-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TfMUC7m4QO9RPp5DRslfxVSjbdkkV0WRBrhb2htqykfHL1NH4RFzmxqt/51kZiNd pl4m+NglcHrcy7QZTrTnBA== 0000898822-97-000427.txt : 19970520 0000898822-97-000427.hdr.sgml : 19970520 ACCESSION NUMBER: 0000898822-97-000427 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970508 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970516 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000818789 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 470713310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16918 FILM NUMBER: 97610639 BUSINESS ADDRESS: STREET 1: 950 TOWER LANE SUITE 600 CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4153586394 MAIL ADDRESS: STREET 2: 950 TOWER LANE SUITE 600 CITY: FOSTER CITY STATE: CA ZIP: 94404 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 May 8, 1997 Date of Report (Date of earliest event reported) AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP (Exact name of registrant as specified in Charter) DELAWARE 0-16918 47-0713310 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 1004 Farnam Street, Omaha, Nebraska 68102 (Address of principal executive offices) (Zip Code) (402) 444-1630 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS On May 8, 1997, America First Eureka Holdings, Inc. (the "Company"), a Delaware corporation and a wholly owned subsidiary of America First Financial Fund 1987-A Limited Partnership (the "Partnership"), a Delaware limited partner- ship, entered into an Agreement and Plan of Merger, dated as of May 8, 1997 (the "Merger Agreement"), by and among the Company, the Partnership, America First Capital Associates Limited Partnership Five, the general partner of the Partner- ship and Bay View Capital Corporation, a Delaware corporation ("Bay View"). The Merger Agreement provides for, among other things, the merger of the Company with and into Bay View (the "Merger"), with Bay View surviving the Merger. Pursuant to the Merger Agreement and upon consummation of the Merger, all outstanding shares of common stock of the Company (the "Com- pany Common Stock") will be converted into the right to re- ceive aggregate consideration equal to $90 million in cash and a number of shares of common stock of Bay View ("Bay View Common Stock") equal to $210 million divided by (a) the aver- age (rounded to four decimal points) of the closing sale price of one share of Bay View Common Stock on the Nasdaq Na- tional Market for the 20 consecutive full trading days ending on the fifth business day immediately prior to the date on which the Merger will close ("Average Price"), or (b) if the Average Price is in excess of $52.00 per share, then $52.00, or (c) if the Average Price is less than $42.00 per share, the Company has not elected to terminate the Merger Agree- ment, and Bay View has not elected to adjust the exchange ra- tio after receiving notice from the Company of its intent to terminate the Merger Agreement, then $42.00. Consummation of the Merger is subject to certain customary conditions, including, among others, (i) the ap- proval of the Merger, the Merger Agreement and the transac- tions contemplated thereby by the unit holders of the Part- nership at a meeting held for such purpose and by the share- holders of Bay View at a meeting held for such purpose and (ii) receipt of certain regulatory approvals. The foregoing description of the Merger Agreement is qualified in its en- tirety by reference to the Merger Agreement which is filed as Exhibit 2.1 to this Form 8-K and incorporated herein by ref- erence. In connection with the Merger Agreement, the Com- pany and Bay View entered into a Stock Option Agreement, dated May 8, 1997 (the "Bay View Stock Option Agreement"), pursuant to which Bay View granted to the Company an ir- revocable option to purchase, under certain circumstances, up -2- to 1,290,530 authorized and unissued shares of Bay View Com- mon Stock at a price, subject to certain adjustments, of $51.75 per share (the "Bay View Option"). The Bay View Op- tion, if exercised, would equal, before giving effect to the exercise of the Bay View Option, 19.9% of the total number of shares of Bay View Common Stock outstanding. The Bay View Option was granted by Bay View as a condition and inducement to the Company's willingness to enter into the Merger Agree- ment. Under certain circumstances, Bay View may be required to repurchase the Bay View Option or the shares acquired pur- suant to the exercise of the Bay View Option. Also, in connection with the Merger Agreement, the Partnership and Bay View entered into an Option Agreement, dated May 8, 1997 (the "Partnership Option Agreement"), pursuant to which the Partnership granted to Bay View an ir- revocable option to purchase, under certain circumstances, up to 1,196,107 authorized and unissued units of the Partnership at a price, subject to certain adjustments, of $31.08 per share (the "Partnership Option"). The Partnership Option, if exercised, would equal, before giving effect to the exercise of the Partnership Option, 19.9% of the total number of units of the Partnership outstanding. The Partnership Option was granted by the Partnership as a condition and inducement to Bay View's willingness to enter into the Merger Agreement. Under certain circumstances, the Partnership may be required to repurchase the Partnership Option or the shares acquired pursuant to the exercise of the Partnership Option. The preceding descriptions of the Partnership Option Agreement and the Bay View Stock Option Agreement are qualified in their entirety by reference to the copy of the Bay View Stock Option Agreement and to the copy of the Partnership Option Agreement included as Exhibit 99.1 and Exhibit 99.2 hereto, respectively, and which are hereby incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) The following exhibits are filed as part of this Report: 2.1 Agreement and Plan of Merger dated as of May 8, 1997 by and among Bay View Capital Corpora- tion, America First Eureka Holding, Inc., America First Financial Fund 1987-A Limited Partnership and America First Capital Associ- ates Limited Partnership Five. -3- 99.1 Stock Option Agreement, dated May 8, 1997, by and between Bay View Capital Corpora- tion, as grantee, and America First Financial Fund 1987-A Limited Partnership, as issuer. 99.2 Stock Option Agreement, dated May 8, 1997, by and between America First Eureka Holdings, Inc., as grantee, and Bay View Capi- tal Corporation, as issuer. 99.3 America First Financial Fund 1987-A Limited Partnership Press Release issued May 8, 1997. -4- SIGNATURE Pursuant to the requirements of the Securities Ex- change Act of 1934, the Registrant has duly caused this re- port to be signed on its behalf by the undersigned hereunto duly authorized. AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP By: America First Capital As- sociates Limited Partnership Five, General Partner of the Registrant By: AFCA-5 Management Corpora- tion, General Partner of America First Capital As- sociates Limited Partnership Five Dated: May 16, 1997 By:/s/ George H. Krauss George H. Krauss Chairman of the Board of Directors and Secretary EXHIBIT INDEX Exhibits. 2.1 Agreement and Plan of Merger dated as of May 8, 1997 by and among Bay View Capital Corporation, America First Eureka Holding, Inc., America First Financial Fund 1987-A Lim- ited Partnership and America First Capital As- sociates Limited Partnership Five. 99.1 Stock Option Agreement, dated May 8, 1997, by and between Bay View Capital Corpora- tion, as grantee, and America First Financial Fund 1987-A Limited Partnership, as issuer. 99.2 Stock Option Agreement, dated May 8, 1997, by and between America First Eureka Holdings, Inc., as grantee, and Bay View Capi- tal Corporation, as issuer. 99.3 America First Financial Fund 1987-A Limited Partnership Press Release issued May 8, 1997. EX-2 2 EXHIBIT 2.1 EXHIBIT 2 ================================================================================ AGREEMENT AND PLAN OF MERGER by and among BAY VIEW CAPITAL CORPORATION, AMERICA FIRST EUREKA HOLDINGS, INC., AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP and AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE -------------------------------------------------- Dated May 8, 1997 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- ARTICLE I - --------- THE MERGER ---------- 1.01. The Merger.................................................. 2 ---------- 1.02. Closing..................................................... 2 ------- 1.03. Effective Time.............................................. 2 -------------- 1.04. Additional Actions.......................................... 3 ------------------ 1.05. Certificate of Incorporation and Bylaws of Surviving ---------------------------------------------------- Corporation................................................. 3 ----------- 1.06. Board of Directors and Officers of the Surviving ------------------------------------------------ Corporation................................................. 3 ----------- 1.07. Conversion of Securities.................................... 