
EAGLE FEDERAL SAVINGS BANK
AND MIDCONN BANK
DATED AS OF
JANUARY 27, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER...........................................................1
1.1 The Merger...........................................................1
1.2 Effective Time.......................................................1
1.3 Effects of the Merger................................................1
1.4 Conversion of MidConn Bank Common Stock..............................2
1.5 Surviving Bank Common Stock..........................................3
1.6 Options..............................................................3
1.7 Certificate of Incorporation.........................................4
1.8 Bylaws...............................................................4
1.9 Directors and Officers...............................................4
1.10 Tax Consequences....................................................4
ARTICLE II EXCHANGE OF SHARES..................................................5
2.1 EFC to Make Shares Available.........................................5
2.2 Exchange of Shares...................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MIDCONN BANK.....................6
3.1 Corporate Organization...............................................6
3.2 Capitalization; Subsidiaries.........................................7
3.3 Authority; No Violation..............................................7
3.4 Consents and Approvals...............................................8
3.5 Loan Portfolio; Reports..............................................9
3.6 Financial Statements; Exchange Act Filings; Books and Records........9
3.7 Broker's Fees.......................................................10
3.8 Absence of Certain Changes or Events................................10
3.9 Legal Proceedings...................................................10
3.10 Taxes and Tax Returns..............................................10
3.11 Employee Benefit Plans.............................................11
3.12 Certain Contracts..................................................12
3.13 Agreements with Regulatory Agencies................................12
3.14 Charter Takeover Provisions........................................13
3.15 Environmental Matters..............................................13
3.16 Reserves for Losses................................................13
3.17 Properties and Assets..............................................14
3.18 Insurance..........................................................14
3.19 Liquidation Account................................................15
3.20 Compliance with Applicable Laws....................................15
3.21 Loans..............................................................15
3.22 Affiliates.........................................................16
3.23 Ownership of EFC Common Stock......................................16
3.24 Fairness Opinion...................................................16
3.25 MidConn DRIP.......................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EAGLE............................16
4.1 Corporate Organization..............................................17
4.2 Capitalization......................................................17
4.3 Authority; No Violation.............................................18
4.4 Consents and Approvals..............................................18
4.5 Financial Statements; Exchange Act Filings; Books and Records.......19
-i-
4.6 Absence of Certain Changes or Events................................20
4.7 Ownership of MidConn Bank Common Stock; Affiliates and Associates...20
4.8 Employee Benefit Plans..............................................20
4.9 Agreements with Regulatory Agencies.................................20
4.10 Legal Proceedings..................................................21
4.11 Reserves for Losses................................................21
4.12 Compliance with Applicable Laws....................................21
4.13 Loans..............................................................21
4.14 Environmental Matters..............................................22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...........................22
5.1 Covenants of MidConn Bank...........................................22
5.2 Covenants of EFC....................................................25
5.3 Merger Covenants....................................................26
5.4 Compliance with Antitrust Laws......................................26
5.5 Employment and Consulting Agreement.................................26
ARTICLE VI ADDITIONAL AGREEMENTS..............................................26
6.1 Regulatory Matters..................................................26
6.2 Access to Information...............................................28
6.3 Shareholder Meetings................................................28
6.4 Legal Conditions to Merger..........................................29
6.5 Publication of Combined Financial Results...........................29
6.6 Stock Exchange Listing..............................................29
6.7 Employees...........................................................29
6.8 Indemnification; Directors' and Officers' Insurance.................30
6.9 Subsequent Interim and Annual Financial Statements..................31
6.10 Additional Agreements..............................................31
6.11 Advice of Changes..................................................31
6.12 Current Information................................................31
6.13 Execution and Authorization of Articles of Combination.............32
6.14 Change in Structure................................................32
6.15 Transaction Expenses of MidConn Bank...............................32
ARTICLE VII CONDITIONS PRECEDENT..............................................32
7.1 Conditions to Each Party's Obligation To Effect the Merger..........32
7.2 Conditions to Obligations of EFC and Eagle Bank.....................34
7.3 Conditions to Obligations of MidConn Bank...........................35
ARTICLE VIII TERMINATION AND AMENDMENT........................................36
8.1 Termination.........................................................36
8.2 Effect of Termination...............................................37
8.3 Amendment...........................................................37
8.4 Extension; Waiver...................................................38
ARTICLE IX GENERAL PROVISIONS.................................................38
9.1 Closing.............................................................38
9.2 Nonsurvival of Representations, Warranties and Agreements...........38
9.3 Expenses; Breakup Fee...............................................38
9.4 Notices.............................................................39
9.5 Interpretation......................................................39
9.6 Counterparts........................................................39
9.7 Entire Agreement....................................................40
9.8 Governing Law.......................................................40
ii
9.9 Enforcement of Agreement............................................40
9.10 Severability.......................................................40
9.11 Publicity..........................................................40
9.12 Assignment; Limitation of Benefits.................................40
9.13 Additional Definitions.............................................41
EXHIBITS
A Option Agreement
B Agreement of Merger and Articles of Combination
C MidConn Bank Stockholder Agreement
D Eagle Financial Corp. Stockholder Agreement
E ▇▇▇▇▇ Employment and Consulting Agreement
iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 27, 1997 (this
"Agreement"), is entered into by and among Eagle Financial Corp., a Delaware
corporation ("EFC"), Eagle Federal Savings Bank, a federally-chartered savings
bank and wholly-owned subsidiary of EFC ("Eagle Bank"), and MidConn Bank, a
Connecticut-chartered savings bank ("MidConn Bank"). (Eagle Bank and MidConn
Bank are sometimes collectively referred to herein as the "Constituent Banks".)
WHEREAS, the Boards of Directors of EFC, Eagle Bank and MidConn Bank
have determined that it is in the best interests of their respective companies
and shareholders to consummate the business combination transaction provided for
herein in which MidConn Bank will, subject to the terms and conditions set forth
herein, merge with and into Eagle Bank, with Eagle Bank being the Surviving Bank
(as defined) and a wholly-owned subsidiary of EFC (the "Merger");
WHEREAS, as an inducement to EFC to enter into this Agreement, MidConn
Bank will enter into an option agreement, in the form attached hereto as Exhibit
A (the "Option Agreement"), with EFC immediately following the execution of this
Agreement pursuant to which MidConn Bank will grant EFC an option to purchase,
under certain circumstances, an aggregate of 485,319 newly issued shares of
common stock, par value $1.00 per share, of MidConn Bank upon the terms and
conditions therein contained; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 1.2 hereof), MidConn Bank shall merge into Eagle
Bank, with Eagle Bank being the surviving corporation (hereinafter sometimes
called the "Surviving Bank") in the Merger. Upon consummation of the Merger, the
corporate existence of MidConn Bank shall cease and the Surviving Bank shall
continue to exist as a federal savings bank under the Home Owners' Loan Act
("HOLA").
1.2 Effective Time.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the Agreement of Merger and Articles of
Combination in substantially the form set forth at Exhibit B hereto (the
"Articles of Combination") which shall be filed with the Corporate Secretary of
the Office of Thrift Supervision (the "OTS") on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective on
the Closing Date, as set forth in the Articles of Combination.
1.3 Effects of the Merger.
At and after the Effective Time, all assets and property of the
Constituent Banks shall immediately, without any further act, become the
property of the Surviving Bank to the same extent as they were the property of
the Constituent Banks, and the Surviving Bank shall be a continuation
of the entity that absorbed the Constituent Banks. All rights and obligations of
the Constituent Banks shall remain unimpaired, and the Surviving Bank shall,
upon the Effective Time, succeed to all those rights and obligations.
1.4 Conversion of MidConn Bank Common Stock.
(a) At the Effective Time, subject to Sections 2.2(e), 1.4(b)
and 8.1(h) hereof, each share of the common stock, par value $1.00 per share, of
MidConn Bank (the "MidConn Bank Common Stock") issued and outstanding prior to
the Effective Time (other than Objecting Shares (as such term is defined below
in this Section 1.4)) shall, by virtue of this Agreement and without any action
on the part of the holder thereof, be converted into and exchangeable for .86
shares (the "Exchange Ratio") of common stock of EFC, par value $.01 per share
(the "EFC Common Stock").
(b) Certificates for fractions of shares of EFC Common Stock
will not be issued. In lieu of a fraction of a share of EFC Common Stock, each
holder of MidConn Bank Common Stock otherwise entitled to a fraction of a share
of EFC Common Stock shall be entitled to receive an amount of cash equal to (i)
the fraction of a share of the EFC Common Stock to which such holder would
otherwise be entitled, multiplied by (ii) the actual market value of the EFC
Common Stock, which shall be deemed to be the average of the daily closing
prices per share for EFC Common Stock for the twenty consecutive trading days on
which shares of EFC Common Stock are actually traded (as reported on the Nasdaq
Stock Market National Market System) ending on the third trading day preceding
the Closing Date. Following consummation of the Merger, no holder of MidConn
Bank Common Stock shall be entitled to dividends or any other rights in respect
of any such fraction.
(c) All of the shares of MidConn Bank Common Stock converted
into EFC Common Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
certificate (each a "Certificate") previously representing any such shares of
MidConn Bank Common Stock shall thereafter represent the right to receive (i)
the number of whole shares of EFC Common Stock and (ii) cash in lieu of
fractional shares into which the shares of MidConn Bank Common Stock represented
by such Certificate have been converted pursuant to Section 1.4(a) and (b)
hereof. Certificates previously representing shares of MidConn Bank Common Stock
shall be exchanged for certificates representing whole shares of EFC Common
Stock and cash in lieu of fractional shares issued in consideration therefor
upon the surrender of such Certificates in accordance with Section 2.2 hereof,
without any interest thereon. If prior to the Effective Time EFC should split or
combine its common stock, or pay a dividend or other distribution in such common
stock, then the Exchange Ratio shall be appropriately adjusted to reflect such
split, combination, dividend or other distribution.
(d) At the Effective Time, all shares of MidConn Bank Common
Stock that are owned by MidConn Bank as treasury stock and all shares of MidConn
Bank Common Stock that are owned directly or indirectly by EFC or MidConn Bank
or any of EFC's Subsidiaries (other than shares of MidConn Bank Common Stock
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by third
parties (any such shares which are similarly held, whether held directly or
indirectly by EFC or MidConn Bank, as the case may be, being referred to herein
as "Trust Account Shares") and other than any shares of MidConn Bank Common
Stock held by EFC or MidConn Bank or any of EFC's Subsidiaries in respect of a
debt previously contracted (any such shares of MidConn Bank Common Stock which
are similarly held, whether held directly or indirectly by EFC or MidConn Bank,
being referred to herein as "DPC Shares")) shall be canceled and shall cease to
exist and no stock of EFC or other consideration shall be delivered in exchange
therefor. All shares of EFC Common Stock that are owned by MidConn Bank (other
than Trust Account Shares and DPC Shares) shall become treasury stock of EFC.
(e) Notwithstanding anything in this Agreement to the contrary
and unless otherwise provided by applicable law, shares of MidConn Bank Common
Stock that are issued and
2
outstanding immediately prior to the Effective Time and that are owned by
shareholders who have properly objected within the meaning of Sections
36a-125(h) and 33-374 of the Connecticut General Statutes (the "Objecting
Shares"), shall not be converted into the right to receive shares of EFC Common
Stock, unless and until such shareholders shall have failed to perfect or shall
have effectively withdrawn or lost their right of payment under applicable law.
If any such shareholder shall have failed to perfect or shall have effectively
withdrawn or lost such right of payment, each share of MidConn Bank Common Stock
held by such shareholder shall thereupon be deemed to have been converted into
the right to receive and become exchangeable for, at the Effective Time, shares
of EFC Common Stock pursuant to Section 1.04(a) hereof.
(f) MidConn Bank shall give EFC (i) prompt notice of any
objections filed pursuant to Section 36a-125(h) of the Connecticut General
Statutes received by MidConn Bank, withdrawals of such objections, and any other
instruments served in connection with such objections pursuant to the
Connecticut General Statutes and received by MidConn Bank and (ii) the
opportunity to direct all negotiations and proceedings with respect to
objections under the Connecticut General Statutes consistent with the
obligations of MidConn Bank thereunder. MidConn Bank shall not, except with the
prior written consent of EFC, (x) make any payment with respect to any such
objection, (y) offer to settle or settle any such objections or (z) waive any
failure to timely deliver a written objection in accordance with the Connecticut
General Statutes.
1.5 Surviving Bank Common Stock.
Each of the shares of the common stock, par value $.01 per share, of
Eagle Bank issued and outstanding immediately prior to the Effective Time shall
become shares of the Surviving Bank after the Merger and shall thereupon
constitute all of the issued and outstanding shares of the Surviving Bank.
1.6 Options.
(a) Provided that each option granted by MidConn Bank to purchase
shares of MidConn Bank Common Stock pursuant to the MidConn Stock Option Plans
(defined below) that is outstanding and unexercised immediately before the
Effective Time (a "MidConn Option") is then vested and exercisable in full
pursuant to the terms thereof and provided, further, that the substitution of
EFC Common Stock for and cancellation of each MidConn Option contemplated by
this Section 1.6(a) is permitted under the terms of each MidConn Option, then
each holder of a MidConn Option shall have the right to receive, at the
Effective Time, in substitution for and cancellation of such MidConn Option,
shares of EFC Common Stock in accordance with the formula set out below. The
"Option Value" of each MidConn Option shall be the product of (w) the number of
whole shares of MidConn Bank Common Stock that could be purchased immediately
before the Effective Time upon exercise of the MidConn Option times the excess
of the product of (x) the actual market value of a share of EFC Common Stock
(determined in accordance with Section 1.4(b) hereof) (the "AMV") multiplied by
(y) the Exchange Ratio over (z) the per share exercise price of such MidConn
Option. At the Effective Time, each holder of a MidConn Option shall receive, in
substitution for and cancellation thereof, a number of shares of EFC Common
Stock equal to the Option Value divided by the AMV.
(b) If the conditions set out in the first sentence of Section 1.6(a)
are not satisfied as of the Effective Time as to every MidConn Option, each
MidConn Option shall be converted automatically into an option to purchase
shares of EFC Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the applicable MidConn
Stock Option Plans and the option agreement with respect to the Option):
(1) The number of shares of EFC Common Stock to be
subject to each MidConn Option immediately after the
Effective Time shall be equal to the product of (a)
the number of shares of MidConn Bank Common Stock
subject to the Option
3
immediately before the Effective Time, multiplied by
(b) the Exchange Ratio, provided, that any fractional
shares of EFC Common Stock resulting from such
multiplication shall be rounded to the nearest share;
and
(2) The exercise price per share of EFC Common Stock
under the MidConn Option immediately after the
Effective Time shall be equal to the exercise price
per share of MidConn Bank Common Stock under such
Option immediately before the Effective Time divided
by the Exchange Ratio, provided that such exercise
price shall be rounded to the nearest cent.
The conversion of the MidConn Options provided for in this Section 1.6(b) shall
be and is intended to be effected in a manner consistent with Section 424(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). The duration and
other terms of each such MidConn Option immediately after the Effective Time
shall be the same as the corresponding terms in effect immediately before the
Effective Time, except that all references to MidConn Bank in the MidConn Stock
Option Plans (and the corresponding references in the option agreement
documenting such Option) shall be deemed to be references to EFC. For purposes
of this Agreement, the MidConn Stock Option Plans are the (i) MidConn Bank 1986
Stock Option and Incentive Plan, (ii) MidConn Bank 1986 Stock Option Plan for
Outside Directors, (iii) MidConn Bank 1994 Stock Option and Incentive Award
Plan, and (iv) MidConn Bank 1994 Stock Option Plan for Outside Directors.
1.7 Certificate of Incorporation.
At the Effective Time, the federal stock charter of Eagle Bank, as in
effect at the Effective Time, shall be the charter of the Surviving Bank.
1.8 Bylaws.
At the Effective Time, the Bylaws of Eagle Bank, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Bank.
1.9 Directors and Officers.
At the Effective Time, the directors and officers of Eagle Bank
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Bank. One director of MidConn Bank, to be selected by the Board of
Directors of EFC in consultation with the directors of MidConn Bank, shall be
invited to serve as an additional member of the Board of Directors of EFC in the
class of directors whose term expires as of EFC's annual meeting following the
fiscal year ended September 30, 1999. Eagle Bank's Board of Directors also will
be expanded to add such additional director upon the Merger.
1.10 Tax Consequences.
It is intended that the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of the Code.
4
ARTICLE II
EXCHANGE OF SHARES
2.1 EFC to Make Shares Available.
At or prior to the Effective Time, EFC shall deposit, or shall cause to
be deposited, with EFC's transfer agent, Boston Equiserve, L.P., or such other
bank, trust company or transfer agent as EFC may select (the "Exchange Agent"),
for the benefit of the holders of Certificates, for exchange in accordance with
this Article II, certificates representing the shares of EFC Common Stock and
the cash in lieu of fractional shares (such cash and certificates for shares of
EFC Common Stock, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) hereof in
exchange for outstanding shares of MidConn Bank Common Stock.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, and in no
event later than five business days thereafter, the Exchange Agent shall mail to
each holder of record of a Certificate or Certificates a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of EFC Common Stock and the cash in lieu of fractional shares into which
the shares of MidConn Bank Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. MidConn Bank
shall have the right to review both the letter of transmittal and the
instructions prior to such documents being finalized. Upon surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of EFC Common Stock to which such holder of MidConn Bank
Common Stock shall have become entitled pursuant to the provisions of Article I
hereof and (y) a check representing the amount of cash in lieu of fractional
shares, if any, which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to EFC Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of EFC Common Stock
represented by such Certificate. No holder of an unsurrendered Certificate shall
be entitled, until the surrender of such Certificate, to vote the shares of EFC
Common Stock into which his MidConn Bank Common Stock shall have been converted.
(c) If any certificate representing shares of EFC Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of EFC Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
5
(d) After the close of business on the day immediately prior
to the Effective Time, there shall be no transfers on the stock transfer books
of MidConn Bank of the shares of MidConn Bank Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be canceled and exchanged for certificates
representing shares of EFC Common Stock as provided in this Article II.
(e) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of MidConn Bank for six months after the Effective Time shall
be returned to EFC. Any shareholders of MidConn Bank who have not theretofore
complied with this Article II shall thereafter look only to EFC for payment of
their shares of EFC Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on EFC Common Stock deliverable in respect of each
share of MidConn Bank Common Stock such shareholder holds as determined pursuant
to this Agreement, in each case, without any interest thereon. Notwithstanding
the foregoing, none of EFC, MidConn Bank, the Exchange Agent or any other person
shall be liable to any former holder of shares of MidConn Bank Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
EFC, the posting by such person of a bond in such amount as EFC may reasonably
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of EFC Common Stock and cash in lieu
of fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MIDCONN BANK
MidConn Bank hereby makes the following representations and warranties
to EFC and Eagle Bank as set forth in this Article III, each of which is being
relied upon by EFC and Eagle Bank as a material inducement to enter into and
perform this Agreement. All of the disclosure schedules of MidConn Bank
referenced below and thereby required of MidConn Bank pursuant to this
Agreement, which disclosure schedules shall be cross-referenced to the specific
sections and subsections of this Agreement and delivered herewith, are referred
to herein as the "MidConn Disclosure Schedule."
3.1 Corporate Organization.
MidConn Bank is a savings bank duly organized, validly existing
and in good standing under the corporate and banking laws of the State of
Connecticut. MidConn Bank has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of any material business conducted by it or the character or
location of any material properties or assets owned or leased by it makes such
licensing or qualification necessary. The deposit accounts in MidConn Bank are
insured by the Federal Deposit Insurance Corporation (the "FDIC") through the
Bank Insurance Fund and the Savings Association Fund in the proportion set forth
at Section 3.1 of the MidConn Disclosure Schedule to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid by MidConn Bank. The Amended and Restated Certificate
of Incorporation and Bylaws of MidConn Bank, copies of which are provided
atSection 3.1 of the MidConn Disclosure Schedule, are true, correct and complete
copies of such documents as in effect as of the date of this Agreement.