3 ------------------------ 1.08. Exchange of Certificates.................................... 4 ------------------------ 1.09. No Fractional Shares........................................ 5 -------------------- 1.10. Anti-Dilution Adjustments................................... 5 ------------------------- 1.11. Reservation of Right to Revise Transaction.................. 5 ------------------------------------------ ARTICLE II - ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER, SELLING STOCKHOLDER AND GENERAL PARTNER 2.01. Organization and Authority.................................. 6 -------------------------- 2.02. Subsidiaries................................................ 6 ------------ 2.03. Capitalization.............................................. 7 -------------- 2.04. Authorization............................................... 7 ------------- 2.05. Seller Financial Statements................................. 8 --------------------------- 2.06. Seller Reports.............................................. 9 -------------- 2.07. Properties and Leases....................................... 9 --------------------- 2.08. Taxes....................................................... 10 ----- 2.09. Material Adverse Effect..................................... 10 ----------------------- 2.10. Commitments and Contracts................................... 11 ------------------------- 2.11. Litigation and Other Proceedings............................ 12 -------------------------------- 2.12. Insurance................................................... 12 --------- 2.13. Compliance with Laws........................................ 12 -------------------- 2.14. Labor....................................................... 14 ----- 2.15. Material Interests of Certain Persons....................... 14 ------------------------------------- 2.16. Allowance for Loan and Lease Losses; Non-performing Assets.. 15 ---------------------------------------------------------- 2.17. Employee Benefit Plans...................................... 15 ---------------------- 2.18. Conduct of Seller to Date................................... 17 ------------------------- 2.19. Proxy Statement, etc........................................ 18 -------------------- 2.20. Registration Obligations.................................... 19 ------------------------ 2.21. State Takeover Statutes..................................... 19 ----------------------- 2.22. Accounting, Tax and Regulatory Matters...................... 19 -------------------------------------- 2.23. Brokers and Finders......................................... 19 ------------------- 2.24. Interest Rate Risk Management Instruments................... 19 ----------------------------------------- 2.25. Accuracy of Information..................................... 20 ----------------------- i 2.26. Authorization............................................... 20 ------------- 2.27. Beneficial Ownership of Seller Equity Securities............ 20 ------------------------------------------------ 2.28. Rights to Acquire Equity Securities......................... 20 ----------------------------------- 2.29. Title to Seller Common Stock................................ 20 ---------------------------- 2.30. Authorization............................................... 21 ------------- ARTICLE III - ----------- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER 3.01. Organization and Authority.................................. 21 -------------------------- 3.02. Subsidiaries................................................ 21 ------------ 3.03. Capitalization of Buyer..................................... 22 ----------------------- 3.04. Authorization............................................... 22 ------------- 3.05. Buyer Financial Statements.................................. 23 -------------------------- 3.06. Buyer Reports............................................... 24 ------------- 3.07. Properties and Leases....................................... 24 --------------------- 3.08. Taxes....................................................... 24 ----- 3.09. Material Adverse Effect..................................... 25 ----------------------- 3.10. Commitments and Contracts................................... 25 ------------------------- 3.11. Litigation and Other Proceedings............................ 26 -------------------------------- 3.12. Insurance................................................... 27 --------- 3.13. Compliance with Laws........................................ 27 -------------------- 3.14. Labor....................................................... 29 ----- 3.15. Material Interests of Certain Persons....................... 29 ------------------------------------- 3.16. Allowance for Loan Losses; Non-performing Assets............ 29 ------------------------------------------------ 3.17. Employee Benefit Plans...................................... 30 ---------------------- 3.18. Conduct of Buyer to Date.................................... 31 ------------------------ 3.19. Proxy Statement, etc........................................ 32 -------------------- 3.20. State Takeover Statutes..................................... 32 ----------------------- 3.21. Accounting, Tax and Regulatory Matters...................... 33 -------------------------------------- 3.22. Brokers and Finders......................................... 33 ------------------- 3.23. Interest Rate Risk Management Instruments................... 33 ----------------------------------------- 3.24. Accuracy of Information..................................... 33 ----------------------- ARTICLE IV - ---------- CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME 4.01. Conduct of Businesses Prior to the Effective Time........... 34 ------------------------------------------------- 4.02. Forbearances of Seller...................................... 34 ---------------------- 4.03 Forbearances of Selling Stockholder......................... 37 ----------------------------------- 4.04. Forbearances of Buyer....................................... 37 --------------------- ARTICLE V - --------- ADDITIONAL AGREEMENTS 5.01. Access and Information...................................... 38 ---------------------- 5.02. Registration Statement Regulatory Matters................... 39 ----------------------------------------- 5.03. Approval of Merger and Distribution......................... 40 ----------------------------------- 5.04. Current Information......................................... 40 ------------------- 5.05. Agreements of Affiliates.................................... 40 ------------------------ 5.06. Expenses.................................................... 41 -------- 5.07. Miscellaneous Agreements and Consents....................... 41 ------------------------------------- 5.08. Employee Benefits........................................... 42 ----------------- 5.09. Equity Appreciation Plan and Long Term Incentive ------------------------------------------------ Compensation Plan........................................... 42 ----------------- 5.10. Press Releases.............................................. 42 -------------- ii 5.11. State Takeover Statutes..................................... 43 ----------------------- 5.12. D&O Indemnification......................................... 43 ------------------- 5.13. Best Efforts................................................ 43 ------------ 5.14. Insurance................................................... 43 --------- 5.15. Conforming Entries.......................................... 43 ------------------ 5.16. Environmental Reports....................................... 45 --------------------- 5.17. Seller Bank Securities...................................... 45 ---------------------- 5.18. Agreement with FDIC......................................... 45 ------------------- 5.19. Directors of Buyer.......................................... 45 ------------------ 5.20. Indemnification of Buyer.................................... 45 ------------------------ 5.21. Selling Stockholder and General Partner Approval............ 46 ------------------------------------------------ 5.22. Distribution................................................ 46 ------------ 5.23. EAP and LTIP Distributions.................................. 46 -------------------------- ARTICLE VI - ---------- CONDITIONS ---------- 6.01. Conditions to Each Party's Obligation To Effect the --------------------------------------------------- Merger...................................................... 46 ------ 6.02. Conditions to Obligations of Seller To Effect the Merger.... 47 -------------------------------------------------------- 6.03. Conditions to Obligations of Buyer To Effect the Merger..... 48 ------------------------------------------------------- ARTICLE VII - ----------- TERMINATION, AMENDMENT AND WAIVER 7.01. Termination................................................. 48 ----------- 7.02. Effect of Termination....................................... 49 --------------------- 7.03. Amendment................................................... 