6
3.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of MidConn Bank consists of
8,000,000 shares of MidConn Bank Common Stock and 1,000,000 shares of serial
preferred stock, no par value (the "MidConn Bank Preferred Stock"). As of the
date hereof, there are (x) 1,953,469 shares of MidConn Bank Common Stock issued
and outstanding, (y) no shares of MidConn Bank Common Stock reserved for
issuance upon exercise of outstanding stock options or otherwise, except for (i)
83,830 shares of MidConn Bank Common Stock reserved for issuance pursuant to
outstanding options under the MidConn Stock Option Plans and (ii) 485,319 shares
of MidConn Bank Common Stock reserved for issuance upon exercise of the option
to be issued to EFC pursuant to the Option Agreement, and (z) no shares of
MidConn Bank Preferred Stock issued or outstanding, held in MidConn Bank's
treasury or reserved for issuance upon exercise of outstanding stock options or
otherwise. All of the issued and outstanding shares of MidConn Bank Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. Except with respect to the aforementioned options to purchase
83,830 shares of MidConn Bank Common Stock issued pursuant to the MidConn Stock
Option Plans and for the Option Agreement, and except for formula option grants
under the MidConn Bank 1994 Stock Option Plan for Outside Directors, MidConn
Bank does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of MidConn Bank Common Stock or MidConn Bank
Preferred Stock or any other equity security of MidConn Bank or any securities
representing the right to purchase or otherwise receive any shares of MidConn
Bank Common Stock or any other equity security of MidConn Bank. The names of the
optionees, the date of each option to purchase MidConn Bank Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under the applicable MidConn Stock Option Plan are set forth in Section 3.2(a)
of the MidConn Disclosure Schedule. Since September 30, 1996, MidConn Bank has
not issued any shares of its capital stock or any options or other securities
convertible into or exercisable for any shares of its capital stock, other than
pursuant to the exercise of director or employee stock options granted prior to
September 30, 1995 under the MidConn Stock Option Plans or shares issued
pursuant to the MidConn Bank Dividend Reinvestment Plan (the "MidConn DRIP") and
other formula option grants under the MidConn Bank 1994 Stock Option Plan for
Outside Directors.
(b) Except as set forth at Section 3.2(b) of the MidConn
Disclosure Schedule, MidConn Bank has no Subsidiaries, and has not owned any
Subsidiaries during the period from September 30, 1985 through the date hereof.
3.3 Authority; No Violation.
(a) MidConn Bank has full corporate power and authority to
execute and deliver this Agreement, the Articles of Combination and the Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Articles of Combination and
the Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of Directors
of MidConn Bank. The Board of Directors of MidConn Bank has directed that this
Agreement and the transactions contemplated hereby be submitted to MidConn
Bank's shareholders for approval at a special meeting of such shareholders and,
except for the adoption of this Agreement, including the Articles of
Combination, by the requisite vote of MidConn Bank's shareholders, no other
corporate proceedings on the part of MidConn Bank (except for matters related to
setting the date, time, place and record date for the special meeting) are
necessary to approve this Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been, and the
Articles of Combination and the Option Agreement, upon execution and delivery by
MidConn Bank, will be duly and validly executed and delivered by MidConn Bank
and (assuming due authorization, execution and delivery by EFC and Eagle Bank of
this Agreement and by EFC of the Option Agreement) will constitute valid and
binding obligations of MidConn Bank, enforceable against
7
MidConn Bank in accordance with their terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) None of the execution and delivery of this Agreement, the
Option Agreement or the Articles of Combination by MidConn Bank, nor the
consummation by MidConn Bank of the transactions contemplated hereby or thereby,
nor compliance by MidConn Bank with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Amended and Restated Certificate
of Incorporation or Bylaws of MidConn Bank, or (ii) assuming that the consents
and approvals referred to in Section 3.4 hereof are duly obtained, (x) violate
any Laws (as defined in Section 9.13 hereof) applicable to MidConn Bank or any
of its properties or assets, or (y) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of MidConn Bank under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which MidConn
Bank is a party, or by which it or any of its properties or assets may be bound
or affected.
3.4 Consents and Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger with the OTS under the HOLA and the Bank Merger Act
and approval of such applications and notices, (ii) the filing of applications
and notices with the Banking Commissioner of the State of Connecticut (the
"Connecticut Commissioner") and approval of such applications and notices as to
the Merger (the "State Banking Approvals"), (iii) the filing with the
Connecticut Commissioner of an acquisition statement pursuant to Section 36a-184
of the Banking Law of the State of Connecticut prior to the acquisition of more
than 10% of the MidConn Bank Common Stock pursuant to the Option Agreement, if
not exempt, (iv) the filing with the Securities and Exchange Commission (the
"SEC") of a registration statement on Form S-4 to register the shares of EFC
Common Stock to be issued in connection with the Merger (including the shares of
EFC Common Stock that may be issued upon the exercise of the options referred to
in Section 1.6 hereof) and the filing of a Form F-5 with the FDIC, both of which
will include the joint proxy statement/prospectus to be used in soliciting the
approval of MidConn Bank's and EFC's shareholders at special meetings to be held
in connection with this Agreement and the transactions contemplated hereby (the
"Joint Proxy Statement/Prospectus"), (v) the approval of this Agreement by the
requisite vote of the shareholders of MidConn Bank, (vi) the approval of the
issuance of EFC Common Stock hereunder by a majority of the total votes cast in
person or by proxy of EFC Common Stock, (vii) the filings with the OTS required
by the Articles of Combination, and (viii) such other filings, authorizations or
approvals as may be set forth in Section 3.4(a) of the MidConn Disclosure
Schedule, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (any and each, a "Governmental Entity") or with any third party
are necessary in connection with (1) the execution and delivery by MidConn Bank
of this Agreement, the Option Agreement and the Articles of Combination, (2) the
consummation by MidConn Bank of the Merger, the Articles of Combination and the
other transactions contemplated hereby, and (3) the consummation by MidConn Bank
of the Option Agreement; except, in each case, for such consents, approvals or
filings, the failure of which to obtain will not have a material adverse effect
on the ability of EFC to consummate the transactions contemplated hereby.
(b) MidConn Bank has no knowledge of any reason why approval
or effectiveness of any of the applications, notices or filings referred to in
Section 3.4(a) hereof cannot be obtained or granted on a timely basis.
8
3.5 Loan Portfolio; Reports.
(a) As of September 30, 1996 and thereafter, through and
including the date of this Agreement, except as set forth at Section 3.5(a) of
the MidConn Disclosure Schedule, MidConn Bank is not a party to any written or
oral loan agreement, note or borrowing arrangement (including, without
limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any director, officer or
five percent or greater shareholder of MidConn Bank or any Affiliated Person (as
defined in Section 9.13 hereof) of the foregoing.
(b) MidConn Bank has timely filed all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that it was required to file since September 30, 1990 with (i) the
FDIC, (ii) the Connecticut Commissioner and any other state banking commissions
or any other state regulatory authority (each a "State Regulator"), (iii) the
SEC and (iv) the Nasdaq Stock Market and any other self-regulatory organization
("SRO") (collectively, "Regulatory Agencies"). Except for normal examinations
conducted by a Regulatory Agency in the regular course of the business of
MidConn Bank, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of MidConn Bank
since September 30, 1990, nor does MidConn Bank have knowledge of any pending or
threatened proceeding or investigation.
3.6 Financial Statements; Exchange Act Filings; Books and Records.
(a) MidConn Bank has previously delivered to EFC true, correct
and complete copies of (a) the statements of condition of MidConn Bank as of
September 30 for the fiscal years 1994, 1995, and 1996 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the fiscal years 1993 through 1996, inclusive, as reported in MidConn
Bank's Annual Report on Form F-2 for the fiscal year ended September 30, 1996
filed with the FDIC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the regulations of the FDIC thereunder, in each case
accompanied by the audit report of Coopers & ▇▇▇▇▇▇▇ L.L.P. (Coopers &
▇▇▇▇▇▇▇"), independent public accountants with respect to MidConn Bank. The
financial statements referred to in this Section 3.6 (including the related
notes, where applicable) fairly present, and the financial statements referred
to in Section 6.9 hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the operations and the financial condition of MidConn
Bank for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where applicable)
comply, and the financial statements referred to in Section 6.9 hereof will
comply, with applicable accounting requirements and with the published rules and
regulations of the FDIC or SEC, if applicable with respect thereto, and each of
such statements (including the related notes, where applicable) has been, and
the financial statements referred to in Section 6.9 hereof will be, prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by the FDIC's Quarterly Report on Form F-4. MidConn Bank's Annual
Report on Form F-2 for the fiscal year ended September 30, 1996 and all
subsequently filed reports under Sections 13(a), 13 (c), 14 or 15(d) of the
Exchange Act comply in all material respects with the appropriate requirements
for such reports under the Exchange Act, and MidConn Bank has included at
Section 3.6(a) of the MidConn Disclosure Schedule true, correct and complete
copies of such reports.
(b) The audits of MidConn Bank have been conducted in
accordance with generally accepted auditing standards. The books and records of
MidConn Bank are being maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements and reflect only
actual transactions.
9
(c) Except and to the extent (i) reflected, disclosed or
provided for in the financial statements as of September 30, 1996 referred to
above, (ii) of liabilities incurred since September 30, 1996 in the ordinary
course of business and consistent with past practice, and (iii) of liabilities
related to the Agreement, MidConn Bank has no liabilities, whether absolute,
accrued, contingent or otherwise.
(d) The minute books of MidConn Bank contain records of all
meetings and other corporate action held of its shareholders and Board of
Directors (including committees thereof) that are complete and accurate in all
material respects.
3.7 Broker's Fees.
Neither MidConn Bank nor any of its officers or directors has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, the Articles of Combination or the Option
Agreement, except that MidConn Bank has engaged, and will pay a financial
advisory fee to ▇▇▇▇▇▇▇▇▇ & Company, Inc. ("O & Co.") in accordance with the
terms of a letter agreement, a true, correct and complete copy of which is
included at Section 3.7 of the MidConn Disclosure Schedule.
3.8 Absence of Certain Changes or Events.
(a) Except as disclosed in MidConn Bank's Annual Report on
Form F-2 for the fiscal year ended September 30, 1996, or in any Current or
Quarterly Report of MidConn Bank on Form F-8 or Form F-4 filed on or prior to
the date of this Agreement, since September 30, 1996 (i) MidConn Bank has not
incurred any material liability, except as contemplated by this Agreement or in
the ordinary course of its business consistent with past practices, and (ii) no
event has occurred which has had, or is likely to have, individually or in the
aggregate, a Material Adverse Effect (as defined Section 9.13 hereof) on MidConn
Bank.
(b) Since September 30, 1996, MidConn Bank has carried on its
business in the ordinary and usual course consistent with past practices.
3.9 Legal Proceedings.
(a) Except as set forth at Section 3.9 of the MidConn
Disclosure Schedule, MidConn Bank is not a party to any, and there are no
pending or threatened, legal, administrative, arbitration or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against MidConn Bank or which challenge the validity or propriety of the
transactions contemplated by this Agreement, the Articles of Combination or the
Option Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon MidConn Bank or the assets of MidConn Bank.
3.10 Taxes and Tax Returns.
MidConn Bank has duly filed all federal and state tax returns required
to be filed by it on or prior to the date hereof (all such returns being
accurate and complete in all material respects) and has duly paid or made
provisions for the payment of all material taxes and other governmental charges
which have been incurred or are due or claimed to be due from it by federal and
state taxing authorities on or prior to the date hereof other than taxes or
other charges (a) which (x) are not yet delinquent or (y) are being contested in
good faith and set forth at Section 3.10 of the MidConn Disclosure Schedule and
(b) which have not been finally determined. Except as set forth in Section 3.10
of the MidConn Disclosure Schedule, all liability with respect to the income tax
returns of MidConn Bank has been satisfied for all years to and including 1995.
The Internal Revenue Service ("IRS") has not notified
10
MidConn Bank of, or otherwise asserted, that there are any material deficiencies
with respect to the income tax returns of MidConn Bank subsequent to 1990. There
are no material disputes pending, or claims asserted for, taxes or assessments
upon MidConn Bank, nor has MidConn Bank been requested to give any currently
effective waivers extending the statutory period of limitation applicable to any
federal or state income tax return for any period. In addition, federal and
state returns which are accurate and complete in all material respects have been
filed by MidConn Bank for all periods for which returns were due with respect to
income tax withholding, Social Security and unemployment taxes and the amounts
shown on such federal and state returns to be due and payable have been paid in
full or adequate provision therefor has been included by MidConn Bank in its
financial statements as of September 30, 1996.
3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the MidConn Disclosure Schedule sets
forth a true and complete list of each employee benefit plan (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), arrangement or agreement that is maintained as of the date
of this Agreement (the "Plans") by MidConn Bank and any other entity which
together with MidConn Bank would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m).
(b) Section 3.11(b) of the MidConn Disclosure Schedule
includes true, correct and complete copies of each of the Plans and all related
documents, including but not limited to (i) the actuarial report for such Plan
(if applicable) for each of the last five years, (ii) the most recent
determination letter from the IRS (if applicable) for such Plan, (iii) the
current summary plan description and any summaries of material modifications,
(iv) all annual reports (Form 5500 series) for each Plan filed for the preceding
five plan years, (v) all agreements with fiduciaries and service providers
relating to the Plan, and (vi) all substantive correspondence relating to any
such Plan addressed to or received from the IRS, the Department of Labor, the
Pension Benefit Guaranty Corporation or any other governmental agency.
(c) Except as set forth at Section 3.11(c) of the MidConn
Disclosure Schedule, (i) each of the Plans has been operated and in all material
respects administered in compliance with applicable Laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of MidConn Bank (or any former Subsidiary) beyond their
retirement or other termination of service, other than (w) coverage mandated by
applicable Law, (x) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits accrued as liabilities on the books of MidConn Bank, or
(z) benefits the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no liability under the Title IV of ERISA has been
incurred or assumed by MidConn Bank that has not been satisfied in full, and no
condition exists that presents a material risk to MidConn Bank incurring a
material liability thereunder, (vi) no Plan is a "multi employer pension plan,"
as such term is defined in Section 3(37) of ERISA, (vii) all contributions or
other amounts payable by MidConn Bank as of the Effective Time with respect to
each Plan in respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section 412 of the
Code, (viii) MidConn Bank has not engaged in a transaction in connection with
which MidConn Bank could be subject to either a civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or
4976 of the Code, (ix) to the knowledge of MidConn Bank, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or
11
against any of the plans or any trusts related thereto, and (x) all Plans (other
than Plans providing for the payment of benefits from the general assets of
MidConn Bank) could be terminated as of the Effective Time without material
liability; (xi) no Plan, program, agreement or other arrangement, either
individually or collectively, including as a result of this Agreement, provides
for any payment by MidConn Bank that would not be deductible under Code Sections
162(a)(1) or 404 or that would constitute a "parachute payment" within the
meaning of Code Section 280G; (xii) no "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not
waived, and no "unfunded current liability" as determined under Section 412(l)
of the Code exists with respect to any Plan; and (xiii) no Plan has experienced
a "reportable event" (as such term is defined in Section 4043(b) of ERISA) that
is not subject to an administrative or statutory waiver from the reporting
requirement.
3.12 Certain Contracts.
(a) Except as set forth at Section 3.12(a) of the MidConn
Disclosure Schedule, MidConn Bank is not a party to or bound by any contract,
arrangement or commitment (i) with respect to the employment of any directors,
officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement, the Option Agreement or the
Articles of Combination will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from EFC, Eagle Bank, MidConn Bank, the Surviving Bank
or any of EFC's Subsidiaries to any director, officer or employee thereof, (iii)
which materially restricts the conduct of any line of business by MidConn Bank,
(iv) with or to a labor union or guild (including any collective bargaining
agreement) or (v) (including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan) any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement, the
Option Agreement or the Articles of Combination, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, the Option Agreement or the Articles of
Combination. Section 3.12(a) of the MidConn Disclosure Schedule includes true,
correct and complete copies of all employment, consulting and deferred
compensation agreements to which MidConn Bank is a party. Section 3.12(a) of the
MidConn Disclosure Schedule sets forth a list of all material contracts (as
defined in Item 601(b)(10) of the SEC's Regulation S-K) of MidConn Bank. Each
contract, arrangement or commitment of the type described in this Section
3.12(a), whether or not set forth in Section 3.12(a) of the MidConn Disclosure
Schedule, is referred to herein as a "MidConn Bank Contract," and MidConn Bank
has not received notice of, nor does it have knowledge of, any violation of any
MidConn Bank Contract.
(b) (i) Each MidConn Bank Contract is valid and binding and in
full force and effect, (ii) MidConn Bank has in all material respects performed
all obligations required to be performed by it to date under each MidConn Bank
Contract, and (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of MidConn Bank under any such MidConn Bank Contract.
3.13 Agreements with Regulatory Agencies.
MidConn Bank is not subject to any cease-and-desist or other order
issued by, nor is it a party to any written agreement, consent agreement or
memorandum of understanding with, nor has it adopted any board resolutions at
the request of (each, whether or not set forth on Section 3.13 of the MidConn
Disclosure Schedule, a "Regulatory Agreement"), any Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
MidConn Bank been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
12
3.14 Charter Takeover Provisions.
The Board of Directors of MidConn Bank has approved the offer of EFC to
enter into this Agreement, the Articles of Combination and the Option Agreement
such that the voting, price and procedural provisions of Articles Seventh and
Fourteenth of MidConn Bank's Amended and Restated Certificate of Incorporation
will not apply to the offer to enter into this Agreement, the Articles of
Combination or the Option Agreement or any of the transactions contemplated
hereby or thereby.
3.15 Environmental Matters.
(a) MidConn Bank is in compliance in all material respects
with all applicable federal and state laws and regulations relating to pollution
or protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Material (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation
or notice pending or to the knowledge of MidConn Bank threatened (or past or
present actions or events that could form the basis of any such suit, claim,
action, proceeding, investigation or notice), in which MidConn Bank has been or,
with respect to threatened suits, claims, actions, proceedings, investigations
or notices may be, named as a defendant (x) for alleged noncompliance (including
by any predecessor), with any environmental law, rule or regulation or (y)
relating to any material release or threatened release into the environment of
any Hazardous Material, whether or not occurring at or on a site owned, leased
or operated by MidConn Bank;
(c) To the knowledge of MidConn Bank, during the period of
MidConn Bank's ownership or operation of any of its properties, there has not
been any material release of Hazardous Material in, on, under or affecting any
such property.
(d) To the knowledge of MidConn Bank, MidConn Bank has not
made or participated in any loan to any person who is subject to any suit,
claim, action, proceeding, investigation or notice, pending or threatened, with
respect to (i) any alleged noncompliance as to any property securing such loan
with any environmental law, rule or regulation, or (ii) the release or the
threatened release into the environment of any Hazardous Material at a site
owned, leased or operated by such person on any property securing such loan.
(e) For purposes of this Section 3.15 and Section 4.14, the
term "Hazardous Material" means any hazardous waste, petroleum product,
polychlorinated biphenyl, chemical, pollutant, contaminant, pesticide,
radioactive substance, or other toxic material, or other material or substance
(in each such case, other than small quantities of such substances in retail
containers) regulated under any applicable environmental or public health
statute, law, ordinance, rule or regulation.
(f) No real property owned or leased by MidConn Bank as other
real estate owned ("OREO") or otherwise, or owned or controlled by MidConn Bank
as a trustee or fiduciary meets the statutory criteria of an "Establishment" as
that term is defined pursuant to the Connecticut Transfer of Establishments Act,
P.A. 95-183.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected in
MidConn Bank's financial statements referred to in Section 3.6 hereof as of
September 30, 1996 complied with all Laws and are adequate under GAAP.
MidConn Bank has not been notified by the FDIC, the Connecticut
13
Commissioner or MidConn Bank's independent auditor, in writing or otherwise,
that such reserves are inadequate or that the practices and policies of MidConn
Bank in establishing such reserves and in accounting for delinquent and
classified assets generally fail to comply with applicable accounting or
regulatory requirements, or that the FDIC, the Connecticut Commissioner or
MidConn Bank's independent auditor believes such reserves to be inadequate or
inconsistent with the historical loss experience of MidConn Bank. Section 3.16
of the MidConn Disclosure Schedule sets forth a complete list of all extensions
of credit and OREO that have been classified by any bank examiner as of the most
recently completed examination of MidConn Bank by each of any regulatory or
internal examiner, or other regulatory authority, or otherwise categorized by
MidConn Bank as special mention, substandard, doubtful, loss, classified or
criticized, credit risk assets, concerned loans or words of similar import.
MidConn Bank agrees to (i) update such list no less frequently than quarterly
and (ii) provide no less frequently than monthly a schedule of delinquent loans,
in each case from the date of this Agreement until the earlier of the Closing
Date or the date that this Agreement is terminated in accordance with Section
8.1 hereof. All OREO held by MidConn Bank is recorded in accordance with GAAP.
3.17 Properties and Assets.
Section 3.17 of the MidConn Disclosure Schedule lists (i) all real
property owned by MidConn Bank (other than OREO); (ii) each real property lease,
sublease or installment purchase arrangement to which MidConn Bank is a party;
(iii) a description of each contract for the purchase, sale, or development of
real estate to which MidConn Bank is a party; and (iv) all items of MidConn
Bank's tangible personal property and equipment with a book value of $25,000 or
more or having any annual lease or similar payment requirements of $25,000 or
more. Except for (a) items reflected in MidConn Bank's financial statements as
of September 30, 1996 referred to in Section 3.6 hereof, (b) exceptions to title
that do not interfere materially with MidConn Bank's use and enjoyment of owned
or leased real property (other than OREO), (c) liens for current real estate
taxes not yet delinquent, or being contested in good faith, properly reserved
against (and reflected on the financial statements referred to in clause (a)
above), (d) properties and assets sold or transferred in the ordinary course of
business consistent with past practices since September 30, 1996, and (e) items
listed in Section 3.17 of the MidConn Disclosure Schedule, MidConn Bank has good
and, as to owned real property, marketable and insurable title to all its
properties and assets, reflected in the financial statements of MidConn Bank as
of September 30, 1996, free and clear of all liens, claims, charges and other
encumbrances. MidConn Bank, as lessee, has the right under valid and subsisting
leases to occupy, use and possess all property leased by it, and there has not
occurred under any such lease any material breach, violation or default by
MidConn Bank, and MidConn Bank has not experienced any material uninsured damage
or destruction with respect to such properties since September 30, 1996. All
properties and assets used by MidConn Bank are in good operating condition and
repair suitable for the purposes for which they are currently utilized and
comply in all material respects with all Laws relating thereto now in effect or
scheduled to come into effect. MidConn Bank enjoys peaceful and undisturbed
possession under all leases for the use of all property under which it is the
lessee, and all leases to which MidConn Bank is a party are valid and binding
obligations in accordance with the terms thereof. MidConn Bank is not in
material default with respect to any such lease, and there has not occurred any
default by MidConn Bank or event which with the lapse of time or the giving of
notice, or both, would constitute a material default under any such lease. There
are no Laws, conditions of record, or other impediments which interfere with the
intended use by MidConn Bank of any of the property owned, leased, or occupied
by it.
3.18 Insurance.
Section 3.18 of the MidConn Disclosure Schedule contains a true,
correct and complete list of all insurance policies and bonds maintained by
MidConn Bank, including the name of the insurer, the policy number, the type of
policy and any applicable deductibles. All such insurance policies and bonds (or
other insurance policies and bonds of MidConn Bank that have been in effect from
time to time) are
14
in full force and effect (or were in full force and effect as of the times they
were supposed to cover). MidConn Bank has not received any notice of
cancellation or amendment of any such policy or bond or is in default under any
such policy or bond, no coverage thereunder is being disputed and all claims
thereunder have been filed in a timely fashion. True, correct and complete
copies of all such policies and bonds, as in effect on the date hereof, have
been made available to EFC.
3.19 Liquidation Account.
The liquidation account established by MidConn Bank in connection with
its conversion from the mutual to stock form has been eliminated as provided
under Connecticut law.
3.20 Compliance with Applicable Laws.
MidConn Bank has complied in all material respects with all Laws
applicable to it or to the operation of its business. MidConn Bank has not
received any notice of any alleged or threatened claim, violation, or liability
under any such Laws that has not heretofore been cured and for which there is no
remaining liability.
3.21 Loans.
As of the date hereof:
(a) All loans owned by MidConn Bank, or in which MidConn Bank
has an interest, comply in all material respects with all Laws, including, but
not limited to, applicable usury statutes, underwriting and recordkeeping
requirements and the Truth in Lending Act, the Equal Credit Opportunity Act, and
the Real Estate Settlement Procedures Act, and other applicable consumer
protection statutes and the regulations thereunder.
(b) All loans owned by MidConn Bank, or in which MidConn Bank
has an interest, have been made or acquired by MidConn Bank in accordance with
board of director-approved loan policies and all of such loans are collectible,
except to the extent reserves have been made against such loans in MidConn
Bank's financial statements at September 30, 1996 referred to in Section 3.6
hereof. MidConn Bank holds the mortgages contained in its loan portfolio for its
own benefit to the extent of its interest shown therein; such mortgages evidence
liens having the priority indicated by their terms, subject, as of the date of
recordation or filing of applicable security instruments, only to such
exceptions as are discussed in attorneys' opinions regarding title or in title
insurance policies in the mortgage files relating to the loans secured by real
property or are not material as to the collectability of such loans; and, except
as set forth as Section 3.21(b) of the MidConn Disclosure Schedule, all loans
owned by MidConn Bank are with full recourse to the borrowers, and MidConn Bank
has taken no action which would result in a waiver or negation of any rights or
remedies available against the borrower or guarantor, if any, on any loan. All
applicable remedies against all borrowers and guarantors are enforceable except
as may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity. All loans purchased or
originated by MidConn Bank and subsequently sold by MidConn Bank have been sold
without recourse to MidConn Bank and without any liability under any yield
maintenance or similar obligation. True, correct and complete copies of loan
delinquency reports as of December 31, 1996 prepared by MidConn Bank, which
reports include all loans delinquent or otherwise in default, are included at
Section 3.21(b) of the MidConn Disclosure Schedule. True, correct and complete
copies of the currently effective lending policies and practices of MidConn Bank
have been furnished to EFC.
(c) Except as set forth at Section 3.21(c) of the MidConn
Disclosure Schedule, each outstanding loan participation sold by MidConn Bank,
if any, was sold with the risk of non-payment of all or any portion of that
underlying loan to be shared by each participant (including MidConn Bank)
15
proportionately to the share of such loan represented by such participation
without any recourse of such other lender or participant to MidConn Bank for
payment or repurchase of the amount of such loan represented by the
participation or liability under any yield maintenance or similar obligation.
MidConn Bank has properly fulfilled its contractual responsibilities and duties
in any loan in which it acts as the lead lender or servicer and has complied
with its duties as required under applicable regulatory requirements.
(d) MidConn Bank has properly perfected or caused to be
properly perfected all security interests, liens, or other interests in any
collateral securing any loans made by it.
3.22 Affiliates.
Each director and person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of MidConn Bank is listed at
Section 3.22 of the MidConn Disclosure Schedule, and each such person has
delivered to EFC, concurrently with the execution of this Agreement, a
stockholder agreement in the form of Exhibit C hereto (the "MidConn Bank
Stockholder Agreement"). The MidConn Bank Stockholder Agreement has been duly
and validly executed and delivered by each person that is a party thereto
(assuming due authorization, execution and delivery by EFC and constitutes the
valid and binding obligation of such person, enforceable against such person in
accordance with their terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
3.23 Ownership of EFC Common Stock.
Except as set forth at Section 3.23 of the MidConn Disclosure Schedule,
neither MidConn Bank nor any of its directors, officers, 5% or greater
shareholders or affiliates (as used above in Section 3.22) (i) beneficially own,
directly or indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, any shares of outstanding capital stock of EFC (other than those
agreements, arrangements or understandings specifically contemplated hereby).
3.24 Fairness Opinion.
MidConn Bank has received an opinion from ▇▇▇▇▇▇▇▇▇ & Company, Inc. ("O
& Co.") to the effect that, in its opinion, the consideration to be paid to
stockholders of MidConn Bank hereunder is fair to such stockholders from a
financial point of view ("Fairness Opinion"), and O & Co. has consented to the
inclusion of the Fairness Opinion in the Form S-4 (defined below).
3.25 MidConn DRIP.
MidConn Bank has suspended the MidConn DRIP such that from the date
hereof, no issuances or purchases of MidConn Bank Common Stock under the MidConn
DRIP shall be permitted, nor shall any other obligations thereunder accrue.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EAGLE
EFC, on behalf of itself and its wholly-owned subsidiary, Eagle Bank,
hereby makes the following representations and warranties to MidConn Bank as set
forth in this Article IV, each of
16
which is being relied upon by MidConn Bank as a material inducement to enter
into and perform this Agreement.
4.1 Corporate Organization.
(a) EFC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. EFC has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of any
material business conducted by it or the character or location of any material
properties or assets owned or leased by it makes such licensing or qualification
necessary. EFC is duly registered as a savings and loan holding company with the
OTS under the HOLA. The Restated Certificate of Incorporation and Bylaws of EFC,
as filed or incorporated by reference into EFC's most recent report under the
Exchange Act which required such document to be filed as an exhibit thereto, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement.
(b) Eagle Bank is a federal savings bank with its main office
in the State of Connecticut. Eagle Bank has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business as it
is now being conducted, and is licensed or qualified to do business in each
jurisdiction in which the nature of any material business conducted by it or the
character or location of any material properties or assets owned or leased by it
makes such licensing or qualification necessary. The Charter and Bylaws of Eagle
Bank, copies of which have previously been made available to MidConn Bank, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement.
4.2 Capitalization.
(a) The authorized capital stock of EFC consists of 8,000,000
shares of EFC Common Stock and 2,000,000 shares of serial preferred stock, par
value $.01 per share (the "EFC Preferred Stock"). As of the date hereof, there
are (x) 4,543,398 shares of EFC Common Stock issued and outstanding, (y) no
shares of EFC Common Stock reserved for issuance upon exercise of outstanding
stock options or otherwise, except for 425,965 shares of EFC Common Stock
reserved for issuance pursuant to outstanding options, and (z) no shares of EFC
Preferred Stock issued or outstanding, held in EFC's treasury or reserved for
issuance upon exercise of outstanding stock options or otherwise, except in
connection with the Eagle Financial Corp. Rights Agreement dated October 22,
1996. All of the issued and outstanding shares of EFC Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Except with respect to the aforementioned options to purchase 398,965
shares of EFC Common Stock, EFC does not as of the date of this Agreement have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of EFC Common Stock or EFC Preferred Stock or any other equity
security of EFC or any securities representing the right to purchase or
otherwise receive any shares of EFC Common Stock or any other equity security of
EFC. The shares of EFC Common Stock to be issued pursuant to the Merger are
authorized and, at the Effective Time, all such shares will be duly authorized
and validly issued and fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
(b) The authorized capital stock of Eagle Bank consists of
100,000 shares of common stock, par value $.01 per share, 100,000 of which are
issued and outstanding and owned by EFC free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to ownership thereof.
17
4.3 Authority; No Violation.
(a) EFC has full corporate power and authority to execute and
deliver this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of EFC. No other corporate proceedings on the part of EFC are
necessary to consummate the transactions contemplated hereby or thereby, except
for the approval of this Agreement by a majority of the total votes cast in
person or by proxy of EFC Common Stock. This Agreement has been, and the Option
Agreement, upon execution and delivery by EFC, will be duly and validly executed
and delivered by EFC and (assuming due authorization, execution and delivery by
MidConn Bank) will constitute valid and binding obligations of EFC, enforceable
against EFC in accordance with their terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Eagle Bank has full corporate power and authority to
execute and deliver this Agreement and the Articles of Combination and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Articles of Combination and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of Eagle Bank and by EFC as the sole
shareholder of Eagle Bank. No other corporate proceedings on the part of Eagle
Bank are necessary to consummate the transactions contemplated hereby or
thereby. This Agreement has been, and the Articles of Combination, upon
execution and delivery by Eagle Bank, will be duly and validly executed and
delivered by Eagle Bank and (assuming due authorization, execution and delivery
by MidConn Bank) will constitute valid and binding obligations of Eagle Bank,
enforceable against Eagle Bank in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement by
EFC or Eagle Bank, the Option Agreement by EFC or the Articles of Combination by
Eagle Bank, nor the consummation by EFC or Eagle Bank, as the case may be, of
the transactions contemplated hereby or thereby, nor compliance by EFC or Eagle
Bank with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the Restated Certificate of Incorporation or Bylaws of EFC or the
Charter or Bylaws of Eagle Bank, as the case may be, or (ii) assuming that the
consents and approvals referred to in Section 4.4 hereof are duly obtained, (x)
violate any Laws applicable to EFC or Eagle Bank or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
respective properties or assets of EFC or Eagle Bank under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which EFC or
Eagle Bank is a party, or by which they or any of their respective properties or
assets may be bound or affected.
4.4 Consents and Approvals.
(a) Except for (i) the filing of applications and notices, as
applicable, as to the Merger with the OTS under HOLA and the Bank Merger Act and
approval of such applications and notices, (ii) the State Banking Approvals,
(iii) the filing with the Connecticut Commissioner of an acquisition statement
pursuant to Section 36a-184 of the Banking Law of the State of Connecticut prior
to the acquisition of more than 10% of the MidConn Bank Common Stock pursuant to
the Option Agreement, if not exempt, (iv) the filing with the SEC of a
registration statement on Form S-4 to
18
register the shares of EFC Common Stock to be issued in connection with the
Merger (including the shares of EFC Common Stock that may be issued upon the
exercise of the options referred to in Section 1.6 hereof) and the filing of a
Form F-5 with the FDIC, both of which will include the Joint Proxy
Statement/Prospectus, (v) the approval of this Agreement by the requisite vote
of the shareholders of MidConn Bank, (vi) the approval of the issuance of EFC
Common Stock hereunder by a majority of the total votes cast in person or by
proxy of EFC Common Stock, (vii) the filings with the OTS required by the
Articles of Combination, and (viii) such filings and approvals as are required
to be made or obtained under the securities or "Blue Sky" laws of various states
or with the Nasdaq Stock Market (or such other exchange as may be applicable) in
connection with the issuance of the shares of EFC Common Stock pursuant to this
Agreement, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary in connection with (1)
the execution and delivery by EFC and Eagle Bank of this Agreement, (2) the
execution and delivery by EFC of the Option Agreement, (3) the execution and
delivery by Eagle Bank of the Articles of Combination, (4) the consummation by
EFC and Eagle Bank of the Merger and the other transactions contemplated hereby,
and (5) the consummation by Eagle Bank of the transactions contemplated by the
Articles of Combination; except in each case, for such consents, approvals or
filings the failure of which to obtain will not have a material adverse effect
on the ability of MidConn Bank to consummate the transactions contemplated
hereby.
(b) EFC has no knowledge of any reason why approval or
effectiveness of any of the applications, notices or filings referred to in
Section 4.4(a) cannot be obtained or granted on a timely basis.
(c) Each of EFC and Eagle Bank has timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that each was required to file since September 30, 1994
with (i) the OTS, (ii) the SEC and (iii) the Nasdaq Stock Market and any other
self-regulatory organization. Except for normal examinations conducted by any of
the foregoing regulatory agencies in the regular course of the business of EFC
and Eagle Bank, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of EFC and Eagle
Bank since September 30, 1994, nor does EFC and Eagle Bank have knowledge of any
such pending or threatened proceeding or investigation.
4.5 Financial Statements; Exchange Act Filings; Books and Records.
(a) EFC has previously delivered to MidConn Bank true, correct
and complete copies of (a) the consolidated balance sheets of EFC and its
Subsidiaries as of September 30 for the fiscal years 1995 and 1996 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years 1994 through 1996, inclusive, as reported in
EFC's Annual Report on Form 10-K for the fiscal year ended September 30, 1996
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of KPMG Peat Marwick LLP ("KPMG Peat Marwick"), independent public
accountants with respect to EFC. The financial statements referred to in this
Section 4.5 (including the related notes, where applicable) fairly present, and
the financial statements referred to in Section 6.9 hereof will fairly present
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial condition of EFC and its Subsidiaries for
the respective fiscal periods or as of the respective dates therein set forth;
each of such statements (including the related notes, where applicable) comply,
and the financial statements referred to in Section 6.9 hereof will comply, with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, and each of such statements (including the
related notes, where applicable) has been, and the financial statements referred
to in Section 6.9 hereof will be, prepared in accordance with GAAP consistently
applied during the periods involved, except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. EFC's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996 and all subsequently filed reports under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act
19
comply in all material respects with the appropriate requirements for such
reports under the Exchange Act, and EFC has previously made available to MidConn
Bank true, correct and complete copies of such reports. The books and records of
EFC and Eagle Bank have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
(b) Except and to the extent (i) reflected, disclosed or
provided for in the financial statements as of September 30, 1996 referred to
above, (ii) of liabilities incurred since September 30, 1996 in the ordinary
course of business and consistent with past practice, and (iii) of liabilities
related to the Agreement, EFC and Eagle Bank have no liabilities, whether
absolute, accrued, contingent or otherwise.
4.6 Absence of Certain Changes or Events.
Since September 30, 1996, no event has occurred which has had,
individually or in the aggregate, a Material Adverse Effect on EFC.
4.7 Ownership of MidConn Bank Common Stock; Affiliates and Associates.
(a) Except with respect to this Agreement and the Option
Agreement, neither EFC nor any of its affiliates or associates (as such terms
are defined under the Exchange Act), (i) beneficially own, directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
more than five percent of the outstanding capital stock of MidConn Bank.
(b) Neither EFC nor any of its Subsidiaries is an "affiliate"
(as such term is defined in Section 203(c) (1) of the General Corporation Law of
the State of Delaware (the "DGCL")) or an "associate" of MidConn Bank (as such
term is defined in Section 203(c) (2) of the DGCL). Each director and person who
is an "affiliate" (for purposes of Rule 144 under the Securities Act and for
purposes of qualifying the Merger for "pooling-of-interests" accounting
treatment) of EFC has delivered to EFC, concurrently with the execution of this
Agreement, a stockholder agreement in the form of Exhibit D hereto (the "EFC
Stockholder Agreement").
4.8 Employee Benefit Plans.
EFC has heretofore made available for inspection, or delivered (if
requested) to MidConn Bank true, correct and complete copies of each of the
employee benefit plans arrangements or agreements that are maintained as of the
date of this Agreement (the "EFC Plans") by EFC or any of its Subsidiaries,
which together with EFC would be deemed a "single employer" within the meaning
of Section 4001 of ERISA or Code Sections 414(b), (c) or (m). No "accumulated
funding deficiency" as defined in Section 302(a)(2) of ERISA or Section 412 of
the Code, whether or not waived, and no "unfunded current liability" as
determined under Section 412(l) of the Code exists with respect to any EFC Plan.