50 --------- 7.04. Severability................................................ 50 ------------ 7.05. Waiver...................................................... 50 ------ ARTICLE VIII - ------------ GENERAL PROVISIONS 8.01. Non-Survival of Representations, Warranties and Agreements.. 50 ---------------------------------------------------------- 8.02. Notices..................................................... 51 ------- 8.03. Miscellaneous............................................... 52 ------------- iii AGREEMENT AND PLAN OF MERGER ---------------------------- This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into on May 8, 1997 by and among BAY VIEW CAPITAL CORPORATION, a Delaware corporation ("Buyer"), AMERICA FIRST EUREKA HOLDINGS, INC., a Delaware corporation ("Seller"), AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP, the sole stockholder of Seller and a Delaware limited partnership ("Selling Stockholder") and AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE, the General Partner of Selling Stockholder and a Delaware limited partnership. W I T N E S S E T H: - - - - - - - - - WHEREAS, Buyer is a registered unitary savings and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"); and WHEREAS, Seller is a registered unitary savings and loan holding company under HOLA; and WHEREAS, the Boards of Directors of Buyer, and Seller have approved the merger (the "Merger") of Seller with and into Buyer, pursuant to the terms and subject to the conditions of this Agreement to be followed immediately by the merger of EurekaBank, A Federal Savings Bank, a wholly owned subsidiary of Seller and a federal savings bank ("Seller Bank") with and into Bay View Bank, a wholly owned subsidiary of Buyer and a federal savings bank ("Buyer Bank"), pursuant to the Subsidiary Agreement and Plan of Merger in the form attached hereto as Exhibit A (the "Subsidiary Merger Agreement"); and WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "IRC"), and this Agreement shall constitute a plan of reorganization pursuant to Section 368 of the IRC; and WHEREAS, as a condition to, and promptly after the execution of this Agreement, (i) Buyer and each director of Seller and certain other persons designated by Seller will enter into Support Agreements (the "Buyer Support Agreements") in the form attached hereto as Exhibit B and (ii) Seller and each director of Buyer will enter into Support Agreements (the "Seller Support Agreements") in the form attached hereto as Exhibit C; and WHEREAS, as a condition to, and immediately prior to execution of this Agreement, Buyer and Selling Stockholder will enter into an option agreement (the "Buyer Option Agreement") in the form attached hereto as Exhibit D; and WHEREAS, as a condition to, and immediately prior to execution of this Agreement, Buyer and Seller will enter into an option agreement (the "Seller Option Agreement") in the form attached hereto as Exhibit E; and WHEREAS, the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with the transactions contemplated by this Agreement. NOW THEREFORE, in consideration of the premises and the representations, warranties and agreements herein contained, the parties agree as follows: ARTICLE I --------- THE MERGER 1.01. The Merger. Subject to the terms and conditions of this ---------- Agreement, and pursuant to the provisions of the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as hereinafter defined), Seller shall be merged with and into Buyer pursuant to the terms and conditions set forth herein. Upon consummation of the Merger, the separate corporate existence of Seller shall cease and Buyer shall continue as the surviving corporation (sometimes referred to herein as the "Surviving Corporation") under the DGCL, and all rights, properties and assets and every other interest of or belonging to or due to the Seller will be deemed to be transferred to and vested in Buyer. 1.02. Closing. The closing (the "Closing") of the Merger shall take ------- place at 10:00 a.m. local time, on the date that the Effective Time (as defined in Section 1.03) occurs, or at such other time, and at such place, as Buyer and Seller shall agree (the "Closing Date"). The Closing is anticipated to occur on December 31, 1997. In no event will the Closing Date occur until after the record date for the quarterly dividend of Seller with respect to the fourth calendar quarter of 1997. 1.03. Effective Time. The Merger shall become effective on the date -------------- and at the time (the "Effective Time") on which appropriate documents in respect of the Merger are filed with the Secretary of State of the State of Delaware in such form as required by and in accordance with, the relevant provisions of the DGCL. Subject to the terms and conditions of this Agreement, the Effective Time shall occur on any such date as Buyer shall notify Seller in writing (such notice to be at least five business days in advance of the Effective Time) but not earlier than the satisfaction of all conditions set forth in Section 6.01(a) and 6.01(b). As soon as practicable following the Effective Time, Buyer and Seller shall cause a certificate or plan of merger reflecting the terms of this Agreement to be delivered for filing and recordation with other state or local officials in the State of Delaware in accordance with the DGCL. 2 1.04. Additional Actions. If, at any time after the Effective Time, ------------------ Buyer or Buyer Bank shall consider or be advised that any further deeds, assignments or assurances or any other acts are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in Buyer or Buyer Bank its right, title or interest in, to or under any of the rights, properties or assets of Seller or Seller Bank, as the case may be, or (b) otherwise carry out the purposes of this Agreement, Seller shall be deemed to have granted to Buyer and Buyer Bank, jointly and severally, an irrevocable power of attorney to execute and deliver all such deeds, assignments or assurances and to do all acts necessary or desirable to vest, perfect or confirm title and possession to such rights, properties or assets in Buyer or Buyer Bank, as the case may be, and otherwise to carry out the purposes of this Agreement, and the officers and directors of Buyer are authorized in the name of Seller and the General Partner or otherwise to take any and all such action. 1.05. Certificate of Incorporation and Bylaws of Surviving ---------------------------------------------------- Corporation. The Certificate of Incorporation and Bylaws of Buyer in effect - ----------- immediately prior to the Effective Time shall, without any change, be the Certificate of Incorporation and Bylaws of the Surviving Corporation following the Merger until otherwise amended or repealed in accordance with applicable law. 1.06. Board of Directors and Officers of the Surviving Corporation. ------------------------------------------------------------ At the Effective Time, the directors of Buyer immediately prior to the Effective Time, and Stephen T. McLin and another person selected by Seller acceptable to Buyer, shall be the directors of the Surviving Corporation. At the Effective Time, the officers of Buyer immediately prior to the Effective Time shall be the officers of the Surviving Corporation. Such directors and officers shall hold office in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. 1.07. Conversion of Securities. (a) At the Effective Time, by virtue ------------------------ of the Merger and without any action on the part of Buyer, Seller or the holder of any of the following securities: (i) Each share of the common stock, par value $.01 per share, of Buyer ("Buyer Common Stock") (and the associated Rights under the Stockholder Protection Rights Agreement dated as of July 31, 1990, as amended (the "Buyer Rights Agreement") between Buyer and Manufacturers Hanover Trust Company of California, as Rights Agent) issued and outstanding or held in treasury immediately prior to the Effective Time shall remain issued and outstanding or held in treasury and shall be unchanged after the Merger; and (ii) Each share of common stock, par value $1.00 per share, of Seller ("Seller Common Stock") issued and outstanding immediately prior to the Effective Time ("Exchange Shares") 3 shall cease to be outstanding and shall be converted into and become the right to receive: (1) that number of shares of Buyer Common Stock (and the associated Rights under the Buyer Rights Agreement) equal to (i) 70% of Purchase Price, divided by (ii) the number of Exchange Shares, divided by (iii) the Buyer Stock Price (such number of shares being the "Per Share Stock Consideration"). The "Buyer Stock Price" means (a) the average (rounded to four decimal points) of the average closing sale price of one share of Buyer Common Stock on the Nasdaq National Market ("Nasdaq") for the 20 consecutive full trading days ending on the fifth business day immediately prior to the Closing Date ("Average Price"), (b) if the Average Price is in excess of $52.00 per share, then $52.00, or (c) if the Average Price is less than $42.00 per share and Buyer has not made an Adjustment Election (as defined in Section 7.01(f)), then $42.00. "Purchase Price" shall mean $300 million; and (2) an amount of cash equal to (i) 30% of Purchase Price, divided by (ii) the number of Exchange Shares (such amount of cash being the "Per Share Cash Consideration"). 