The EFC Plans are in compliance in all material respects with the applicable
requirements of ERISA and the Code.
4.9 Agreements with Regulatory Agencies.
Neither EFC nor any of its affiliates is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or has adopted
any board resolutions at the request of, any Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has EFC nor
Eagle Bank been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
20
4.10 Legal Proceedings.
Neither EFC nor any of its Subsidiaries is a party to any, and there
are no pending or threatened, legal, administrative, arbitration or other
proceedings, claims, actions or governmental or regulatory investigations
against EFC or any of its Subsidiaries which challenge the validity or propriety
of the transactions contemplated by this Agreement, the Articles of Combination
or the Option Agreement as to which there is a reasonable probability of
success.
4.11 Reserves for Losses.
All reserves or other allowances for possible losses reflected in EFC's
financial statements referred to in Section 4.5 hereof as of September 30, 1996
complied with all Laws and are adequate under GAAP. Eagle Bank has not been
notified by the FDIC, the OTS or Eagle Bank's independent auditor, in writing or
otherwise, that such reserves are inadequate or that the practices and policies
of Eagle Bank in establishing such reserves and in accounting for delinquent and
classified assets generally fail to comply with applicable accounting or
regulatory requirements, or that the FDIC, the OTS or Eagle Bank's independent
auditor believes such reserves to be inadequate or inconsistent with the
historical loss experience of Eagle Bank. All OREO held by Eagle Bank is
recorded in accordance with GAAP.
4.12 Compliance with Applicable Laws.
Each of EFC and Eagle Bank has complied in all material respects with
all Laws applicable to it or to the operation of its business. Neither EFC nor
Eagle Bank has received any notice of any alleged or threatened claim,
violation, or liability under any such Laws that has not heretofore been cured
and for which there is no remaining liability.
4.13 Loans.
As of the date hereof:
(a) All loans owned by Eagle Bank, or in which Eagle Bank has
an interest, comply in all material respects with all Laws, including, but not
limited to, applicable usury statutes, underwriting and recordkeeping
requirements and the Truth in Lending Act, the Equal Credit Opportunity Act, and
the Real Estate Settlement Procedures Act, and other applicable consumer
protection statutes and the regulations thereunder.
(b) All loans owned by Eagle Bank, or in which Eagle Bank has
an interest, have been made or acquired by Eagle Bank in accordance with board
of director-approved loan policies and all of such loans are collectible, except
to the extent reserves have been made against such loans in EFC's financial
statements at September 30, 1996 referred to in Section 4.5 hereof. Eagle Bank
holds the mortgages contained in its loan portfolio for its own benefit to the
extent of its interest shown therein; such mortgages evidence liens having the
priority indicated by their terms, subject, as of the date of recordation or
filing of applicable security instruments, only to such exceptions as are
discussed in attorneys' opinions regarding title or in title insurance policies
in the mortgage files relating to the loans secured by real property or are not
material as to the collectability of such loans. All applicable remedies against
all borrowers and guarantors are enforceable except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and except as may be limited by the exercise of judicial discretion in
applying principles of equity. All loans purchased or originated by Eagle Bank
and subsequently sold by Eagle Bank have been sold without recourse to Eagle
Bank and without any liability under any yield maintenance or similar
obligation.
(c) Eagle Bank has properly perfected or caused to be properly
perfected all security interests, liens, or other interests in any collateral
securing any loans made by it.
21
4.14 Environmental Matters.
(a) Eagle Bank is in compliance in all material respects with
all applicable federal and state laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation
or notice pending or to the knowledge of Eagle Bank threatened (or past or
present actions or events that could form the basis of any such suit, claim,
action, proceeding, investigation or notice), in which Eagle Bank has been or,
with respect to threatened suits, claims, actions, proceedings, investigations
or notices may be, named as a defendant (x) for alleged noncompliance (including
by any predecessor), with any environmental law, rule or regulation or (y)
relating to any material release or threatened release into the environment of
any Hazardous Material, whether or not occurring at or on a site owned, leased
or operated by Eagle Bank;
(c) To the knowledge of Eagle Bank, during the period of Eagle
Bank's ownership or operation of any of its properties, there has not been any
material release of Hazardous Material in, on, under or affecting any such
property.
(d) To the knowledge of Eagle Bank, Eagle Bank has not made or
participated in any loan to any person who is subject to any suit, claim,
action, proceeding, investigation or notice, pending or threatened, with respect
to (i) any alleged noncompliance as to any property securing such loan with any
environmental law, rule or regulation, or (ii) the release or the threatened
release into the environment of any Hazardous Material at a site owned, leased
or operated by such person on any property securing such loan.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of MidConn Bank.
During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Articles of Combination or the Option Agreement or with the prior
written consent of EFC, MidConn Bank shall carry on its business in the ordinary
course consistent with past practices and consistent with prudent banking
practices. MidConn Bank will use its reasonable best efforts to (x) preserve its
business organization intact, (y) keep available to itself and EFC the present
services of the employees of MidConn Bank and (z) preserve for itself and EFC
the goodwill of the customers of MidConn Bank and others with whom business
relationships exist. Without limiting the generality of the foregoing, and
except as set forth in the MidConn Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to by EFC in writing, MidConn Bank
shall not:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock; provided, however, from
the date hereof to the Effective Time, MidConn Bank may declare, set aside or
pay cash dividends per share of MidConn Bank Common Stock equivalent to the cash
dividends per share (i.e., at the same rate as that paid by EFC multiplied by
the Exchange Ratio) declared, set aside or paid by EFC during such period,
provided, further, however, that under no circumstances shall MidConn Bank
declare, set aside or pay any dividends if it would result in the holders of
MidConn Bank Common Stock receiving more than four dividend payments in fiscal
1997, when considered with anticipated EFC dividends based on past practice, nor
shall MidConn Bank be prohibited from declaring, setting aside or paying
dividends consistent herewith if the Closing Date
22
(defined below) is such that holders of MidConn Bank Common Stock would receive
fewer than four dividends in fiscal 1997, when considered with anticipated EFC
dividends based on past practice.
(b) (i) split, combine or reclassify any shares of its capital
stock or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock except
upon the exercise or fulfillment of rights or options issued or existing
pursuant to the MidConn Stock Option Plans in accordance with their present
terms, all to the extent outstanding and in existence on the date of this
Agreement, and except pursuant to the Option Agreement, or (ii) repurchase,
redeem or otherwise acquire (except for the acquisition of Trust Account Shares
and DPC Shares, as such terms are defined in Section 1.4(d) hereof), any shares
of the capital stock of MidConn Bank or any securities convertible into or
exercisable for any shares of the capital stock of MidConn Bank;
(c) except with respect to shares of MidConn Bank Common Stock
subject to issuance under the MidConn DRIP as of the date hereof, issue, deliver
or sell, or authorize or propose the issuance, delivery or sale of, any shares
of its capital stock or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, other than (i) the issuance of
MidConn Bank Common Stock pursuant to stock options or similar rights to acquire
MidConn Bank Common Stock granted pursuant to the MidConn Stock Option Plans and
outstanding prior to the date of this Agreement, in each case in accordance with
their present terms and (ii) pursuant to the Option Agreement;
(d) amend its Amended and Restated Certificate of
Incorporation, Bylaws or other similar governing documents;
(e) authorize or permit any of its officers, directors,
employees or agents to, directly or indirectly, solicit, initiate or encourage
any inquiries relating to, or the making of any proposal from, hold substantive
discussions or negotiations with or provide any information to, any person,
entity or group (other than EFC) concerning any Acquisition Transaction (as
defined below). Notwithstanding the foregoing, MidConn Bank may enter into
discussions or negotiations, or provide information in connection with a
possible Acquisition Transaction if the Board of Directors of MidConn Bank
reasonably determines, following receipt of written advice of MidConn Bank's
legal counsel, that such discussions or negotiations must be commenced, or such
information must be furnished, in the exercise of its fiduciary duty. MidConn
Bank shall promptly communicate to EFC the material terms of any proposal,
whether written or oral, which it may receive in respect of any such Acquisition
Transaction and whether it is providing information to a third party. MidConn
Bank will promptly cease and cause to be terminated any existing activities,
discussions or negotiations previously conducted with any parties other than EFC
with respect to any of the foregoing. As used in this Agreement, Acquisition
Transaction shall mean any offer, proposal or expression of interest relating to
(i) any tender or exchange offer, (ii) any merger, consolidation or other
business combination involving MidConn Bank, or (iii) the acquisition in any
manner of a substantial equity interest in, or a substantial portion of the
assets, out of the ordinary course of business, of, MidConn Bank other than the
transactions contemplated or permitted by this Agreement, the Articles of
Combination and the Option Agreement:
(f) make capital expenditures aggregating in excess of
$25,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating
with, or by purchasing an equity interest in or the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings, or in the ordinary course of business
consistent with prudent banking practices;
23
(i) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, any of the conditions to the Merger set
forth in Article VII not being satisfied, or a violation of any provision of
this Agreement, the Articles of Combination or the Option Agreement, except, in
every case, as may be required by applicable law;
(j) change its methods of accounting in effect at September
30, 1996, except as required by changes in GAAP or regulatory accounting
principles as concurred to by MidConn Bank's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew (other than by automatic
renewal pursuant to the terms thereof) or terminate any Plan or any agreement,
arrangement, plan or policy between MidConn Bank and one or more of its current
or former directors or officers, provided, however, that MidConn Bank shall be
permitted to amend the MidConn Bank Defined Benefit Pension Plan to provide that
each employee of MidConn Bank who is a participant in such Plan as of the
Effective Time shall not fail to receive credit for a year of "Credited Service"
(as defined in such Plan) for the Plan Year ending December 31, 1997 for
purposes of benefit accrual under such Plan solely because such participant has
less than 1,000 hours of service during such Plan Year, (ii) increase in any
manner the compensation of any employee or director or pay any benefit not
required by any plan or agreement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares), (iii)
enter into, modify or renew any contract, agreement, commitment or arrangement
providing for the payment to any director, officer or employee of compensation
or benefits, (iv) hire any new employee, (v) pay expenses of any non-employee
directors for attending conventions or similar meetings which conventions or
meetings are held after the date hereof; (vi) pay any retention or other
bonuses, or any severance, to any employee, except in accordance with Section
5.1(k) of the MidConn Disclosure Schedule, (vii) make any contribution to any
Plan that is subject to Title IV of ERISA in excess of the amount required to
satisfy applicable minimum funding requirements under ERISA and the Code, or
(viii) make any nondeductible contribution to any Plan;
(l) except for short-term borrowings with a maturity of one
year or less by MidConn Bank in the ordinary course of business consistent with
past practices, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(m) sell, purchase, enter into or renew a lease, relocate,
open or close any banking or other office, or file an application pertaining to
such action with any Governmental Entity;
(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with the foreclosure of one- to four-family residential properties
in the ordinary course of business consistent with past banking practices;
(o) make any new loans to, modify the terms of any existing
loan to, or engage in any other transactions (other than routine banking
transactions) with, any Affiliated Person of MidConn Bank;
(p) make any equity investment, or invest in any marketable
equity securities or other securities not eligible to be owned by a Federal
savings association;
(q) incur deposit liabilities, other than in the ordinary
course of business consistent with past practices, including deposit pricing;
24
(r) change or waive any provision of, any deposit, loan,
investment or other Board of Director approved operating policy;
(s) purchase any loans or sell, purchase or lease any real
property, except for the sale of real estate that is the subject of a casualty
loss or condemnation or the sale of OREO on a basis consistent with past
practices;
(t) originate any loans except in accordance with existing
MidConn Bank lending policies;
(u) make any investments in derivative securities or engage in
any forward commitment, futures transaction, financial options transaction,
hedging or arbitrage transaction or covered asset trading activities;
(v) sell or purchase any mortgage loan servicing rights; or
(w) agree or commit to do any of the actions set forth in (a)
- (v) above.
The consent of EFC to any action by MidConn Bank that is not permitted by any of
the preceding paragraphs shall be evidenced by a writing signed by the President
or any Executive Vice President of EFC.
5.2 Covenants of EFC.
During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Articles of Combination or the Option Agreement or with MidConn
Bank's prior written consent, EFC and Eagle Bank shall use all reasonable
efforts to preserve intact their present business organizations and
relationships. Without limiting the generality of the foregoing and except as
otherwise contemplated by this Agreement or consented to in writing by MidConn
Bank, EFC shall not, and shall not permit Eagle Bank to:
(a) declare or pay any extraordinary or special dividends on
or make any other extraordinary or special distributions in respect of any of
its capital stock (except that Eagle Bank may declare and pay extraordinary or
special dividends and distributions to EFC and except that EFC may increase the
quarterly cash dividend rate on the EFC Common Stock);
(b) take any action that will result in (i) any of EFC's
representations and warranties set forth in this Agreement being or becoming
untrue, unless the failure of such representations or warranties to be true
would not, individually or in the aggregate, have a Material Adverse Effect on
EFC, (ii) any of the conditions to the Merger set forth in Article VII not being
satisfied, or (iii) in a violation of any provision of this Agreement or the
Articles of Combination, except, in every case, as may be required by applicable
law;
(c) change its methods of accounting in effect at September
30, 1996, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by EFC's independent auditors;
(d) purchase or acquire, directly or indirectly, a number of
shares of MidConn Bank equal to or greater than 5% of the issued and outstanding
number of such shares of MidConn Bank Common Stock; or
(e) agree or commit to do any of the actions set forth in (a)
- (d) above.
25
5.3 Merger Covenants.
Notwithstanding that MidConn Bank believes that it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, MidConn Bank recognizes that EFC may
have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). In that
regard, and in general, from and after the date of this Agreement to the
Effective Time, MidConn Bank and EFC shall consult and cooperate with each other
in order to formulate the plan of integration for the Merger, including, among
other things, with respect to conforming, based upon such consultation, MidConn
Bank's loan, accrual and reserve policies to those policies of EFC to the extent
appropriate, provided, that any change in MidConn Bank's policies in connection
with such matters need not be effected until the parties receive all necessary
governmental and stockholder approvals and consents to consummate the
transactions contemplated hereby.
5.4 Compliance with Antitrust Laws.
Each of EFC and MidConn Bank shall use its reasonable best efforts to
resolve objections, if any, which may be asserted with respect to the Merger
under antitrust laws, including, without limitation, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
In the event a suit is threatened or instituted challenging the Merger as
violative of antitrust laws, each of EFC and MidConn Bank shall use its
reasonable best efforts to avoid the filing of, or resist or resolve such suit.
EFC and MidConn Bank shall use their reasonable best efforts to take such action
as may be required: (a) by the Antitrust Division of the Department of Justice
or the Federal Trade Commission in order to resolve such objections as either of
them may have to the Merger under antitrust laws, or (b) by any federal or state
court of the United States, in any suit brought by a private party or
governmental entity challenging the Merger as violative of antitrust laws, in
order to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order, or other order which has the effect of preventing
the consummation of the Merger. Reasonable best efforts shall not include, among
other things and to the extent EFC so desires, the willingness of EFC to accept
an order agreeing to the divestiture, or the holding separate, of any assets of
EFC or MidConn Bank.
5.5 Employment and Consulting Agreement.
On the Closing Date, Eagle Bank will execute and deliver to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ an employment and consulting agreement substantially in the form of the
agreement attached hereto as Exhibit E.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Upon the execution and delivery of this Agreement, EFC and
MidConn Bank (as to information to be included therein pertaining to MidConn
Bank) shall promptly cause to be prepared and filed with the SEC a registration
statement of EFC on Form S-4, including the Joint Proxy Statement/Prospectus
(the "Registration Statement") for the purpose of registering the EFC Common
Stock to be issued in the Merger (including the EFC Common Stock that may be
issued upon exercise of the options referred to in Section 1.6 hereof), and for
soliciting the approval of this Agreement and the Merger by the shareholders of
MidConn Bank and for soliciting the approval by the shareholders of EFC of the
issuance of the EFC Common Stock to MidConn Bank's shareholders as part of the
Merger. The Joint Proxy Statement/Prospectus also shall be filed by MidConn Bank
with the FDIC on Form F-5 (the "Form F-5"). EFC and MidConn Bank shall use their
reasonable best efforts to have the Registration Statement and the Form F-5
declared effective by the SEC and approved by the FDIC, respectively, as soon as
possible after the filing. The parties shall cooperate in responding to and
26
considering any questions or comments from the SEC and FDIC staff regarding the
information contained in the Registration Statement concerning MidConn Bank. If
at any time after the Registration Statement and the Form F-5 are filed with the
SEC and FDIC, and prior to the Closing Date, any event relating to any party
hereto is discovered by such party, which should be set forth in an amendment
of, or a supplement to, the Registration Statement and the Form F-5, including
the Joint Prospectus/Proxy Statement (including, without limitation, any change
in the O & Co. Fairness Opinion), such party shall promptly so inform EFC and
MidConn Bank (as applicable), and shall furnish EFC and MidConn Bank (as
applicable) with all necessary information relating to such event whereupon EFC
and MidConn Bank shall promptly cause an appropriate amendment to the
Registration Statement and the Form F-5 to be filed with the SEC and the FDIC.
Upon the effectiveness of such amendment, EFC and MidConn Bank (if prior to the
meetings of shareholders pursuant to Section 6.3 hereof) will take all necessary
action as promptly as practicable to permit an appropriate amendment or
supplement to be transmitted to their respective shareholders entitled to vote
at such meetings. EFC shall also use reasonable efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement and the Articles of Combination
and MidConn Bank shall furnish all information concerning MidConn Bank and the
holders of MidConn Bank Common Stock as may be reasonably requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger). MidConn Bank and EFC shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to MidConn Bank or EFC and Eagle Bank, as the case may be,
which appears in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement; provided, however, that nothing contained herein
shall be deemed to provide either party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to contemplation of the transactions
contemplated herein.
(c) MidConn Bank shall, upon request, furnish EFC with all
information concerning MidConn Bank and its directors, officers and shareholders
and such other matters as may be reasonably necessary or advisable in connection
with the Registration Statement, the Form F-5 or any other statement, filing,
notice or application made by or on behalf of EFC or Eagle Bank to any
Governmental Entity in connection with the Merger or the other transactions
contemplated by this Agreement.
(d) EFC and MidConn Bank shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (defined in Section 7.1(c)
hereof) will not be obtained or that the receipt of any such approval will be
materially delayed.
27
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, MidConn Bank shall accord to the
officers, employees, accountants, counsel and other representatives of EFC and
Eagle Bank, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, MidConn Bank shall make available to EFC (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or federal or state banking laws and (ii) all other information
concerning its business, properties and personnel as EFC may reasonably request.
EFC shall receive notice of all meetings of the MidConn Bank Board of Directors
and any committees thereof, and of any management committees (in all cases, at
least as timely as all MidConn Bank representatives to such meetings are
required to be provided notice). Up to two representatives of EFC shall be
permitted to attend all meetings of the Board of Directors (except for the
portion of such meetings which relate to the Merger or an Acquisition
Transaction or such other matters deemed confidential ("Confidential Matters")
by the Boards of Directors of MidConn Bank) and such meetings of committees of
the Board of Directors and management of MidConn Bank which EFC desires. EFC
will hold all such information in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement which EFC
entered into with O & Co. dated October 30, 1996 (the "Confidentiality
Agreement").
(b) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, EFC shall, and shall cause Eagle Bank
to, afford to the officers, employees, accountants, counsel and other
representatives of MidConn Bank, access, during normal business hours during the
period prior to the Effective Time, to such information regarding EFC and Eagle
Bank as shall be reasonably necessary for MidConn Bank to fulfill its
obligations pursuant to this Agreement or which may be reasonably necessary for
MidConn Bank to confirm that the representations and warranties of EFC contained
herein are true and correct and that the covenants of EFC contained herein have
been performed in all material respects. MidConn Bank will hold all such
information in confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and warranties of
the other set forth herein.
(d) MidConn Bank shall provide EFC with true, correct and
complete copies of all financial and other information provided to directors of
MidConn Bank in connection with meetings of its Board of Directors or committees
thereof, except materials relating to Confidential Matters, which information
shall be provided to EFC concurrently with its provision to directors of MidConn
Bank.
6.3 Shareholder Meetings.
MidConn Bank shall take all steps necessary to duly call, give notice
of, convene and hold a meeting of its shareholders within 35 days after the
Registration Statement becomes effective and the FDIC approves the Form F-5 for
the purpose of voting upon the approval of this Agreement, including the
Articles of Combination, and the Merger (the "Special Meeting"). Management and
the Board of Directors of MidConn Bank shall recommend to MidConn Bank's
shareholders approval of this Agreement, including the Articles of Combination,
and the transactions contemplated hereby, together with any matters incident
thereto, and shall oppose any third party proposal or other action that is
inconsistent with this Agreement or the consummation of the transactions
contemplated hereby, unless the Board of Directors of MidConn Bank reasonably
determines, based upon the written advice of MidConn Bank's legal counsel, that
such recommendation or opposition, as the case may be, would constitute a breach
of the exercise of its fiduciary duty. EFC shall take all steps necessary to
duly call, give notice of, convene and hold a meeting of its shareholders within
35 days after the Registration Statement becomes effective and the FDIC approves
the Form F-5 for the purpose of voting to approve the issuance of EFC Common
Stock pursuant to this Agreement and, through its Board of Directors,
28
shall recommend to its shareholders approval of such issuance. MidConn Bank and
EFC shall coordinate and cooperate with respect to the foregoing matters.
6.4 Legal Conditions to Merger.
Each of EFC and MidConn Bank shall use their reasonable best efforts
(a) to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
with respect to the Merger and, subject to the conditions set forth in Article
VII hereof, to consummate the transactions contemplated by this Agreement and
(b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by MidConn
Bank or EFC in connection with the Merger and the other transactions
contemplated by this Agreement.
6.5 Publication of Combined Financial Results.
EFC shall use commercially reasonable efforts to publish within 45 days
after the end of the first month after the Effective Time in which there are at
least 30 days of post-Merger combined operations (which month may be the month
in which the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
6.6 Stock Exchange Listing.
EFC shall cause the shares of EFC Common Stock to be issued in the
Merger and pursuant to options referred to herein to be approved for quotation
on the Nasdaq Stock Market National Market System (or such other exchange on
which the EFC Common Stock has become listed, or approved for listing) prior to
or at the Effective Time.
6.7 Employees.
(a) Except as set forth at Schedule 6.7(a) of the MidConn
Disclosure Schedule, as to employees of MidConn Bank whose employment is
terminated in connection with the Merger either because an employee's position
is eliminated or an employee is not offered comparable employment (i.e., not
offered employment for a position of generally similar job description or
responsibilities) within three months of the Effective Time of the Merger
(except for such employees who have existing employment or severance agreements
or whose employment is terminated for non-performance, cause or like reason),
Eagle Bank will pay severance based on one week of base salary (or one week of
average weekly hourly wages, calculated on a weekly average basis for the
quarter ended December 31, 1996 in the case of hourly employees) for each full
year of employment with MidConn Bank with a minimum of two weeks, up to an
aggregate of 26 weeks and will pay such employees for unused vacation and sick
leave in accordance with the documented policies of MidConn Bank in effect on
the date hereof. Also as to such employees whose employment is terminated, Eagle
Bank will pay the applicable premium for health plan continuation (COBRA)
coverage in effect from time to time for such employee for a period equal to the
number of weeks of severance such person receives in accordance with this
Section 6.7(a).
(b) As to each employee of MidConn Bank who is a party to an
employment or severance agreement with MidConn Bank on the date hereof and whose
employment is terminated after the Effective Time and during the term of such
agreement, Eagle Bank will assume the obligations of MidConn Bank under such
agreement and, in addition, at the discretion of each such employee, will (i)
pay the applicable premium for health plan continuation (COBRA) coverage in
effect from time to time for such employee and the qualified beneficiaries of
such employee for a period of 18 months following such termination of employment
(or, if less, the period during which the employee or qualified beneficiary is
entitled to such continuation coverage); (ii) continue in effect, at Eagle
Bank's
29
expense, for the remaining term of such agreement, group term life insurance on
the life of such employee with a death benefit equal to the amount of such
insurance provided to the employee by MidConn Bank immediately before the
Effective Time (but not in excess of three times such employee's annual rate of
compensation from MidConn Bank as of the Effective Time); and (iii) will pay
such employees for unused vacation and sick leave in accordance with the
documented policies of MidConn Bank on the date hereof; provided, however, that
Eagle Bank shall have no obligation to make any payment to or on behalf of any
such employee or to provide any benefit to such employee to the extent that such
payment or benefit would constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code and all such payments and benefits shall be
reduced to the extent necessary to prevent any such payment or benefit from
constituting a parachute payment.
(c) It is the intent of EFC and Eagle Bank in connection with
reviewing applicants for employment positions to give MidConn Bank employees who
are not offered positions at the Effective Time the same consideration as is
afforded EFC or Eagle Bank employees for such position in accordance with
existing formal or informal policies.
6.8 Indemnification; Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative, in
which any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of MidConn Bank (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of MidConn Bank or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and use their best efforts to defend against and respond thereto to
the extent permitted by applicable law and the Amended and Restated Certificate
of Incorporation and Bylaws of MidConn Bank. It is understood and agreed that
after the Effective Time, EFC shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law and the Restated Certificate of
Incorporation and Bylaws of EFC or the Charter and Bylaws of Eagle Bank, as may
be the case, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to EFC; provided, however, that (1)
EFC shall have the right to assume the defense thereof and upon such assumption
EFC shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if EFC elects not to assume
such defense or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are issues which raise conflicts of interest
between EFC and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to EFC, and EFC shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (2) EFC shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for
each Indemnified Party, and (3) EFC shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed). EFC shall have no obligation to advance
expenses incurred in connection with a threatened or pending action, suit or
preceding in advance of final disposition of such action, suit or proceeding,
unless (i) EFC would be permitted to advance such expenses pursuant to the DGCL
and EFC's Restated Certificate of Incorporation or Bylaws, and (ii) EFC receives
an undertaking by the Indemnified Party to repay such amount if it is determined
that such party is not entitled to be indemnified by EFC pursuant to the DGCL
and EFC's Restated Certificate of Incorporation or Bylaws. Any Indemnified Party
wishing to claim
30
indemnification under this Section 6.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify EFC thereof; provided, however,
that the failure to so notify shall not affect the obligations of EFC under this
Section 6.8 except to the extent such failure to notify materially prejudices
EFC. EFC's obligations under this Section 6.8 continue in full force and effect
for a period of six years from the Effective Time; provided, however, that all
rights to indemnification in respect of any claim asserted or made within such
period shall continue until the final disposition of such claim.
(b) In the event EFC or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of EFC assume
the obligations set forth in this section.
(c) The provisions of this Section 6.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives after the Effective Time.
6.9 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter (other than the fourth fiscal quarter), EFC
will deliver to MidConn Bank and MidConn Bank will deliver to EFC their
respective Quarterly Reports on Form 10-Q or F-4, as filed with the SEC or the
FDIC, as the case may be, under the Exchange Act. Each party shall deliver to
the other any Current Reports on Form 8-K or F-8 promptly after filing such
reports with the SEC or the FDIC, as the case may be.
6.10 Additional Agreements.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or the
Articles of Combination, or to vest the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
Constituent Banks to the Merger, the proper officers and directors of each party
to this Agreement and EFC's Subsidiaries shall take all such necessary action as
may be reasonably requested by, and at the sole expense of, EFC.
6.11 Advice of Changes.
EFC and MidConn Bank shall promptly advise the other party of any
change or event that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect on it or to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein. From time to time prior to the Effective Time, each
party will promptly supplement or amend its disclosure schedule delivered in
connection with the execution of this Agreement to reflect any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such disclosure schedule or which is
necessary to correct any information in such disclosure schedule which has been
rendered inaccurate thereby. No supplement or amendment to such disclosure
schedule shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Sections 7.2(a) or 7.3(a) hereof, as the case may
be, or the compliance by MidConn Bank or EFC, as the case may be, with the
respective covenants set forth in Sections 5.1 and 5.2 hereof.
6.12 Current Information.
During the period from the date of this Agreement to the Effective
Time, MidConn Bank will cause one or more of its designated representatives to
confer on a regular and frequent basis (not less
31
than monthly) with representatives of EFC and to report the general status of
the ongoing operations of MidConn Bank. MidConn Bank will promptly notify EFC of
any material change in the normal course of business or in the operation of the
properties of MidConn Bank and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of litigation involving MidConn Bank, and will
keep EFC fully informed of such events.
6.13 Execution and Authorization of Articles of Combination.
Prior to the Effective Time, (a) EFC shall (i) cause the Board of
Directors of Eagle Bank to approve the Articles of Combination, and (ii) cause
Eagle Bank to execute and deliver the Articles of Combination, and (iii) approve
the Articles of Combination as the sole shareholder of Eagle Bank, and (b)
MidConn Bank shall (i) cause the Board of Directors of MidConn Bank to approve
the Articles of Combination, and (ii) cause MidConn Bank to execute and deliver
the Articles of Combination.
6.14 Change in Structure.
In the event that EFC elects to change the structure of the Merger, the
parties agree to modify this Agreement and the various exhibits hereto to
reflect such revised structure. EFC may elect to modify the structure of the
transactions contemplated by this Agreement as noted herein so long as (i) there
are no material adverse federal income tax consequences to the MidConn Bank
shareholders as a result of such modification, (ii) the consideration to be paid
to the MidConn Bank shareholders under this Agreement is not thereby changed or
reduced in amount, and (iii) such modification will not be reasonably likely to
delay materially or jeopardize receipt of any required regulatory approvals. In
such events, EFC shall prepare appropriate amendments to this Agreement and the
exhibits hereto for execution by the parties hereto. EFC and MidConn Bank agree
to cooperate fully with each other to effect such amendments.
6.15 Transaction Expenses of MidConn Bank.
(a) For planning purposes, MidConn Bank shall, within 15 days
from the date hereof, provide EFC with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by MidConn
Bank in connection with this transaction, including the fees and expenses of
counsel, accountants, investment bankers and other professionals. MidConn Bank
shall promptly notify EFC if or when it determines that it will expect to exceed
its budget.
(b) Promptly after the execution of this Agreement, MidConn
Bank shall ask all of its attorneys and other professionals to render current
and correct invoices for all unbilled time and disbursements. MidConn Bank shall
accrue and/or pay all of such amounts as soon as possible.
(c) MidConn Bank shall advise EFC monthly of all out-of-pocket
expenses which MidConn Bank has incurred in connection with this transaction.
(d) EFC, in reasonable consultation with MidConn Bank, shall
make all arrangements with respect to the printing and mailing of the Joint
Proxy Statement/Prospectus.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
32
(a) Shareholder Approvals.
This Agreement, including the Articles of Combination, and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of MidConn Bank Common
Stock entitled to vote thereon. The issuance of the EFC Common Stock in the
Merger shall have been approved by the affirmative vote of a majority of the
total votes cast in person or by proxy of shares of EFC Common Stock.
(b) Stock Exchange Listing.
The shares of EFC Common Stock which shall be issued in the
Merger (including the EFC Common Stock that may be issued upon exercise of the
options referred to in Section 1.6 hereof) upon consummation of the Merger shall
have been authorized for quotation on the Nasdaq Stock Market National Market
System (or such other exchange on which the EFC Common Stock may become listed).
(c) Other Approvals.
All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals"). No Requisite
Regulatory Approval shall contain a non-customary condition that EFC reasonably
determines to be burdensome or otherwise alter the benefits for which it
bargained in this Agreement.
(d) Registration Statement; Form F-5.
The Registration Statement shall have become effective under
the Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC. The Form F-5 shall
have been approved for use by the FDIC, and no stop order or other prohibition
on its use shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the FDIC.
(e) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement or the Articles of Combination shall
be in effect. No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any Governmental Entity
which prohibits, restricts or makes illegal consummation of the Merger.
(f) Federal Tax Opinion.
EFC shall have received from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., EFC's
special counsel, an opinion to EFC, MidConn Bank and the holders of MidConn Bank
Common Stock, in form and substance reasonably satisfactory to EFC,
substantially to the effect that on the basis of facts, representations, and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the time of such opinion, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368 of the Code. In rendering such opinion, such counsel may require and, to the
extent such counsel deems necessary or appropriate, may rely upon
representations made in certificates of officers of MidConn Bank, EFC, Eagle
Bank, their respective affiliates and others.
33
(g) Pooling of Interests.
EFC shall have promptly received advice from KPMG Peat
Marwick, independent accountants, (i) within two weeks of the date hereof, that
the Merger as structured would be accounted for as a pooling-of-interests and
(ii) as of the Effective Time, a written opinion to the effect that the Merger
will be accounted for as a pooling-of-interests.
7.2 Conditions to Obligations of EFC and Eagle Bank.
The obligation of EFC and Eagle Bank to effect the Merger is also
subject to the satisfaction or waiver by EFC at or prior to the Effective Time
of the following conditions:
(a) Representations and Warranties.
The representations and warranties of MidConn Bank set forth
in this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date;
provided, however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on
MidConn Bank. Such determination of aggregate Material Adverse Effect shall be
made as if there were no materiality qualifications in such representations and
warranties. EFC shall have received a certificate signed on behalf of MidConn
Bank by each of the President and Chief Executive Officer and the Chief
Financial Officer of MidConn Bank to the foregoing effect.
(b) Performance of Covenants and Agreements of MidConn Bank.
MidConn Bank shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date. EFC shall have received a certificate signed on
behalf of MidConn Bank by each of the President and Chief Executive Officer and
the Chief Financial Officer of MidConn Bank to such effect.
(c) Consents under Agreements.
The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(c) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Bank pursuant to the Merger to any obligation, right or interest of MidConn Bank
under any loan or credit agreement, note, mortgage, indenture, lease, license or
other agreement or instrument shall have been obtained except for those, the
failure of which to obtain, will not result in a Material Adverse Effect on the
Surviving Bank.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
EFC shall have received the opinion of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel to MidConn Bank, dated the Closing
Date, as to such matters as EFC may reasonably request. As to any matter in such
opinion which involves matters of fact, such counsel may rely upon the
certificates of officers and directors of MidConn Bank and of public officials,
reasonably acceptable to EFC.
34
(f) Accountant's Comfort Letter.
MidConn Bank shall have caused to be delivered on the
respective dates thereof to EFC "comfort letters" from Coopers & ▇▇▇▇▇▇▇,
MidConn Bank's independent public accountants, dated the date on which the
Registration Statement or last amendment thereto shall become effective, and
dated the date of the Closing (defined in Section 9.1 hereof), and addressed to
EFC and MidConn Bank, with respect to MidConn Bank's financial data presented in
the Joint Proxy Statement/Prospectus, which letters shall be based upon
Statements on Auditing Standards Nos. 72 and 76.
7.3 Conditions to Obligations of MidConn Bank.
The obligation of MidConn Bank to effect the Merger is also subject to
the satisfaction or waiver by MidConn Bank at or prior to the Effective Time of
the following conditions:
(a) Representations and Warranties.
The representations and warranties of EFC set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on EFC.
Such determination of aggregate Material Adverse Effect shall be made as if
there were no materiality qualifications in such representations and warranties.
MidConn Bank shall have received a certificate signed on behalf of EFC by each
of the President and Chief Executive Officer and the Chief Financial Officer of
EFC to the foregoing effect.
(b) Performance of Covenants and Agreements of EFC.
EFC and Eagle Bank shall have each performed in all material
respects all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date. MidConn Bank shall have received a
certificate signed on behalf of EFC by each of the President and Chief Executive
Officer and the Chief Financial Officer of EFC to such effect.
(c) Consents under Agreements.
The consent or approval or waiver of each person (other than
the Governmental Entities referred to in Section 7.1(c)) whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument to which EFC or Eagle Bank is a party
or is otherwise bound shall have been obtained.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Legal Opinion.
MidConn Bank shall have received the opinion of ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P., special counsel to EFC, dated the Closing Date, as to such
matters as MidConn Bank may reasonably request. As to any matter in such opinion
which involves matters of fact, such counsel may rely upon the certificates of
officers and directors of EFC and of public officials and opinions of local
counsel, reasonably acceptable to MidConn Bank.
35
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of MidConn Bank or EFC, if applicable:
(a) by mutual consent of EFC and MidConn Bank in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either EFC or MidConn Bank upon written notice to the
other party (i) 30 days after the date on which any request or application for a
Regulatory Approval shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Regulatory
Approval, unless within the 30-day period following such denial or withdrawal
the parties agree to file, and have filed with the applicable Governmental
Entity, a petition for rehearing or an amended application, provided, however,
that no party shall have the right to terminate this Agreement pursuant to this
Section 8.1(b), if such denial or request or recommendation for withdrawal shall
be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein;
(c) by either EFC or MidConn Bank if the Merger shall not have
been consummated on or before September 30, 1997, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either EFC or MidConn Bank (provided that the
terminating party is not in breach of its obligations under Section 6.3 hereof)
if the approval of the shareholders of MidConn Bank or the approval of the
shareholders of EFC required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of shareholders or at any adjournment or postponement thereof;
(e) by either EFC or MidConn Bank (provided that the
terminating party is not then in breach of any representation, warranty,
covenant or other agreement contained herein that, individually or in the
aggregate, would give the other party the right to terminate this Agreement) if
there shall have been a breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, if such breach,
individually or in the aggregate, has had or is likely to have a Material
Adverse Effect on the breaching party, and such breach shall not have been cured
within 30 days following receipt by the breaching party of written notice of
such breach from the other party hereto or such breach, by its nature, cannot be
cured prior to the Closing;
(f) by either EFC or MidConn Bank (provided that the
terminating party is not then in breach of any representation, warranty,
covenant or other agreement contained herein that, individually or in the
aggregate, would give the other party the right to terminate this Agreement) if
there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, and such breach
shall not have been cured within 30 days following receipt by the breaching
party of written notice of such breach from the other party hereto or such
breach, by its nature, cannot be cured prior to the Closing;
(g) by EFC, if the management of MidConn Bank or its Board of
Directors, for any reason, (i) fails to call and hold within 35 days of the
effectiveness of the Registration Statement a special meeting of MidConn Bank's
shareholders to consider and approve this Agreement and the transactions
contemplated hereby, (ii) fails to recommend to shareholders the approval of
this
36
Agreement and the transactions contemplated hereby, (iii) fails to oppose any
third party proposal that is inconsistent with the transactions contemplated by
this Agreement or (iv) violates Section 5.1(e) of this Agreement; and
(h) by MidConn Bank, if at any time following the
Determination Date the "EFC Common Stock Price" after the Determination Date
shall be less than $24.00. Notwithstanding the foregoing, if MidConn elects to
exercise its termination right pursuant to this subsection (h), it shall give
prompt written notice to EFC. During the seven-day period commencing with its
receipt of such notice, EFC shall have the option of increasing the
consideration to be received by the holders of MidConn Bank Common Stock
hereunder by increasing the Exchange Ratio to equal a number (rounded to four
decimals) equal to a quotient, the numerator of which is $24.00 multiplied by
the Exchange Ratio and the denominator of which is the AMV of shares of EFC
Common Stock, provided that in no event shall such adjusted Exchange Ratio be
less than .86. If EFC makes an election contemplated by the preceding sentence,
within such seven-day period, it shall give prompt written notice to MidConn
Bank of such election and the revised Exchange Ratio, whereupon no termination
shall have occurred pursuant to this subsection (i) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this subsection (h).