1.08. Exchange of Certificates. (a) At the Closing, the Selling ------------------------ Stockholder shall deliver to Buyer certificates evidencing all of the Exchange Shares ("Certificates"), duly endorsed in blank or accompanied by stock powers duly executed in blank. Buyer shall issue Buyer Common Stock (and the associated Rights) to the Selling Stockholder in exchange for Certificates in an amount equal to the Per Share Stock Consideration multiplied by the number of Exchange Shares evidenced by such Certificates. (b) Buyer shall cooperate with the Selling Stockholder in distributing the Buyer Common Stock issued pursuant to Section 1.08(a) to the holders of Beneficial Unit Certificates of Selling Stockholder ("BUC Holders"), Limited Partners of Selling Stockholder (the "Limited Partners") and the General Partner in accordance with a plan of dissolution of the Selling Stockholder (the "Distribution") which plan shall be approved by the Limited Partners and BUC Holders pursuant to Section 5.03 of this Agreement. In consummating the Distribution, Buyer and the Selling Stockholder agree to use their best efforts to cause the Buyer Common Stock distributed in the Distribution to be registered pursuant to the Securities Act of 1933, as amended (the "Securities Act"). (c) All shares of Seller Common Stock exchanged pursuant to this Section 1.08 shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and 4 each Certificate previously evidencing any such shares shall thereafter represent the right to receive the consideration described in this Agreement. The holders of Certificates shall cease to have any rights with respect to shares of Seller Common Stock except as otherwise provided herein or by law. 1.09. No Fractional Shares. Notwithstanding any other provision of -------------------- this Agreement, neither certificates nor scrip for fractional shares of Buyer Common Stock shall be issued in the Merger. The Selling Stockholder shall receive in lieu thereof cash (without interest) in an amount determined by multiplying the fractional share interest to which such holder would otherwise be entitled by the Closing Price on the last business day preceding the Effective Time. With respect to a share of stock, "Closing Price" shall mean: the closing sale price of one share of Buyer Common Stock on the Nasdaq. The Selling Stockholder shall not be entitled to dividends, voting rights or any other rights in respect of any fractional share. 1.10. Anti-Dilution Adjustments. If prior to the Effective Time -------------------------- Buyer shall declare a stock dividend or make distributions upon or subdivide, split up, reclassify or combine or make other similar change to Buyer Common Stock, exchange Buyer Common Stock for a different number or kind of shares or securities or declare a dividend or make a distribution on Buyer Common Stock or on any security convertible into Buyer Common Stock, or is involved in any transaction resulting in any of the foregoing (including any exchange of Buyer Common Stock for a different number or kind of shares or securities) appropriate adjustment or adjustments will be made to the Buyer Stock Price, Average Price and the per share prices set forth in Section 1.07. 1.11. Reservation of Right to Revise Transaction. Buyer may at any ------------------------------------------ time change the method of effecting the acquisition of Seller by Buyer (in a manner reasonably acceptable to Seller counsel) and Seller shall cooperate in such efforts (including without limitation the provisions of this Article I) (any such additional transactions together with the Merger being referred to herein as the "Transactions")), if and to the extent Buyer has been advised in writing by Buyer's independent accountants that the method of effecting the acquisition contemplated hereby will not result in the best utilization of net operating loss carry-forwards of Seller and the Seller Subsidiaries, provided, --------- however, that no such change shall (A) alter or change the amount or kind of - ------- consideration to be issued to Selling Stockholder as provided for in this Agreement (the "Merger Consideration"), (B) adversely affect the tax treatment to Selling Stockholder as a result of receiving the Merger Consideration or (C) materially delay receipt of any approval referred to in Section 6.01(b) or the consummation of the transactions contemplated by this Agreement. Buyer may exercise this right of revision by giving written notice thereof in the manner provided in Section 8.02 of this Agreement. 5 ARTICLE II ---------- REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER, SELLING STOCKHOLDER AND GENERAL PARTNER Seller represents and warrants to and covenant with Buyer as follows: 2.01. Organization and Authority. Seller is a corporation duly -------------------------- organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified, except as set forth on Schedule 2.01 and except where the failure to be so qualified would not have a material adverse effect on the financial condition or results of operations ("Material Adverse Effect") of Seller and its Subsidiaries, taken as a whole, and has corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted. Seller is registered as a unitary savings and loan holding company with the Office of Thrift Supervision (the "OTS") under HOLA. True and complete copies of the Certificate of Incorporation and Bylaws of Seller and of the charter and bylaws of the Seller Subsidiaries (as that term is defined in Section 2.02), each as in effect on the date of this Agreement, have been provided to Buyer. As used in this Agreement, the word "Subsidiary" when used 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. 2.02. Subsidiaries. Schedule 2.02 sets forth, among other things, a ------------ complete and correct list of all of Seller's Subsidiaries (each a "Seller Subsidiary" and collectively the "Seller Subsidiaries"), all outstanding Equity Securities of each of which, except as set forth on Schedule 2.02, are owned directly or indirectly by Seller. "Equity Securities" of an issuer means capital stock or other equity securities of such issuer, options, limited partnership units, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, shares of any capital stock or other Equity Securities of such issuer, or contracts, commitments, understandings or arrangements by which such issuer is or may become bound to issue additional shares of its capital stock or other Equity Securities of such issuer, or options, warrants, scrip or rights to purchase, acquire, subscribe to, calls on or commitments for any shares of its capital stock or other Equity Securities. Except as set forth on Schedule 2.02, all of the outstanding shares of capital stock of the Seller Subsidiaries are validly issued, fully paid and nonassessable, and those shares owned by Seller are owned free and clear of any lien, claim, charge, option, encumbrance, agreement, mortgage, pledge, security 6 interest or restriction (a "Lien") with respect thereto. Each of the Seller Subsidiaries is a corporation or savings bank duly incorporated or organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or organization, and has corporate power and authority to own or lease its properties and assets and to carry on its business as it is now being conducted. Each of the Seller Subsidiaries is duly qualified to do business in each jurisdiction where its ownership or leasing of property or the conduct of its business requires it so to be qualified, except where the failure to so qualify would not have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole. Except as set forth on Schedule 2.02, Seller does not own beneficially, directly or indirectly, any shares of any class of Equity Securities or similar interests of any corporation, bank, business trust, association or similar organization. Seller Bank is chartered by the OTS. The deposits of Seller Bank are insured by the Savings Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF"). Except as set forth on Schedule 2.02, neither Seller nor any Seller Subsidiary holds any interest in a partnership, limited liability company, joint venture or any other kind of business enterprise. 2.03. Capitalization. The authorized capital stock of Seller consists -------------- of 100 shares of Seller Common Stock of which 100 are issued and outstanding, all of which shares are beneficially owned by Selling Stockholder. There are no other Equity Securities of Seller outstanding. All of the issued and outstanding shares of Seller Common Stock are validly issued, fully paid, and nonassessable, and have not been issued in violation of any preemptive right. The authorized capital stock of Seller Bank consists of (i) 10,000,000 shares of common stock, par value $1.00 per share ("Seller Bank Common Stock"), of which 5,000,000 shares are issued and outstanding and (ii) 1,000,000 shares of preferred stock, par value $100.00 per share("Seller Bank Preferred Stock"), issuable in series, of which 200,000 shares are issued and outstanding. There are no other Equity Securities of Seller Bank outstanding. All of the issued and outstanding shares of Seller Bank Common Stock and Seller Bank Preferred Stock are validly issued, fully paid and nonassessable, and have not been issued in violation of any preemptive right. 