For purposes of this subsection (h), the following terms shall
have the meanings indicated:
"EFC Common Stock Price" means the closing sales price of EFC
Common Stock as reported on the Nasdaq Stock Market National Market System.
"Determination Date" means the first date on which each of (i)
the approval of the OTS required for consummation of the Merger shall have been
received; (ii) the approval of the Connecticut Commissioner for consummation of
the Merger shall have been received; and (iii) the requisite shareholder
approvals for consummation of the Merger shall have been received.
8.2 Effect of Termination.
In the event of termination of this Agreement by either EFC or MidConn
Bank as provided in Section 8.1 hereof, this Agreement shall forthwith become
void and have no effect except (i) the last sentences of Sections 6.2(a) and
6.2(b) and Sections 8.2, 9.2 and 9.3 hereof shall survive any termination of
this Agreement, and (ii) notwithstanding anything to the contrary contained in
this Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful or intentional breach of any provision of
this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Board of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of MidConn Bank or
EFC; provided, however, that after any approval of the transactions contemplated
by this Agreement by MidConn Bank's shareholders, there may not be, without
further approval of such shareholders, any amendment of this Agreement which
reduces the amount or changes the form of the consideration to be delivered to
MidConn Bank shareholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
37
8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement, the closing of
the Merger (the "Closing") will take place at 10:00 a.m. at the main offices of
EFC on (i) the fifth day after the last Requisite Regulatory Approval is
received and all applicable waiting periods have expired, (ii) if elected by
EFC, the last business day of the month in which the date specified in the
immediately preceding clause occurs, or (iii) such other date, place and time as
the parties may agree (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Option Agreement, which shall terminate in accordance with
its terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense, except (i) as otherwise provided in this paragraph, and (ii) the costs
and expenses of printing the Joint Proxy Statement/Prospectus (including the
costs and expenses associated with any post-effective amendment to the Joint
Proxy Statement/Prospectus, including but not limited to costs of resolicitation
of EFC and/or MidConn shareholders in connection therewith if such
resolicitation is as a result of changes at, by, or on behalf of EFC) and all
filing and other fees paid to the SEC in connection with this Agreement shall be
borne by EFC. In the event that this Agreement is terminated by either EFC or
MidConn Bank by reason of a material breach pursuant to Sections 8.1(e) or (f)
hereof or by EFC pursuant to Section 8.1(g) hereof, the other party shall pay
all documented, reasonable costs and expenses up to $500,000 incurred by the
terminating party in connection with this Agreement and the transactions
contemplated hereby plus a breakup fee of $500,000. In the event that this
Agreement is terminated by either EFC or MidConn Bank under Section 8.1(d)
hereof by reason of the other party's shareholders not having given any required
approval, such other party shall pay all documented, reasonable costs and
expenses up to $500,000 incurred by the terminating party in connection with
this Agreement and the transactions contemplated hereby.
38
9.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to EFC, to:
Eagle Financial Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and
(b) if to MidConn Bank, to:
MidConn Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Stanford ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
9.5 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
39
9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Articles of Combination, the Option Agreement,
the MidConn Bank Stockholder Agreement and the EFC Stockholder Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to any applicable conflicts of law
rules.
9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
9.11 Publicity.
Except as otherwise required by law or the rules of the Nasdaq National
Market (or such other exchange on which the EFC Common Stock may become listed),
so long as this Agreement is in effect, neither EFC nor MidConn Bank shall, or
shall permit any of EFC's Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to, or otherwise make
any public statement concerning, the transactions contemplated by this
Agreement, the Articles of Combination, the Option Agreement, the MidConn Bank
Stockholder Agreement or the EFC Stockholder Agreement without the consent of
the other party, which consent shall not be unreasonably withheld.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether 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. Except as otherwise specifically provided in Section 6.8 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
40
9.13 Additional Definitions.
In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater
shareholder, spouse or other person living in the same household of such
director, officer or shareholder, or any company, partnership or trust in which
any of the foregoing persons is an officer, 5% or greater shareholder, general
partner or 5% or greater trust beneficiary.
"Knowledge": with respect to any party hereto, shall mean the actual
knowledge of the directors, and (i) as to EFC, its executive officers (to the
extent still employed by EFC or any EFC Subsidiary) referred to (by name or
group reference) in its proxy materials for the January 1997 annual meeting of
shareholders, and (ii) as to MidConn Bank, its principal officers (to the extent
still employed by MidConn Bank) referred to (by name or group reference) in its
proxy materials for the January 1997 annual meeting of shareholders.
"Laws": any and all statutes, laws, ordinances, rules, regulations,
orders, permits, judgments, injunctions, decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to EFC or MidConn Bank, means a
condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the financial condition, results of operations,
business or properties of EFC or MidConn Bank (other than as a result of (i)
changes in laws or regulations or accounting rules of general applicability or
interpretations thereof, or (ii) decreases in capital under Financial Accounting
Standards No. 115 attributable to general changes in interest rates), or (B) the
ability of EFC or MidConn Bank to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement, the Articles of
Combination and, in the case of MidConn Bank, the Option Agreement.
"Subsidiary": with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.
41
IN WITNESS WHEREOF, EFC, Eagle Bank and MidConn Bank have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
EAGLE FINANCIAL CORPORATION
ATTEST:
By: /s/▇▇▇▇ ▇. ▇▇▇▇ By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- ----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary President and Chief Executive Officer
EAGLE FEDERAL SAVINGS BANK
ATTEST:
By: /s/▇▇▇▇ ▇. ▇▇▇▇ By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary President and Chief Executive Officer
MIDCONN BANK
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------- ---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary President and Chief Executive Officer
42
Exhibit A
OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY
THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
This OPTION AGREEMENT, dated as of January 27, 1997 (this
"Agreement"), is entered into between MIDCONN BANK, a Connecticut-chartered
savings bank ("Issuer"), and EAGLE FINANCIAL CORP., a Delaware corporation
("Grantee").
WITNESSETH:
WHEREAS, Grantee, Eagle Federal Savings Bank, a wholly-owned
subsidiary of Grantee, and Issuer have entered into an Agreement and Plan of
Merger, dated as of January 27, 1997 (the "Plan"), which was executed by the
parties thereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering
into the Plan and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Plan, the parties
hereto agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 485,319 fully paid and nonassessable shares of common stock, par value $1.00
per share of Issuer ("Issuer Common Stock") (which number of shares is equal to
19.9% of the total of (i) the number of outstanding shares of Issuer Common
Stock on the date hereof and (ii) the number of shares issuable pursuant to this
Option), at a price per share equal to $21.00 (the "Initial Price"); provided,
however, that in the event Issuer issues or agrees to issue any additional
shares of Issuer Common Stock (other than shares issued upon the exercise of
options outstanding as of the date of the Plan in accordance with their terms
pursuant to existing stock option plans), or grants one or more options to
purchase additional shares of Issuer Common Stock at a price less than the
Initial Price, as adjusted pursuant to Section 5(b) hereof, such price shall be
equal to such lesser price (such price, as adjusted, is hereinafter referred to
as the "Option Price"). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at
any time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time;
(ii) 12 months after the first occurrence of a Purchase Event;
(iii) 12 months after the termination of the Plan following the
occurrence of a Preliminary Purchase Event (as defined below), unless
clause (vii) is applicable;
(iv) upon the termination of the Plan, prior to the occurrence of
a Purchase Event or Preliminary Purchase Event, by MidConn Bank
pursuant to Section 8.1(h) of the Plan, both parties pursuant to
Section 8.1(a) of the Plan, by either party pursuant to Section 8.1(b)
or (c) of the Plan or Section 8.1(d) of the Plan based on any required
vote of Grantee's shareholders not being received, or by Issuer
pursuant to Section 8.1(e) or (f) of the Plan;
(v) six months after the termination of the Plan, by either party
pursuant to Section 8.1(d) of the Plan based on the required vote of
Issuer's shareholders not being received, if no Purchase Event or
Preliminary Purchase Event has occurred prior to the meeting of
shareholders (or any adjournment or postponement thereof) held to vote
on the Plan;
(vi) 12 months after the termination of the Plan, by Grantee
pursuant to Section 8.1(e) or (f) thereof as a result of a breach by
Issuer, unless such breach was willful or intentional; or
(vii) 18 months after the termination of the Plan, by Grantee
pursuant to Section 8.1(e) or (f) thereof as a result of a willful or
intentional breach by Issuer, or by Grantee pursuant to Section 8.1(g)
of the Plan.
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior written
consent, shall have entered into any letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below)
with any person (as defined below) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the shareholders of Issuer
approve or accept any Acquisition Transaction with any Person (as the
term "person" is defined in Section 3(a)9 and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations thereunder) other than Grantee or any
Grantee Subsidiary. For purposes of this Agreement "Acquisition
Transaction" shall mean (x) a merger, consolidation or other business
combination involving Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Issuer, (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of Beneficial Ownership
(as the term "beneficial ownership" is defined in Regulation 13d-3(a)
of the Exchange Act) of securities representing 10.0% or more of the
voting power of Issuer; provided, however, that "Acquisition
Transaction" shall not include a transaction entered into after the
termination of the Plan in which the Issuer is the surviving entity,
if in connection with such transaction, no person acquires Beneficial
Ownership of 10.0% or more of the total voting power of the Issuer to
be outstanding after giving effect to such transaction and in which
the aggregate voting power of Issuer acquired by all persons is less
than 15% of the total voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or
any current affiliate of Issuer) shall have acquired Beneficial
Ownership of 10.0% or more of the outstanding shares of Issuer Common
Stock;
(iii) (a) Any Person (other than Grantee or any Grantee
Subsidiary) shall have made a bona fide proposal to Issuer or, by a
public announcement or written communication that is or becomes the
subject of public disclosure, to Issuer's shareholders to engage in an
Acquisition Transaction (including, without limitation, any situation
in which any Person other than Grantee or any Grantee Subsidiary shall
have commenced (as such
2
term is defined in Rule 14d-2 under the Exchange Act), or shall have
filed a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such
that, upon consummation of such offer, such person would have
Beneficial Ownership of 10.0% or more of the then outstanding shares
of Issuer Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer", respectively)), (b) such bona
fide proposal is not withdrawn or such public announcement or written
communication is not publicly withdrawn at least five business days
prior to the MidConn Special Meeting (as defined in the Plan), and (c)
the shareholders of Issuer do not approve the Merger, as defined in
the Plan, at the Special Meeting, as defined in the Plan;
(iv) There shall exist a willful or intentional breach under the
Plan by Issuer and such breach would entitle Grantee to terminate the
Plan;
(v) The special meeting of Issuers' shareholders held for the
purpose of voting on the Plan, shall not have been held pursuant to
the Plan or shall have been canceled prior to termination of the Plan,
or for any reason whatsoever Issuer's Board of Directors shall have
failed to recommend, or shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors,
that Issuer's shareholders approve the Plan, or if Issuer or Issuer's
Board of Directors fails to oppose any proposal by any Person (other
than Grantee or any Grantee Subsidiary); or
(vi) Any Person (other than Grantee or any Grantee Subsidiary)
shall have filed an application or notice with the Board of Governors
of the Federal Reserve System (the "FRB"), the Federal Deposit
Insurance Corporation (the "FDIC"), the Connecticut Banking
Commissioner (the "Commissioner"), or other regulatory or
administrative agency or commission (each, a "Governmental Authority")
for approval to engage in an Acquisition Transaction.
(c) The term "Purchase Event" shall mean any of the following events or
transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any
Grantee Subsidiary) of Beneficial Ownership (other than on behalf of
the Issuer) of 25% or more of the then outstanding Issuer Common
Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) except that the percentage referred to in clause (z)
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice," the date
of which being hereinafter referred to as the "Notice Date") specifying (i) the
total number of shares of Issuer Common Stock it will purchase pursuant to such
exercise and (ii) the time (which shall be on a business day that is not less
than three nor more than 10 business days from the Notice Date) on which the
closing of such purchase shall take place (the "Closing Date"); such closing to
take place at the principal office of the Issuer; provided, however, that, if
prior notification to or approval of the FDIC, the FRB, the Commissioner or any
other Governmental Authority is required in connection with such purchase (each,
a "Notification" or an "Approval," as the case may be), (a) Grantee shall
promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to
3
clause (ii) of this sentence, the period of time that otherwise would run from
the Notice Date shall instead run from the later of (x) in connection with any
Notification, the date on which any required notification periods have expired
or been terminated and (y) in connection with any Approval, the date on which
such approval has been obtained and any requisite waiting period or periods
shall have expired. For purposes of Section 2(a) hereof, any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto. On or prior
to the Closing Date, Grantee shall have the right to revoke its exercise of the
Option by written notice to the Issuer given not less than three business days
prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Issuer
Common Stock specified in the Option Notice in immediately available funds by
wire transfer to a bank account designated by Issuer; provided, however, that
failure or refusal of Issuer to designate such a bank account shall not preclude
Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing
hereunder shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended, and applicable state securities laws and to certain
provisions of an agreement among Eagle Financial Corp., Eagle Federal
Savings Bank and MidConn Bank, dated as of January 27, 1997. A copy of
such agreement is on file at the principal office of Eagle Financial
Corp., and will be provided to the holder hereof without charge upon
receipt by Eagle Financial Corp. of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC"), FDIC or Governmental Authority responsible for
administering any applicable state securities laws or an opinion of counsel, in
form and substance satisfactory to Issuer's counsel, to the effect that such
legend is not required for purposes of the Securities Act or applicable state
securities laws; (ii) the reference to the provisions of this Agreement in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, unless prohibited by applicable law, Grantee shall be deemed to be
the holder of record of the number of shares of Issuer Common Stock specified in
the Option Notice, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Issuer Common
Stock shall not then actually be delivered to Grantee. Issuer shall pay all
expenses and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee.
4
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all reasonable action as may from time to time be
requested by the Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (y) in the event
prior approval of or notice to the FDIC, the FRB, the Commissioner or any other
Governmental Authority, under the Change in Bank Control Act of 1978, as
amended, the Bank Holding Company Act, as amended, Section 36a-181 or Section
36a- 184, as applicable, of the Connecticut Bank Holding Company Act, or any
other applicable federal or state banking law, is necessary before the Option
may be exercised, cooperating with Grantee in preparing such applications or
notices and providing such information to each such Governmental Authority as it
may require in order to permit Grantee to exercise the Option and Issuer duly
and effectively to issue shares of Issuer Common Stock pursuant hereto; and (iv)
to take all action provided herein to protect the rights of Grantee against
dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the type or number of shares of
Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), the type and number of shares of Issuer Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares of Issuer Common Stock
are to be issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased or
decreased (as applicable) so that, after such issuance and together with the
shares of Issuer Common Stock previously issued pursuant to the exercise of the
Option (as adjusted on account of any of the foregoing changes in the Issuer
Common Stock), the Option shall equal the sum of 19.9% of the total of (i) the
number of shares of Issuer Common Stock then issued and outstanding and (ii) the
number of share issuable pursuant to this Option.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by
5
multiplying the Option Price by a fraction, the numerator of which shall be
equal to the number of shares of Issuer Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of shares
of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of the Option
(or part thereof) or of any of the shares of Issuer Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf offering circular or,
if applicable, a registration statement with the SEC, under the Securities Act
covering any shares issued and issuable pursuant to the Option and, if
applicable, shall use its reasonable best efforts to cause such registration
statement to become effective, and to remain current and effective for a period
not in excess of 180 days from the day such registration statement first becomes
effective, in order to permit the sale or other disposition of any shares of
Issuer Common Stock issued upon total or partial exercise of the Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Grantee shall have the right to demand two such registrations which right shall
be transferable. Grantee shall provide all information reasonably requested by
Issuer for inclusion in any offering circular or, if applicable, registration
statement to be filed hereunder. In connection with any such offering circular
or, if applicable, registration statement, Issuer and Grantee shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registration. If requested by Grantee
in connection with such registration, Issuer and Grantee shall become a party to
any underwriting agreement relating to the sale of such shares, but only to the
extent of obligating themselves in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Notwithstanding the foregoing, if Grantee revokes any exercise
notice or fails to exercise any Option with respect to any exercise notice
pursuant to Section 2(e) hereof, Issuer shall not be obligated to continue any
registration process with respect to the sale of Option Shares issuable upon the
exercise of such Option and Grantee shall not be deemed to have demanded
registration of Option Shares.
(b) In the event that Grantee requests Issuer to prepare an offering
circular or, if applicable, to file a registration statement following the
failure to obtain any approval required to exercise the Option as described in
Section 9 hereof, the closing of the sale or other disposition of the Issuer
Common Stock or other securities pursuant to such offering circular or, if
applicable, registration statement shall occur substantially simultaneously with
the exercise of the Option.
(c) Concurrently with the preparation of an offering circular or, if
applicable, filing of a registration statement under Section 6(a) hereof, Issuer
shall also make all filings required to comply with state securities laws in
such number of states as Grantee may reasonably request.
SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, (i) at the request (the date of such
request being the "Option Repurchase Request Date") of Grantee, Issuer shall
repurchase, subject to compliance with applicable law and out of funds legally
available therefor, the Option from Grantee at a price (the "Option Repurchase
Price") equal to the amount by which (A) the market/offer price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which the Option may then be exercised and (ii) at the request (the date of such
request being the "Option Share Repurchase Request Date") of the owner of Option
Shares from time to time (the "Owner"), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated, provided however, that Issuer shall
not be required to so repurchase to the extent beyond which such repurchase
would cause the Issuer not to be classified as "adequately capitalized" as
defined in the Federal Deposit Insurance Act and the regulations of the FDIC
thereunder. The term "market/offer price" shall mean the highest of (i) the
price per share of Issuer
6
Common Stock at which a tender offer or exchange offer therefor has been made
after the date hereof and on or prior to the Option Repurchase Request Date or
the Option Share Repurchase Request Date, as the case may be, (ii) the price per
share of Issuer Common Stock paid or to be paid by any third party pursuant to
an agreement with Issuer (whether by way of a merger, consolidation or
otherwise), (iii) the average of the 20 highest last sale prices for shares of
Issuer Common Stock as reported within the 90-day period ending on the Option
Repurchase Request Date or the Option Share Repurchase Request Date, as the case
may be, and (iv) in the event of a sale of all or substantially all of Issuer's
assets, the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Issuer as determined by an investment
banking firm selected by Grantee or the Owner, as the case may be, and
reasonably acceptable to Issuer, divided by the number of shares of Issuer
Common Stock outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be the
value determined by an investment banking firm selected by Grantee or the Owner,
as the case may be, and reasonably acceptable to Issuer. The investment banking
firm's determination shall be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing any
Option and/or any Option Shares in full, Issuer shall promptly so notify Grantee
and/or the Owner and thereafter deliver or cause to be delivered, from time to
time, to Grantee and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that it is
no longer prohibited from delivering, within five business days after the date
on which Issuer is no longer so prohibited; provided, however, that if Issuer at
any time after delivery of a notice of repurchase pursuant to Section 7(b)
hereof is prohibited as referred to above, from delivering to Grantee and/or the
Owner, as appropriate, the Option Repurchase Price or the Option Share
Repurchase Price, respectively, in full, Grantee or the Owner, as appropriate,
may revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
equal to the number of shares of Issuer Common Stock purchasable immediately
prior to the delivery of the notice of repurchase less the number of shares of
Issuer Common Stock covered by the portion of the Option repurchased or, (B) to
the Owner, a certificate for the number of Option Shares covered by the
revocation.