2.04. Authorization. (a) Seller has the corporate power and authority ------------- to enter into this Agreement and, subject to the approval of this Agreement by the Selling Stockholder, to carry out its obligations hereunder. The only vote required for Selling Stockholder to approve this Agreement is the affirmative vote of a Majority in Interest of the Limited Partners as provided in Section 10.03 of the Limited Partnership Agreement of the Selling Stockholder (the "Limited Partnership Agreement") at a meeting called for such purpose. The execution, delivery and performance of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all 7 requisite corporate action on the part of Seller. Subject to approval by the Selling Stockholder and the execution and delivery hereof by the parties hereto, this Agreement is a valid and binding obligation of Seller enforceable against Seller in accordance with its terms. (b) Except as set forth on Schedule 2.04B, neither the execution nor delivery nor performance by Seller of this Agreement, nor the consummation by Seller and Seller Bank of the transactions contemplated hereby, nor compliance by Seller with any of the provisions hereof, or compliance by Seller Bank with any of the provisions of the Subsidiary Merger Agreement will (i) violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any Lien upon any of the material properties or assets of Seller or any Seller Subsidiary under any of the terms, conditions or provisions of (x) its articles or certificate of incorporation, charter or bylaws or (y) any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Seller or any Seller Subsidiary is a party or by which it may be bound, or to which Seller or any Seller Subsidiary or any of the material properties or assets of Seller or any Seller Subsidiary may be subject, or (ii) subject to compliance with the statutes and regulations referred to in paragraph (c) of this Section 2.04, to the best of knowledge of Seller violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Seller or any Seller Subsidiary or any of their respective material properties or assets. (c) Other than in connection or in compliance with the provisions of the DGCL, the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act"), the securities or blue sky laws of the various states or filings, consents, reviews, authorizations, approvals or exemptions required by the FDIC or under HOLA or the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), or any required approvals or filings pursuant to any state statutes or regulations applicable to Seller, Buyer or their respective Subsidiaries with respect to the transactions contemplated by this Agreement, no notice to, filing with, exemption or review by or authorization, consent or approval of, any public body or authority is necessary for the consummation by Seller and Seller Bank of the transactions contemplated by this Agreement. 2.05. Seller Financial Statements. The consolidated balance sheets --------------------------- of Seller and its Subsidiary as of December 31, 1996, 1995 and 1994 and related consolidated statements of income, 8 cash flows and partners' capital for each of the three years in the three-year period ended December 31, 1996, together with the notes thereto, audited by KPMG Peat Marwick LLP and included in an annual report on Form 10-K of Selling Stockholder (including amendments thereto) as filed with the Securities and Exchange Commission (the "SEC") (the "Seller Financial Statements"), except as set forth on Schedule 2.05, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP"), present fairly the consolidated financial position of Selling Stockholder, Seller and its Subsidiary at the dates and the consolidated results of operations, cash flows and partners' capital of Selling Stockholder, Seller and its Subsidiary for the periods stated therein and are derived from the books and records of Selling Stockholder, Seller and its Subsidiary, which are complete and accurate in all material respects and have been maintained in all material respects in accordance with applicable laws and regulations. Except as set forth on Schedule 2.05, neither Seller nor its Subsidiary has any material contingent liabilities that are not reflected in the Seller Reports (defined below) or disclosed in the financial statements described above. 2.06. Seller Reports. Except as set forth on Schedule 2.06, since -------------- January 1, 1994, each of Seller and the Seller Subsidiaries has filed all material reports, registrations and statements, together with any required material amendments thereto, that it was required to file with (i)the OTS, (ii) the FDIC, and (iii) any other federal, state, municipal, local or foreign government, securities, banking, savings and loan, insurance and other governmental or regulatory authority and the agencies and staffs thereof (the entities in the foregoing clauses (i) through (iii) being referred to herein collectively as the "Regulatory Authorities" and individually as a "Regulatory Authority"). All such reports and statements filed with any such Regulatory Authority are collectively referred to herein as the "Seller Reports." As of its respective date, each Seller Report complied in all material respects with all the rules and regulations promulgated by the applicable Regulatory Authority and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.07. Properties and Leases. Except as set forth on Schedule 2.07 or --------------------- as may be reflected in the Seller Financial Statements, except for any Lien for current taxes not yet delinquent and except with respect to assets classified as real estate owned, Seller and its Subsidiaries have good title free and clear of any material Lien to all the real and personal property reflected in Seller's consolidated balance sheet as of December 31, 1996 included in the most recent Selling Stockholder Form 10-K and, in each case, all real and personal property acquired since such 9 date, except such real and personal property as has been disposed of in the ordinary course of business. All leases material to Seller or any Seller Subsidiary pursuant to which Seller or any Seller Subsidiary, as lessee, leases real or personal property, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any material existing default by Seller or any Seller Subsidiary or any event which, with notice or lapse of time or both, would constitute such a material default. Substantially all of Seller's and Seller Subsidiaries' buildings, structures and equipment in regular use have been well maintained in all material respects and are in good and serviceable condition, normal wear and tear excepted. 2.08. Taxes. Except as set forth on Schedule 2.08, Seller and each ----- Seller Subsidiary have timely filed or will timely (including extensions) file all tax returns required to be filed at or prior to the Closing Date ("Seller Returns"). Each of Seller and its Subsidiaries has paid, or set up adequate reserves on the Seller Financial Statements for the payment of, all taxes required to be paid in respect of the periods covered by such returns and has set up adequate reserves on the most recent financial statements Selling Stockholder has filed under the Exchange Act for the payment of all taxes anticipated to be payable in respect of all periods up to and including the latest period covered by such financial statements. Neither Seller nor any Seller Subsidiary will have any liability material to the financial condition or results of operations (the "Condition") of Seller and the Seller Subsidiaries, taken as a whole, for any such taxes in excess of the amounts so paid or reserves so established and no material deficiencies for any tax, assessment or governmental charge have been proposed, asserted or assessed (tentatively or definitely) against any of Seller or any Seller Subsidiary which would not be covered by existing reserves. Neither Seller nor any Seller Subsidiary is delinquent in the payment of any material tax, assessment or governmental charge, nor, except as previously disclosed, has it requested any extension of time within which to file any tax returns in respect of any fiscal year which have not since been filed and no requests for waivers of the time to assess any tax are pending. The federal and state income tax returns of Seller and the Seller Subsidiaries have been audited and settled by the Internal Revenue Service (the "IRS") or appropriate state tax authorities for all periods ended through December 31, 1985 or the period for assessment of taxes in respect of such periods has expired. There is no deficiency or refund litigation or matter in controversy with respect to Seller Returns. Neither Seller nor any Seller Subsidiary has extended or waived any statute of limitations on the assessment of any tax due that is currently in effect. 2.09. Material Adverse Effect. Since December 31, 1996, there has ----------------------- been no Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, except as may have resulted or may result from changes to laws and regulations or changes in economic 10 conditions applicable to thrift institutions generally or in general levels of interest rates affecting thrift institutions generally. 2.10. Commitments and Contracts. (a) Except as set forth on ------------------------- Schedule 2.10A, neither Seller nor any Seller Subsidiary is a party or subject to any of the following (whether written or oral, express or implied): (i) any material agreement, arrangement or commitment (A) not made in the ordinary course of business or (B) pursuant to which Seller or any of its Subsidiaries is or may become obligated to invest in or contribute capital to any Seller Subsidiary; (ii) any agreement, indenture or other instrument not disclosed in the Seller Financial Statements relating to the borrowing of money by Seller or any Seller Subsidiary or the guarantee by Seller or any Seller Subsidiary of any such obligation (other than trade payables or instruments related to transactions entered into in the ordinary course of business by any Seller Subsidiary, such as deposits and Fed Funds borrowings); (iii) any contract, agreement or understanding with any labor union or collective bargaining organization; (iv) any contract containing covenants which limit the ability of Seller or any Seller Subsidiary to compete in any line of business or with any person or which involve any restriction of the geographical area in which, or method by which, Seller or any Seller Subsidiary may carry on its business (other than as may be required by law or any applicable Regulatory Authority); (v) any other contract or agreement which is a material contract within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC; (vi) any lease with annual rental payments aggregating $250,000 or more; or (vii) any agreement, commitment or arrangement to make any distribution or other payments to the Selling Stockholder. (b) Neither Seller nor any Seller Subsidiary is in violation of its certificate or articles of incorporation or bylaws or charter documents or bylaws or in default under any material agreement, commitment, arrangement, lease, insurance policy or other instrument, whether entered into in the ordinary course of business or otherwise and whether written or oral, and there has 11 not occurred any event that, with the lapse of time or giving of notice or both, would constitute such a default, except, in all cases, where such default would not have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole. 2.11. Litigation and Other Proceedings. Except as set forth on -------------------------------- Schedule 2.11, neither Seller nor any Seller Subsidiary is a party to any pending or, to the best knowledge of Seller, threatened claim, action, suit, investigation or proceeding, or is subject to any order, judgment or decree, except for matters which, in the aggregate, will not have, or reasonably could not be expected to have, a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, or which purports or seeks to enjoin or restrain the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, as of the date of this Agreement, there are no actions, suits, or proceedings pending or, to the best knowledge of Seller, threatened against Seller or any Seller Subsidiary or any of their respective officers or directors by any stockholder (or any former stockholder), or involving claims under the DGCL, the Securities Act, the Exchange Act, the Community Reinvestment Act of 1977 as amended (the "CRA"), or the fair lending laws. 2.12. Insurance. Each of Seller and its Subsidiaries has taken all --------- requisite action (including without limitation the making of claims and the giving of notices) pursuant to its directors' and officers' liability insurance policy or policies in order to preserve all rights thereunder with respect to all matters (other than matters arising in connection with this Agreement and the transactions contemplated hereby) occurring prior to the Effective Time that are known to Seller, except for such matters which, individually or in the aggregate, will not have and reasonably could not be expected to have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole. Set forth on Schedule 2.12 is a list of all insurance policies maintained by or for the benefit of Seller or its Subsidiaries or their directors, officers, employees or agents. 2.13. Compliance with Laws. (a) Except as set forth on Schedule -------------------- 2.13A, Seller and each of its Subsidiaries have all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Regulatory Authorities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of Seller and its Subsidiaries; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the best knowledge of Seller, no suspension or cancellation of any of them is threatened; and all such filings, applications and registrations are current. 12 (b) Except as set forth on Schedule 2.13B and except for failures to comply or defaults which individually or in the aggregate would not have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, (i) each of Seller and its Subsidiaries has complied with all laws, regulations and orders (including without limitation zoning ordinances, building codes, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and securities, tax, environmental, civil rights, and occupational health and safety laws and regulations and including without limitation in the case of any Seller Subsidiary that is a bank or savings association, banking organization, banking corporation or trust company, all statutes, rules, regulations and policy statements pertaining to the conduct of a banking, deposit-taking, lending or related business, or to the exercise of trust powers) and governing instruments applicable to them and to the conduct of their business, and (ii) neither Seller nor any Seller Subsidiary is in default under, and no event has occurred which, with the lapse of time or notice or both, could result in the de fault under, the terms of any judgment, order, writ, decree, permit, or license of any Regulatory Authority or court, whether federal, state, municipal, or local and whether at law or in equity. Except as set forth on Schedule 2.13B, as of the date of this Agreement, neither Seller nor any Seller Subsidiary is subject to or reasonably likely to incur a liability as a result of its ownership, operation, or use of any Property (as defined below) of Seller (whether directly or to the best knowledge of Seller, as a consequence of such Property being part of the investment portfolio of Seller or any Seller Subsidiary) (A) that is contaminated by or contains any hazardous waste, toxic substance, or related materials, including, without limitation, asbestos, PCBs, pesticides, herbicides, and any other substance or waste that is hazardous to human health or the environment (collectively, a "Toxic Substance") or (B) on which any Toxic Substance has been stored, disposed of, placed or used in the construction thereof. "Property" of a person shall include all property (real or personal, tangible or intangible) owned or controlled by such person, including, without limitation, property under foreclosure, property held by such person or any Subsidiary of such person in its capacity as a trustee and property in which any venture capital or similar unit of such person or any Subsidiary of such person has an interest. Except as set forth on Schedule 2.13B, no claim, action, suit, or proceeding is pending against Seller or any Seller Subsidiary relating to Property of Seller or any Seller Subsidiary before any court or other Regulatory Authority or arbitration tribunal relating to hazardous substances, pollution, or the environment, and there is no outstanding judgment, order, writ, injunction, decree, or award against or affecting Seller or any Seller Subsidiary with respect to the same. Except for statutory or regulatory restrictions of general application, no Regulatory Authority has placed any restriction on the business of Seller or any Seller Subsidiary which reasonably could be expected to have a 13 Material Adverse Effect on Seller and its Subsidiaries, taken as a whole. (c) From and after January 1, 1994, neither Seller nor any Seller Subsidiary has received any notification or communication which has not been resolved from any Regulatory Authority (i) asserting that any Seller or any Subsidiary of Seller, is not in substantial compliance with any of the statutes, regulations or ordinances that such Regulatory Authority enforces, except with respect to matters which (A) are set forth on Schedule 2.13C or in any writing previously furnished to Buyer and (B) reasonably could not be expected to have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole, (ii) threatening to revoke any license, franchise, permit or governmental authorization that is material to the Condition of Seller and its Subsidiaries, taken as a whole, including without limitation such company's status as an insured depositary institution under the Federal Deposit Insurance Act (the "FDIA"), or (iii) requiring or threatening to require Seller or any of its Subsidiaries, or indicating that Seller or any of its Subsidiaries may be required to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement restricting or limiting or purporting to direct, restrict or limit in any manner the operations of Seller or any of its Subsidiaries, including, without limitation, any restriction on the making of distributions or payment of dividends. No such cease and desist order, agreement or memorandum of understanding or other agreement is currently in effect. (d) Except as set forth on Schedule 2.13D, neither Seller nor any Seller Subsidiary is required by Section 32 of the FDIA to give prior notice to any federal banking agency of the proposed addition of an individual to its board of directors or the employment of an individual as a senior executive officer. 