(d) Issuer shall not enter into any agreement with any Person (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other Person assumes all the obligations of Issuer pursuant to this Section 7 in
the event that Grantee or the Owner elects, in its sole discretion, to require
such other Person to perform such obligations.
7
SECTION 8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into a letter of intent or definitive agreement (i) to
consolidate or merge with any Person (other than Grantee or a Grantee
Subsidiary), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person (other than Grantee or a
Grantee Subsidiary) to merge into Issuer, and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all of its assets to
any Person (other than Grantee or a Grantee Subsidiary) then, and in each such
case, such letter of intent or definitive agreement governing such transaction
shall make proper provision so that the Option shall, upon the consummation of
such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute Option"), at the
election of Grantee, of either (x) the Acquiring Corporation (as defined below)
or (y) any person that controls the Acquiring Corporation (the Acquiring
Corporation and any such controlling person being hereinafter referred to as the
"Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7 hereof) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of Issuer Common Stock
for which the Option was theretofore exercisable and the denominator is the
number of shares for which the Substitute Option is exercisable.
(c) The Substitute Option shall otherwise have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee, provided, further that the terms
of the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7 hereof.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving corporation, and (iii) the transferee of all
or any substantial part of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one-year period immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
provided, that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of Issuer
Common Stock issued by Issuer, the corporation merging into Issuer or
by any company which controls or is controlled by such merging
corporation, as Grantee may elect.
8
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of (i) the
shares of Substitute Common Stock outstanding immediately prior to the issuance
of the Substitute Option and (ii) the shares subject to the Substitute Option.
In the event that the Substitute Option would be exercisable for more than such
number of shares of Substitute Common Stock but for this clause (e), the
Substitute Option Issuer shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by Grantee and the Substitute Option Issuer. In addition, the provisions of
Section 5(a) hereof shall not apply to the issuance of any Substitute Option and
for purposes of applying Section 5(a) hereof thereafter to any Substitute
Option, the percentage referred to in Section 5(a) hereof shall thereafter equal
the percentage that the percentage of the shares of Substitute Common Stock
subject to the Substitute Option bears to the number of shares of Substitute
Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has
given the notice referred to in one or more of such Sections, the exercise of
the rights specified in any such Section shall be extended (a) if the exercise
of such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FDIC, the Commissioner or any other Governmental Authority despite the best
efforts of Issuer or the Substitute Option Issuer, as the case may be, to obtain
such approvals, the exercise of the rights shall be deemed to have been
rescinded as of the related notice date. In the event (a) Grantee receives
official notice that an approval of the OTS, the FDIC, the Commissioner or any
other Governmental Authority required for the purchase and sale of the Option
Shares will not be issued or granted or (b) a closing date has not occurred
within 12 months after the related notice date due to the failure to obtain any
such required approval, Grantee shall be entitled to exercise the Option in
connection with the concurrent resale of the Option Shares pursuant to a
registration statement as provided in Section 6 hereof. Nothing contained in
this Agreement shall restrict Grantee from specifying alternative means of
exercising rights pursuant to Sections 2, 6 or 7 hereof in the event that the
exercising of any such rights shall not have occurred due to the failure to
obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, subject to any required Governmental
Approval, and except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this
9
Agreement in accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Issuer Common Stock equal to
the maximum number of shares of Issuer Common Stock at any time and from time to
time issuable hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, non-assessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
SECTION 11. (a) Neither of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions arising
under the Securities Act of 1933, as amended, and applicable state
securities laws and to certain provisions of an agreement among Eagle
Financial Corp., Eagle Federal Savings Bank and MidConn Bank, dated as
of January 27, 1997. A copy of such agreement is on file at the
principal office of Eagle Financial Corp., and will be provided to any
permitted assignee of the Option without charge upon receipt of a
written request therefor.
SECTION 12. Each of Grantee and Issuer will use its reasonable efforts
to make all filings with,and to obtain consents of, all third parties and
Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
FDIC, the FRB, the Commissioner and any other Governmental Authority for
approval to acquire the shares issuable hereunder.
SECTION 13. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
SECTION 14. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7 hereof, the full number of shares of Issuer
Common Stock provided in Section 1 hereof (as adjusted pursuant hereto), it is
the express intention of Issuer to allow Grantee to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in the manner and at the respective addresses of the parties set forth in the
Plan.
10
SECTION 16. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 17. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement and shall be effective at the time of execution and
delivery.
SECTION 18. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder.
SECTION 19. Except as otherwise expressly provided herein or in the
Plan, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not defined
herein but defined in the Plan shall have the meanings assigned thereto in the
Plan.
SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.
SECTION 22. In the event that any selection or determination is to be
made by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by Grantee,
Issuer and such Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
11
IN WITNESS WHEREOF, each of the parties has caused this Option
Agreement to be executed and delivered on its behalf by their respective
officers thereunto duly authorized, all as of the date first above written.
MidConn Bank
By:
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
Eagle Financial Corp.
By:
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
12
Exhibit B
AGREEMENT OF MERGER
and
ARTICLES OF COMBINATION
This Agreement of Merger and Articles of Combination
("Articles of Combination") is made and entered into this ___ day of
____________ 1997, between Eagle Federal Saving Bank, a federally-chartered
savings bank ("Eagle Bank"), and MidConn Bank, a Connecticut-chartered savings
bank.
WITNESSETH:
WHEREAS, Eagle Financial Corp., a Delaware corporation
("EFC"), Eagle Bank, a wholly-owned subsidiary of EFC, and MidConn Bank have
entered into an agreement and plan of merger, dated as of January __, 1997 (the
"Agreement");
WHEREAS, pursuant to the Agreement, EFC will acquire MidConn
Bank through the merger of MidConn Bank with and into Eagle Bank, with Eagle
Bank as the surviving bank;
WHEREAS, Eagle Bank has issued and outstanding 100,000 shares
of common stock, par value $0.01 per share ("Eagle Bank Common Stock"), and
MidConn Bank has issued and outstanding ____ shares of common stock, par value
$1.00 per share ("MidConn Bank Common Stock"); and
WHEREAS, all of the issued and outstanding shares of Eagle
Bank Common Stock and ______ of the issued and ______ of the outstanding shares
of MidConn Bank Common Stock, which is at least two-thirds of the issued and
outstanding common stock of MidConn Bank, have been voted in favor of the merger
of MidConn Bank with and into Eagle Bank;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the Agreement, the
parties hereto do mutually agree, intending to be legally bound, as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
1.1 "Bank Merger" shall refer to the merger of MidConn Bank with and
into Eagle Bank as provided in Section 2.1 of these Articles of Combination.
1.2 "Effective Time" shall mean the date and time at which the Bank
Merger contemplated by these Articles of Combination becomes effective as
provided in Section 2.2 hereof.
1.3 "Merging Banks" shall collectively refer to MidConn Bank and Eagle
Bank.
1.4 "OTS" shall mean the Office of Thrift Supervision.
1.5 "Surviving Bank" shall refer to Eagle Bank as the surviving bank in
the Bank Merger. The location of the home office and other offices of the
Surviving Bank shall be as set forth at Annex 1 hereto.
ARTICLE II
TERMS OF THE BANK MERGER
2.1 The Bank Merger.
(a) Subject to the terms and conditions set forth in the
Agreement, at the Effective Time, MidConn Bank shall be merged with and into
Eagle Bank pursuant to 12 U.S.C. ▇▇.▇▇. 1467a(s), 1815(d)(3) and 1828(c), and
pursuant to Section 36a-126(b) of the Banking Law of the State of Connecticut.
Eagle Bank shall be the Surviving Bank in the Bank Merger and shall continue to
be regulated by the OTS.
(b) As a result of the Bank Merger,
(i) subject to Sections 1.4 (a) and (b), 2.2(e) and
8.1(h) of the Agreement, each share of MidConn Bank Common Stock issued and
outstanding prior to the Effective Time shall be converted into and exchangeable
for ______ shares (the "Exchange Ratio") of common stock of EFC, par value $.01
per share (the "EFC Common Stock") and the shares of MidConn Bank Common Stock
converted into EFC Common Stock pursuant to the Agreement shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of MidConn Bank Common Stock shall thereafter represent the right to receive (i)
the number of whole shares of EFC Common Stock and (ii) cash in lieu of
fractional shares into which the shares of MidConn Bank Common Stock represented
by such Certificate have been converted pursuant to Sections 1.4(a) and (b) of
the Agreement; and
(ii) each share of Eagle Bank Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall constitute the only shares of capital stock of the
Surviving Bank issued and outstanding immediately after the Effective Time.
(c) Upon the Effective Time, all assets and property of the
Merging Banks shall immediately, without any further act, become the property of
the Surviving Bank to the same extent as they were the property of the Merging
Banks, and the Surviving Bank shall be a continuation of the entity that
absorbed the Merging Banks. All rights and obligations of the Merging Banks
shall remain unimpaired, and the Surviving Bank shall, upon the Effective Time,
succeed to all those rights and obligations.
(d) Without limiting the terms and provisions of Section
2.1(c) above, as a result of the Bank Merger, the Surviving Bank shall assume
and succeed, in accordance with 12 C.F.R. Part 563b, to all of the rights and
obligations of Eagle Bank relating to its liquidation account, which liquidation
account was established in connection with the conversions of First Federal
Savings and Loan Association of Torrington and Bristol Federal Savings Bank from
mutual to stock form of organization.
2.2 Effective Time. The Bank Merger shall become effective as of the
date specified in the endorsement of these Articles of Combination by the
Corporate Secretary of the OTS. The Bank Merger shall not be effective unless
and until approved by the OTS and as otherwise contemplated by the Agreement.
2.3 Name of the Surviving Bank. The name of the Surviving Bank shall be
"Eagle Federal Savings Bank."
2.4 Charter. On and after the Effective Time, the charter of Eagle Bank
shall be the charter of the Surviving Bank, until amended in accordance with
applicable law.
2
2.5 Bylaws. On and after the Effective Time, the bylaws of Eagle Bank
shall be the bylaws of the Surviving Bank, until amended in accordance with
applicable law.
2.6 Directors and Officers. On and after the Effective Time, until
changed in accordance with the charter and bylaws of the Surviving Bank, (i) the
directors of the Surviving Bank shall be the directors of Eagle Bank immediately
prior to the Effective Time plus one director of MidConn Bank as selected
pursuant to the Agreement; and (ii) the officers of the Surviving Bank shall be
the officers of Eagle Bank immediately prior to the Effective Time [plus certain
officers of MidConn Bank as may be determined by Eagle Bank]. The directors and
officers of the Surviving Bank shall hold office in accordance with the charter
and bylaws of the Surviving Bank. The number, names, residence addresses and
terms of directors of the Surviving Bank are as set forth at Annex 2 hereto.
2.7 Savings Accounts. The savings accounts of the Surviving Bank issued
after the Effective Time shall be issued on the same basis as savings accounts
had been issued by Eagle Bank prior to the Bank Merger.
ARTICLE III
MISCELLANEOUS
3.1 Amendments. To the extent permitted by law, these Articles of
Combination may be amended by a subsequent writing signed by the parties hereto
upon the approval of the board of directors of each of the parties hereto.
3.2 Successors. These Articles of Combination shall be binding on the
successors of Eagle Bank and MidConn Bank.
3.3 Counterparts. These Articles of Combination may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
3
In accordance with the procedures set forth in the rules and
regulations of the OTS and other applicable law, Eagle Bank and MidConn Bank
have caused these Articles of Combination to be executed by their duly
authorized representatives on the date first set forth above.
EAGLE FEDERAL SAVINGS BANK
ATTEST:
By: By:
------------------------------ ---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary President and Chief Executive Officer
MIDCONN BANK
ATTEST:
By: By:
------------------------------ ---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary President, Chief Executive Officer and
Director
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Director
By:
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director
4
ANNEX 1
Offices of Eagle Federal Savings Bank after the Bank Merger
At the Effective Time of the Bank Merger, Eagle Federal Savings Bank
will have the following offices:
Location of Home Office:
------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Location of Other Offices
-------------------------
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
CT
---------------------------------- ---------------------- ----------- ----------
5
ANNEX 2
Directors of Eagle Federal Savings Bank after the Bank Merger
At the Effective Time of the Bank Merger, Eagle Federal Savings Bank
will have __ directors, the names, residence addresses and terms of whom are as
follows:
Name and Address Term Expires
---------------- ------------
6
The foregoing Articles of Combination have been filed with the
Corporate Secretary of the Office of Thrift Supervision, and endorsed pursuant
to Section 552.13(j) of the Rules and Regulations for Federal Associations (12
C.F.R. ss. 552.13(j)), to be effective at ____ _m. on _________, __________ __,
1997.
OFFICE OF THRIFT SUPERVISION
Department of the Treasury
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Corporate Secretary
7
Exhibit C
MIDCONN BANK STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of January ___, 1997, is
entered into by and among Eagle Financial Corp., a Delaware corporation ("EFC"),
and the ____ stockholders of MidConn Bank, a Connecticut-chartered savings bank,
named on Schedule I hereto (collectively, the "Stockholders"), who are directors
or affiliates (for purposes of Rule 145 under the Securities Act of 1933, as
amended, and for purposes of qualifying the Merger for "pooling-of-interests"
accounting treatment) of MidConn Bank.
WHEREAS, EFC, Eagle Federal Savings Bank, a wholly-owned
subsidiary of EFC ("Eagle Bank"), and MidConn Bank have entered into an
Agreement and Plan of Merger, dated as of January ___, 1997 (the "Agreement"),
which is conditioned upon the execution of this Stockholder Agreement and which
provides for, among other things, the merger of MidConn Bank with and into Eagle
Bank, in a stock-for-stock transaction pursuant to which the corporate existence
of MidConn Bank will cease (the "Merger"); and
WHEREAS, in order to induce EFC to enter into or proceed with
the Agreement, each of the Stockholders agrees to, among other things, vote in
favor of the Agreement, the Merger and the other transactions contemplated by
the Agreement in his/her capacity as a stockholder of MidConn Bank;
NOW, THEREFORE in consideration of the premises, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Ownership of MidConn Bank Common Stock. Each Stockholder represents
and warrants that the number of shares of MidConn Bank common stock, par value
$1.00 per share ("MidConn Bank Common Stock"), set forth opposite such
Stockholder's name on Schedule I hereto is the total number of shares of MidConn
Bank Common Stock over which such person has "beneficial ownership" within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
except that the provisions of Rule 13d-3(d)(1)(i) shall be considered without
any limit as to time.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that:
(a) Such Stockholder shall, at any meeting of the holders of
MidConn Bank Common Stock called for the purpose, vote or cause to be voted all
shares of MidConn Bank Common Stock in which such Stockholder has the right to
vote (whether owned as of the date hereof or hereafter acquired) (i) in favor of
the Agreement, the Merger and the other transactions contemplated by the
Agreement and (ii) against any plan or proposal pursuant to which MidConn Bank
is to be acquired by or merged with, or pursuant to which MidConn Bank proposes
to sell all or substantially all of its assets and liabilities to, any person,
entity or group (other than EFC or any affiliate thereof), provided, however,
that the foregoing shall not apply to any Stockholder who is a principal officer
of, but not a director of MidConn Bank.
(b) Except as otherwise expressly permitted hereby, such
Stockholder shall not, prior to the consummation of the Merger or the earlier
termination of this Stockholder Agreement in accordance with its terms, sell,
pledge, transfer or otherwise dispose of his/her shares of MidConn
Bank Common Stock; provided, however, that this Section 2(b) shall not apply to
a pledge existing as of the date of this Agreement.
(c) Such Stockholder shall not in his/her capacity as a
stockholder of MidConn Bank directly or indirectly encourage or solicit or hold
discussions or negotiations with, or provide any information to, any person,
entity or group (other than EFC or an affiliate thereof) concerning any merger,
sale of all or substantially all of the assets or liabilities not in the
ordinary course of business, sale of shares of capital stock or similar
transaction involving MidConn Bank. Nothing herein shall impair such
Stockholder's fiduciary obligations as a director of MidConn Bank.
(d) Such Stockholder shall use his/her best efforts to take or
cause to be taken all action, and to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger contemplated by this Stockholder
Agreement.
(e) Such Stockholder shall not, prior to the public release by
EFC of an earnings report to its stockholders covering at least one month of
operations after consummation of the Merger (the "Restricted Period"), sell,
pledge (other than the replacement of an existing pledge of MidConn Bank Common
Stock), transfer or otherwise dispose of the shares of EFC common stock, par
value $.01 per share (the "EFC Common Stock"), to be received by him/her for
his/her shares of MidConn Bank Common Stock upon consummation of the Merger, it
being agreed that EFC shall use commercially reasonable efforts to publish such
earnings report within 45 days after the end of the first month after the Merger
becomes effective in which there are at least 30 days of post-Merger combined
operations (which month may be the month in which the Merger becomes effective).
(f) Such Stockholder shall comply with all applicable federal
and state securities laws in connection with any sale of EFC Common Stock
received in exchange for MidConn Bank Common Stock in the Merger, including the
trading and volume limitations as to sales by affiliates contained in Rule 145
under the Securities Act of 1933, as amended.
(g) During the Restricted Period, such Stockholder shall not
sell or otherwise dispose of a number of shares of his/her MidConn Bank Common
Stock, or shares of EFC Common Stock which are exchanged for said shares, (i)
which is greater than 10% of his/her total beneficial ownership of said shares
as of the date of the first such sale and (ii) which in the aggregate with
shares sold or otherwise disposed of by all other Stockholders will be greater
than 1% of the issued and outstanding shares of MidConn Bank as of the date of
the first such sale. For purposes of this computation, outstanding stock options
that currently are exercisable would be considered as outstanding or
beneficially owned after such options are converted to common stock equivalents
using the treasury stock method in accordance with generally accepted accounting
principles.
(h) Except as set forth in the attached Schedule II, such
Stockholder has no present plan or intent, and as of the effective time of the
Merger, shall have no present plan or intent, to engage in a sale, exchange,
transfer (other than an intrafamily gift), distribution (including a
distribution by a corporation to its shareholders), redemption, or reduction in
any way of such Stockholder`s risk of ownership by short sale or otherwise, or
other disposition (not including a bona fide pledge), directly or indirectly
(collectively a "Sale"), with respect to any of the shares of EFC Common Stock
to be received by such Stockholder upon the Merger (except for cash received for
fractional shares). Such Stockholder is not aware of, or participating in, any
plan or intent on the part of MidConn Bank's stockholders (a "Plan") to engage
in sales of the EFC Common Stock to be issued in the Merger such that the
aggregate fair market value, as of the effective time of the Merger, of the
shares subject to such Sales would exceed 50% of the aggregate fair market value
of all outstanding MidConn Bank Common Stock immediately before the Merger (the
"Outstanding MidConn Bank Common Stock"). A sale of EFC Common Stock shall be
considered to have occurred pursuant to a Plan if, for example, such Sale occurs
in a transaction that is in contemplation of, or
2
related or pursuant to, the Merger (a "Related Transaction").