2.14. Labor. No work stoppage involving Seller or any Seller ----- Subsidiary is pending or, to the best knowledge of Seller, threatened, which reasonably could be expected to have a Material Adverse Effect on Seller and its Subsidiaries, taken as a whole. Except as set forth on Schedule 2.14, neither Seller nor any Seller Subsidiary is involved in or, to the best knowledge of Seller, threatened with or affected by any labor dispute, arbitration, lawsuit or administrative proceeding. Employees of neither Seller nor any Seller Subsidiary are represented by any labor union or any collective bargaining organization. 2.15. Material Interests of Certain Persons. (a) Except as set forth ------------------------------------- in Selling Stockholder's Form 10-K for the fiscal year ended December 31, 1996, to the best knowledge of Seller no officer or director of Seller or any Subsidiary of Seller or any "associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of any such officer or director has any material interest in any material contract or property (real or personal, 14 tangible or intangible), used in, or pertaining to the business of, Seller or any Subsidiary of Seller, which would be required to be so disclosed if Seller or any such Subsidiary were required to disclose such information pursuant to Item 404 of Regulation S-K promulgated by the SEC. (b) Except as set forth on Schedule 2.15B, there are no loans from Seller or any Seller Subsidiary to any present officer, director, employee or any associate or related interest of any such person which was or would be required under any rule or regulation to be approved by or reported to Seller's or Seller Bank's Board of Directors ("Seller Insider Loans"). All outstanding Seller Insider Loans from Seller or Seller Bank were approved by or reported to the appropriate partner or board of directors in accordance with applicable law and regulations. 2.16. Allowance for Loan and Lease Losses; Non-performing Assets. ---------------------------------------------------------- (a) The allowances for loan and lease losses contained in the Seller Financial Statements were established in accordance with the past practices and experiences of Seller and its Subsidiaries, and the allowance for loan losses shown on the consolidated condensed balance sheet of Selling Stockholder and its Subsidiaries contained in the most recent Selling Stockholder Form 10-K is adequate in all material respects under the requirements of GAAP to provide for possible losses on loans (including without limitation accrued interest receivable) and credit commitments (including without limitation stand-by letters of credit) outstanding as of the date of such balance sheet. (b) As of December 31, 1996, the aggregate amount of all Seller Nonperforming Assets (as defined below) on the books of Seller and its Subsidiaries does not exceed $11,700,000. "Seller Non-performing Assets" shall mean (i) all loans and leases (A) that are contractually past due 90 days or more in the payment of principal and/or interest, (B) that are on nonaccrual status, (C) where a reasonable doubt exists, in the reasonable judgment of Seller, as to the timely future collectibility of principal and/or interest, whether or not interest is still accruing or the loan is less than 90 days past due, (D) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower's ability to pay in accordance with such initial terms, (E) where a specific reserve allocation exists in connection therewith, or (F) that have been classified "doubtful", "loss" or the equivalent thereof by any Regulatory Authority and (ii) all assets classified as real estate acquired through foreclosure or repossession and other assets acquired through foreclosure or repossession. 2.17. Employee Benefit Plans. (a) Except as set forth on Schedule ---------------------- 2.17A, neither Seller nor any Seller Subsidiary is a party to any existing employment, management, consulting, deferred 15 compensation, change-in-control or other similar contract. Schedule 2.17A lists all pension, retirement, supplemental retirement, savings, profit sharing, stock option, stock purchase, stock ownership, stock appreciation right, deferred compensation, consulting, bonus, medical, disability, workers' compensation, vacation, group insurance, severance and other material employee benefit, incentive and welfare policies, contracts, plans and arrangements, and all trust agreements related thereto, maintained (currently or at any time in the last five years) by or contributed to by Seller or any Seller Subsidiary in respect of any of the present or former directors, officers, or other employees of and/or consultants to Seller or any Seller Subsidiary (collectively "Seller Employee Plans"). The aggregate number of Rights (as defined in the Equity Appreciation Plan (the "EAP")) granted under the EAP is 320,000. Seller has furnished Buyer with the following documents with respect to each Seller Employee Plan: (i) a true and complete copy of all written documents comprising such Seller Employee Plan (including amendments and individual agreements relating thereto) or, if there is no such written document, an accurate and complete description of the Seller Employee Plan; (ii) the most recent Form 5500 or Form 5500-C (including all schedules thereto) if applicable; (iii) the most recent financial statements and actuarial reports, if any; (iv) the summary plan description currently in effect and all material modifications thereof, if any; and (v) the most recent IRS determination letter, if any. (b) All Seller Employee Plans have been maintained and operated materially in accordance with their terms and with the material requirements of all applicable statutes, orders, rules and final regulations, including without limitation ERISA and the IRC. All contributions required to be made to Seller Employee Plans have been made. (c) With respect to each of the Seller Employee Plans which is a pension plan (as defined in Section 3(2) of ERISA)(the "Seller Pension Plans"): (i) each Seller Pension Plan which is intended to be "qualified" within the meaning of Section 401(a) of the IRC has been determined to be so qualified by the IRS and, to the knowledge of Seller such determination letter may still be relied upon, and each related trust is exempt from taxation under Section 501(a) of the IRC; (ii) the actuarial present value of all benefits under each Seller Pension Plan which is subject to Title IV of ERISA, valued using the assumptions in the most recent actuarial report, did not, in each case, as of the last applicable annual valuation date (as indicated on Schedule 2.17A), exceed the value of the assets of the Seller Pension Plan allocable to such vested or accrued benefits; (iii) to the best knowledge of Seller there has been no "prohibited transaction," as such term is defined in Section 4975 of the IRC or Section 406 of ERISA, which could subject any Seller Pension Plan or associated trust, or the Seller or any Seller Subsidiary to any material tax or penalty; (iv) except as set forth on Schedule 2.17C, no Seller Pension Plan 16 subject to Title IV of ERISA or any trust created thereunder has been terminated, nor have there been any "reportable events" with respect to any Seller Pension Plan, as that term is defined in Section 4043 of ERISA for which the 30-day notice requirement has not been waived on or after January 1, 1985; and (v) no Seller Pension Plan or any trust created thereunder has incurred any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA (whether or not waived). Except as set forth on Schedule 2.17C, no Seller Pension Plan is a "multiemployer plan" as that term is defined in Section 3(37) of ERISA. With respect to each Seller Pension Plan that is described in Section 4063 (a) of ERISA (a "Multiple Employer Pension Plan"): (i) neither Seller nor any Seller Subsidiary would have any liability or obligation to post a bond under Section 4063 of ERISA if Seller and all Seller Subsidiaries were to withdraw from such Multiple