In addition, shares of MidConn Bank Common Stock (i) with respect to which
dissenters' rights are exercised, (ii) exchanged for cash in lieu of fractional
shares of EFC Common Stock, and (iii) with respect to which a Related
Transaction occurs before the Merger shall be considered to be shares of
Outstanding MidConn Bank Common Stock that are exchanged for shares of EFC
Common Stock that are disposed of pursuant to a Plan.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his/her shares of MidConn Bank Common Stock, provided that
such Stockholder obtains the prior written consent of EFC and that any acquirer
of such MidConn Bank Common Stock agrees in writing to be bound by this
Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by the mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms;
provided, however, that if the holders of MidConn Bank Common Stock fail to
approve the Agreement or MidConn Bank fails to hold a stockholders' meeting to
vote on the Agreement, then (i) Section 2(a) clause (ii) hereof shall continue
in effect as to any plan or proposal received by MidConn Bank from any person,
entity or group (other than EFC or any affiliate thereof) prior to the
termination of the Agreement or within 135 days after such termination and (ii)
Section 2(b) hereof shall continue in effect to preclude a sale other than
pursuant to normal brokers transactions on the Nasdaq Stock Market, pledge other
than to a bona fide financial institution or recognized securities dealer,
transfer or other disposition directly or indirectly to any such person, entity
or group in connection with any such plan or proposal, except upon consummation
of such plan or proposal.
5. Notices. Notices may be provided to EFC and the Stockholders in the
manner specified in the Agreement, with all notices to the Stockholders being
provided to them at the addresses set forth at Schedule I.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings. The Section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
9. Regulatory Approval. If any provision of this Stockholder Agreement
requires the approval of any regulatory authority in order to be enforceable,
then such provision shall not be effective until such approval is obtained;
provided, however, that the foregoing shall not affect the enforceability of any
other provision of this Stockholder Agreement.
3
IN WITNESS WHEREOF, MidConn, by a duly authorized officer, and
each of the Stockholders have caused this Stockholder Agreement to be executed
and delivered as of the day and year first above written.
MIDCONN BANK.
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
STOCKHOLDERS:
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
4
SCHEDULE I
Number of Shares of MidConn Bank
Name and Address of Stockholder Common Stock Beneficially Owned
------------------------------- -------------------------------
5
Exhibit D
EAGLE FINANCIAL CORP. STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of January ___, 1997, is
entered into by and among Eagle Financial Corp., a Delaware corporation ("EFC"),
and the ____ stockholders of EFC named on Schedule I hereto (collectively, the
"Stockholders"), who are directors or affiliates (for purposes of Rule 144 under
the Securities Act of 1933, as amended, and for purposes of qualifying the
Merger for "pooling-of-interests" accounting treatment) of EFC.
WHEREAS, EFC, Eagle Federal Savings Bank, a wholly-owned
subsidiary of EFC ("Eagle Bank"), and MidConn Bank have entered into an
Agreement and Plan of Merger, dated as of January ___, 1997 (the "Agreement"),
which provides for, among other things, the merger of MidConn Bank with and into
Eagle Bank, in a stock-for-stock transaction pursuant to which the corporate
existence of MidConn Bank will cease (the "Merger");
NOW, THEREFORE in consideration of the premises, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Ownership of EFC Common Stock. Each Stockholder represents and
warrants that the number of shares of EFC common stock, par value $.01 per share
("EFC Common Stock"), set forth opposite such Stockholder's name on Schedule I
hereto is the total number of shares of EFC Common Stock over which such person
has "beneficial ownership" within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, except that the provisions of Rule
13d-3(d)(1)(i) shall be considered without any limit as to time.
2. Agreements of the Stockholders. Each Stockholder covenants and
agrees that prior to the public release by EFC of an earnings report to its
stockholders covering at least one month of operations after consummation of the
Merger, such Stockholder shall not sell or otherwise dispose of a number of
shares of his/her EFC Common Stock (i) which is greater than 10% of his total
beneficial ownership of said shares as of the date of the first such sale and
(ii) which in the aggregate with shares sold or otherwise disposed of by all
other Stockholders will be greater than 1% of the issued and outstanding shares
of EFC as of the date of the first such sale. For purposes of this computation,
outstanding stock options that currently are exercisable would be considered as
outstanding or beneficially owned after such options are converted to common
stock equivalents using the treasury stock method in accordance with generally
accepted accounting principles.
3. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by the mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms.
4. Notices. Notices may be provided to EFC and the Stockholders in the
manner specified in the Agreement, with all notices to the Stockholders being
provided to them at the addresses set forth at Schedule I.
5. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Delaware, without giving effect to the principles of
conflicts of laws thereof.
6. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
7. Headings. The Section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
8. Regulatory Approval. If any provision of this Stockholder Agreement
requires the approval of any regulatory authority in order to be enforceable,
then such provision shall not be effective until such approval is obtained;
provided, however, that the foregoing shall not affect the enforceability of any
other provision of this Stockholder Agreement.
2
IN WITNESS WHEREOF, EFC, by a duly authorized officer, and each of the
Stockholders have caused this Stockholder Agreement to be executed and delivered
as of the day and year first above written.
EAGLE FINANCIAL CORP.
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
STOCKHOLDERS:
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
3
SCHEDULE I
Number of Shares of EFC
Name and Address of Stockholder Common Stock Beneficially Owned
------------------------------- -------------------------------
4
Exhibit E
EMPLOYMENT AND CONSULTING AGREEMENT
This AGREEMENT (the "Agreement"), dated as of ________________
_, 1997, is entered into by and between EAGLE FEDERAL SAVINGS BANK (the "Bank")
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇").
WHEREAS, ▇▇▇▇▇ has heretofore entered into an Employment
Agreement dated May 1, 1989 (the "Prior Agreement") with MidConn Bank
("MidConn"); and
WHEREAS, the parties acknowledge that effective as of the
closing of the merger (the "Merger") of MidConn with the Bank pursuant to an
Agreement and Plan of Merger dated January __, 1997, by and among Eagle
Financial Corporation ("EFC"), the Bank and MidConn, ▇▇▇▇▇ will have the right
to terminate his employment with the Bank under the Prior Agreement and receive
certain compensation thereunder; and
WHEREAS, the Bank desires to retain the services of ▇▇▇▇▇ as
an officer from the closing of the Merger through December 31, 1997 and
thereafter through December 31, 1998 as an independent contractor consultant to
the Bank to assist in the transition and integration of MidConn into the Bank
and to advise and assist the Bank in connection with lending and other banking
activities; and
WHEREAS, the Board of Directors of the Bank has approved and
authorized this Agreement and the parties desire to enter into this Agreement to
set forth the terms and conditions for the employment and consulting
relationships of ▇▇▇▇▇ with the Bank.
NOW, THEREFORE, it is AGREED as follows:
1. Full-Time Employment and Consulting.
(a) ▇▇▇▇▇'▇ employment by MidConn under the Prior
Agreement shall terminate upon the closing of the Merger. This Agreement (other
than Section 6(g) hereof) and ▇▇▇▇▇'▇ services hereunder shall have no affect
upon his right to payments under the Prior Agreement in connection with such
termination of employment and, in particular, his right to receive the full
amount of compensation due him pursuant to Section 5.1 of the Prior Agreement.
(b) ▇▇▇▇▇ is employed as an Executive Vice President
of the Bank from the closing of the Merger through December 31, 1997 (the
"Full-Time Employment Period"), reporting to the Chief Executive Officer of the
Bank. As an Executive Vice President, ▇▇▇▇▇ shall assist the Bank to assure a
prompt, efficient and orderly transition and integration of MidConn's assets,
business, operations, customers and employees with those of the Bank, including
the maintenance and expansion of existing depositor and borrowing relationships,
especially in the areas previously served by MidConn, and with respect to
lending activities, credit and loan administration and related matters. In
addition, he shall render executive, policy, and other management services to
the Bank of the type customarily performed by persons serving in similar
executive officer capacities. His responsibilities during the Full-Time
Employment Period shall also include the types of services described in
paragraph (c) below.
(c) ▇▇▇▇▇ shall serve as an independent contractor
consultant to the Bank from January 1, 1998 through December 31, 1998 (the
"Consulting Period"). During the Consulting Period, ▇▇▇▇▇ shall perform
consulting services for approximately 20 hours per week as and when
reasonably requested by the Chief Executive Officer or the Chief Operating
Officer of the Bank. He shall render advisory and consulting services to the
Bank of the type customarily performed by persons serving in similar consulting
capacities, consistent with the knowledge and experience he possesses. ▇▇▇▇▇'▇
services shall include assisting the Bank in accomplishing an efficient and
orderly transition and integration of MidConn's assets, business, operations,
customers and employees with those of the Bank, including the maintenance and
expansion of existing depositor and borrowing relationships especially in the
areas previously served by MidConn and consulting services to the Bank with
respect to lending activities, credit and loan administration and related
matters. ▇▇▇▇▇ shall have sole control of the manner and means of performing his
services during the Consulting Period under this Agreement and shall complete
such services in accordance with his own means and methods of work. Unless the
parties otherwise agree, ▇▇▇▇▇'▇ services with the Bank shall terminate at the
end of the Consulting Period.
(d) During the term of this Agreement, there shall be
no material increase in the duties and responsibilities of ▇▇▇▇▇ otherwise than
as provided herein, unless the parties otherwise agree in writing. During the
term of this Agreement, ▇▇▇▇▇ shall not normally be required to provide services
at a location more than 20 miles from the Bank's home office.
(e) During the Full-Time Employment Period, ▇▇▇▇▇
shall not have any other paid employment other than with a subsidiary of EFC,
except with the prior written consent of the Chief Executive Officer of the
Bank. The parties acknowledge and agree that during the Consulting Period, in
the time that ▇▇▇▇▇ is not providing services to the Bank, he may accept other
employment or engagements and may participate in any other activities without
providing notice to the Bank or seeking the Bank's approval thereof; provided,
however, that such other employment, engagements and activities (i) do not
materially interfere with his ability to perform the consulting services
contemplated hereby, (ii) do not involve any solicitation of services of any
employees of the Bank or solicitation of banking business from any customers of
the Bank, (iii) do not involve any violation of Section 6(h) hereof, (iv) do not
involve employment of ▇▇▇▇▇ by any significant competitor of the Bank, and (v)
are disclosed in advance to the Bank. The term "significant competitor" shall
mean any commercial bank, savings bank, savings and loan association, or
mortgage banking company, or a holding company affiliate of any of the
foregoing, which at the date of its employment of ▇▇▇▇▇ has a branch, office or
other operations site within 20 miles of the Bank's home office or any of its
branches.
2. Compensation. The Bank agrees to pay ▇▇▇▇▇ during the term
of this Agreement compensation as follows: (i) salary at the rate of $14,000 per
month during the Full-Time Employment Period (which is equal to the salary he
received from MidConn immediately before the Merger); and (ii) thereafter,
consulting fees at the rate of $50,000 annually during the Consulting Period.
The compensation under this Section 2 shall be payable by the Bank to ▇▇▇▇▇ not
less frequently than monthly, on the Bank's regularly scheduled paydays for
salaried officers of the Bank.
3. Retirement and Employee Benefits.
(a) During the Full-Time Employment Period, as
Executive Vice President of the Bank, ▇▇▇▇▇ shall be eligible to participate in
retirement and employee benefit plans on the same basis as other officers of the
Bank. ▇▇▇▇▇'▇ previous service with MidConn will not be taken into account in
determining his eligibility, vesting and benefit accrual for purposes of such
plans.
(b) During the Consulting Period, ▇▇▇▇▇ shall not be
entitled to participate in any retirement or employee benefit plans applicable
to employees of the Bank.
(c) As a result of his termination of employment with
MidConn, ▇▇▇▇▇ may be entitled, at his discretion, to continuation coverage
(COBRA). Subject to Section 6(g) hereof, such coverage, if elected by ▇▇▇▇▇,
shall be provided at the Bank's expense, under the health and dental insurance
plan maintained by the Bank for a period of up to 18 months and, at ▇▇▇▇▇'▇
discretion, the
2
Bank will continue for the remaining term of the Prior Agreement the group term
life insurance coverage in effect on ▇▇▇▇▇'▇ life under policies provided by
MidConn immediately before the closing of the Merger (or, if less, shall
continue such group term life insurance having a death benefit not in excess of
three times ▇▇▇▇▇'▇ compensation in effect immediately before the date of this
Agreement).
4. Term. The term of this Agreement shall be from the closing
of the Merger through December 31, 1998, unless earlier terminated pursuant to
Section 6 hereof. The parties by mutual agreement may extend the term of this
Agreement.
5. Standards. ▇▇▇▇▇ shall perform his duties and
responsibilities under this Agreement to the best of his ability and using his
best efforts, in a diligent, timely, professional and workmanlike manner, in
accordance with performance standards generally prevailing in the savings
institutions industry.
6. Termination of Service or Employment.
(a) The Bank may terminate ▇▇▇▇▇'▇ employment as an
Executive Vice President or his services as a consultant at any time. ▇▇▇▇▇
shall have no right to receive compensation or other benefits for any period
after termination for cause by the Bank or voluntary termination by ▇▇▇▇▇. The
term "termination for cause" shall mean termination because of ▇▇▇▇▇'▇ personal
dishonesty, incompetence, misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement. In determining incompetence, the alleged acts or omissions
shall be measured against standards generally prevailing in the savings
institutions industry; provided, that ▇▇▇▇▇ shall be given written notice
specifying the acts or omissions alleged to have violated such standards not
less than 30 days before the effective date of any termination of his employment
or services hereunder on the basis of incompetence, and shall be afforded a
reasonable opportunity to respond thereto at a meeting of the Board of Directors
of the Bank, at which he may be accompanied by counsel; and provided further
that it shall be the Bank's burden to prove the alleged acts and omissions and
the prevailing nature of the standards the Bank shall have alleged are violated
by such acts and/or omissions. Following involuntary termination of ▇▇▇▇▇'▇
employment or consulting services without cause, the Bank shall be obligated to
continue to pay to ▇▇▇▇▇ his compensation in accordance with Section 2 hereof
for the remaining term of this Agreement, subject to reduction by mitigation, so
that following involuntary termination without cause, the amounts payable to
▇▇▇▇▇ hereunder (i) during the Full-Time Employment Period shall be reduced by
amounts received or receivable by ▇▇▇▇▇ for other employment or engagements
following such termination during the Full-Time Employment Period and (ii)
during the Consulting Period shall be reduced by 50/168ths of the amounts
received or receivable by ▇▇▇▇▇ for such other employment or engagements during
the Consulting Period, and no amount shall be payable hereunder for any period
following termination without cause during which ▇▇▇▇▇'▇ aggregate compensation
for other employment and engagements is at an annual rate of $168,000 or more.
(b) If ▇▇▇▇▇ is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as
amended, the Bank's obligations under this Agreement shall be suspended as of
the date of service, unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, the Bank may in its discretion (i) pay ▇▇▇▇▇ all or
part of the compensation withheld while such contractual obligations were
suspended, and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(c) If ▇▇▇▇▇ is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal
3
Deposit Insurance Act, as amended, all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the parties shall not be affected.
(d) If the Bank is in default (as defined in Section
3(x)(1) of the Federal Deposit Insurance Act, as amended), all obligations under
this Agreement shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be
terminated, except to the extent determined that continuation of this Agreement
is necessary for the continued operation of the Bank, (i) by the Director of the
Office of Thrift Supervision (the "Director") or his or her designee, at the
time the Federal Deposit Insurance Corporation or Resolution Trust Company
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of the Federal Deposit Insurance Act,
as amended, or (ii) by the Director or his or her designee at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director or his or her designee to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by any termination hereunder.
(f) ▇▇▇▇▇ may terminate his services hereunder upon
15 days' prior written notice to the Bank given after the date hereof, after
which this Agreement (other than Sections 6(g) and 6(h) hereof) shall terminate.
(g) Notwithstanding any other provisions of this
Agreement or of any other agreement, contract, or understanding heretofore or
hereafter entered into by ▇▇▇▇▇ with MidConn, EFC or the Bank (the "Other
Agreements"), and notwithstanding any formal or informal plan or other
arrangement heretofore or hereafter adopted by MidConn, EFC or the Bank for the
direct or indirect provision of compensation to ▇▇▇▇▇ (including groups or
classes of participants or beneficiaries of which ▇▇▇▇▇ is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for ▇▇▇▇▇ (a "Benefit Plan"), ▇▇▇▇▇ shall not have any right to receive any
payment or other benefit under this Agreement, any Other Agreement, or any
Benefit Plan if such payment or benefit, taking into account all other payments
or benefits to or for ▇▇▇▇▇ under this Agreement, all Other Agreements, and all
Benefit Plans, would cause any such payment to ▇▇▇▇▇ to be a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code (a "Parachute Payment"). In
the event that the receipt of any such payment or benefit under this Agreement,
any Other Agreement, or any Benefit Plan would cause ▇▇▇▇▇ to have received a
Parachute Payment, then ▇▇▇▇▇ shall have the right, in ▇▇▇▇▇'▇ sole discretion,
to designate those payments or benefits under this Agreement, any Other
Agreements, and/or any Benefit Plans, which should be reduced or eliminated so
as to avoid having the payment to ▇▇▇▇▇ under this Agreement be a Parachute
Payment. In the event that there is a dispute between the parties as to whether
a reduction in such payments to ▇▇▇▇▇ is required to prevent such payment from
constituting a Parachute Payment, the parties agree that they shall be bound by
the determination (after reasonable consultation with the Bank and ▇▇▇▇▇ and
their respective tax advisors) of such matter by one of the following accounting
firms selected by the Bank (or such other firm as shall be mutually agreed upon
by the parties): ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP; Deloitte & Touche LLP; Ernst & Young LLP;
or Price Waterhouse LLP. In the event that ▇▇▇▇▇ would otherwise be deemed to
have received an amount that would constitute a Parachute Payment, the amount
paid to him that exceeds the maximum amount permissible under this Section 6(g)
shall be treated as a loan to him and shall be repaid, with interest, to the
extent necessary to reduce the amount paid to the maximum permissible amount.
The interest rate and other terms of any such loan shall conform to terms that
would be applicable to loans of similar unsecured type made by the Bank to third
parties and to all regulatory requirements. Any such loan shall be repaid in
full six months after the date on which the Bank notifies ▇▇▇▇▇ that a loan
relationship exists, and may be repaid by ▇▇▇▇▇ without prepayment penalty at
any time during such six month period. Any payments made to ▇▇▇▇▇ pursuant to
this Agreement, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C.
4
Section 1828(k) and regulations promulgated thereunder. This provision shall
survive the termination of this Agreement.
(h) During the term of this Agreement and thereafter,
▇▇▇▇▇ agrees to maintain the confidentiality of, and not to use, any non-public
information which he acquired during his employment or consulting services
concerning EFC, the Bank, their respective subsidiaries or predecessors, or any
director, officer, employee or agent of the aforesaid entities, including any
information as to the customers, business or personnel practices of such
entities. This provision shall survive the termination of this Agreement.
7. No Assignments. This Agreement is personal to each of the
parties hereto. No party may assign or delegate any rights or obligations
hereunder without first obtaining the written consent of the other party hereto.
However, this Agreement shall be binding on the successors or permitted assigns
of Bank and, in the event of the death of ▇▇▇▇▇, all rights to receive payments
hereunder shall become rights of ▇▇▇▇▇'▇ estate.
8. Amendments or Additions. No amendments or additions to this
Agreement shall be binding unless in writing and signed by the parties hereto.
9. Section Headings. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement.
10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
11. Governing Law. This Agreement shall be governed by the
laws of the United States to the extent applicable and otherwise by the laws of
the State of Connecticut, excluding the choice of law rules thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
Attest: EAGLE FEDERAL SAVINGS BANK
By:
------------------------------ ------------------------------------
(Secretary) Chief Executive Officer
EMPLOYEE/CONSULTANT
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
5