Employer Pension Plan; and (ii) neither Seller nor any Seller Subsidiary would have any liability under Section 4064 of ERISA if such Multiple Employer Pension Plan were to terminate. (d) Except as set forth on Schedule 2.17D, neither Seller nor any Seller Subsidiary has any liability for any post-retirement health, medical or similar benefit of any kind whatsoever, except as required by statute or regulation. (e) Except as set forth on Schedule 2.17E, neither Seller nor any Seller Subsidiary has any material liability under ERISA or the IRC as a result of its being a member of a group described in Sections 414(b), (c), (m) or (o) of the IRC. (f) Except as set forth on Schedule 2.17F neither the execution nor delivery of this Agreement, nor the consummation of any of the transactions contemplated hereby, will (i) result in any material payment to any director or employee of Seller or any Seller Subsidiary from any of such entities, (ii) materially increase any benefit otherwise payable under any of the Seller Employee Plans or (iii) result in the acceleration of the time of payment of any such benefit. (g) Except as set forth on Schedule 2.17G, there are no arrangements or agreements of Seller or any Seller Subsidiary that could possibly result in "parachute payments" (as defined in 280G of the IRC). Set forth on Schedule 2.17G are the names of the persons who could be "disqualified individuals" for purposes of Section 280G of the IRC. 2.18. Conduct of Seller to Date. From and after January 1, 1997 ------------------------- through the date of this Agreement, except as set forth on Schedule 2.18 or in Seller Financial Statements or Seller Reports: (i) Seller and the Seller Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course consistent with past practices; (ii) neither Seller nor any Seller Subsidiary has incurred any material obligation or 17 liability (absolute or contingent), except normal trade or business obligations or liabilities incurred in the ordinary course of business, or subjected to Lien any of its assets or properties other than in the ordinary course of business consistent with past practice; (iii) neither Seller nor any Seller Subsidiary has discharged or satisfied any material Lien or paid any material obligation or liability (absolute or contingent), other than in the ordinary course of business; (iv) neither Seller nor any Seller Subsidiary has sold, assigned, transferred, leased, exchanged, or otherwise disposed of any of its material properties or assets other than for a fair consideration in the ordinary course of business; (v) except as required by contract or law or in the ordinary course of business, neither Seller nor any Seller Subsidiary has (A) increased the rate of compensation of, or paid any bonus to, any of its directors, officers, or other employees, except merit, promotion or annual increases and bonuses in accordance with existing policy, (B) entered into any new, or amended or supplemented any existing employment, management, consulting, deferred compensation, severance, or other similar contract, (C) entered into, terminated, or substantially modified any of the Seller Employee Plans or (D) agreed to do any of the foregoing; (vi) neither Seller nor any Seller Subsidiary has suffered any material damage, destruction, or loss, whether as the result of fire, explosion, earthquake, accident, casualty, labor trouble, requisition, or taking of property by any Regulatory Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other casualty or event, and whether or not covered by insurance; and (vii) neither Seller nor any Seller Subsidiary has canceled or compromised any debt, except for debts charged off or compromised in accordance with the past practice of Seller and its Subsidiaries. 2.19. Proxy Statement, etc. None of the information regarding Seller -------------------- or any Seller Subsidiary supplied or to be supplied by Seller for inclusion or included in (i) the registration statement on Form S-4 to be filed with the SEC by Buyer for the purpose of registering the shares of Buyer Common Stock to be issued pursuant to the provisions of this Agreement (the "Registration Statement"), (ii) the proxy or information statement (the "Proxy Statement") to be mailed to Limited Partners and BUC Holders of Selling Stockholder in connection with the transactions contemplated by this Agreement or (iii) any other documents to be filed with any Regulatory Authority in connection with the transactions contemplated hereby will, at the respective times such documents are filed with any Regulatory Authority and, in the case of the Registration Statement, when it becomes effective and, in the case of the Proxy Statement, when mailed, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the meeting of Limited Partners referred to in Section 5.03 (the 18 "Selling Stockholder Meeting") (or, if no Selling Stockholder Meeting is held, at the time the Proxy Statement is first furnished to Limited Partners) and at the time of the meeting of Buyer's stockholders referred to in Section 5.03 (the "Buyer Meeting"), be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Selling Stockholder Meeting. All documents which Seller or any Seller Subsidiary is responsible for filing with any Regulatory Authority in connection with the Merger will comply as to form in all material respects with the provisions of applicable law. 2.20. Registration Obligations. Except as set forth on Schedule ------------------------ 2.20, neither Seller nor any Seller Subsidiary is under any obligation, contingent or otherwise to register any of its securities under the Securities Act. 2.21. State Takeover Statutes. Except as set forth on Schedule 2.21, ----------------------- the transactions contemplated by this Agreement are not subject to any applicable state takeover law. 2.22. Accounting, Tax and Regulatory Matters. Neither Seller nor any -------------------------------------- Seller Subsidiary has taken or agreed to take any action or has any knowledge of any fact or circumstance that would (i) prevent the transactions contemplated hereby from qualifying as a reorganization within the meaning of Section 368 of the IRC or (ii) materially impede or delay receipt of any approval referred to in Section 6.01(b) or the consummation of the transactions contemplated by this Agreement. 2.23. Brokers and Finders. Except for Merrill Lynch & Co., neither ------------------- Seller nor any Seller Subsidiary nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted directly or indirectly for Seller or any Seller Subsidiary in connection with this Agreement or the transactions contemplated hereby. Schedule 2.23 discloses bona fide estimates of the amounts of all fees and expenses expected to be paid by Seller to all third parties in connection with the Merger ("Merger Fees"). 2.24. Interest Rate Risk Management Instruments. (a) Set forth on ----------------------------------------- Schedule 2.24A is a list, as of the date hereof, of all interest rate swaps, caps, floors, and option agreements and other interest rate risk management arrangements to which Seller or any of its Subsidiaries is a party or by which any of their properties or assets may be bound. (b) All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements to which Seller or any of its Subsidiaries is a party or by which any 19 of their properties or assets may be bound were entered into in the ordinary course of business and, to the best knowledge of Seller, in accordance with prudent banking practice and applicable rules, regulations and policies of Regulatory Authorities and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations and are in full force and effect. Seller and each of its Subsidiaries has duly performed in all material respects all of its obligations thereunder to the extent that such obligations to perform have accrued, and there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder. 2.25. Accuracy of Information. To the best knowledge of Seller, the ----------------------- statements of Seller contained in this Agreement, the Schedules and any other written document executed and delivered by or on behalf of Seller pursuant to the terms of this Agreement are true and correct in all material respects, and such statements and documents do not omit any material fact necessary to make the statements contained therein not misleading. Selling Stockholder represents and warrants to and covenants with Buyer as follows: 2.26. Authorization. Selling Stockholder has the partnership power ------------- and authority to enter into this Agreement and, subject to the approval of this Agreement by a Majority in Interest of the Limited Partners, to carry out its obligations hereunder. The execution, delivery and performance of this Agreement by Selling Stockholder and the consummation by Selling Stockholder of the transactions contemplated hereby have been duly authorized by all requisite partnership action on the part of Selling Stockholder. Subject to approval by a Majority in Interest of the Limited Partners, and the execution and delivery hereof by the parties hereto, this Agreement is a valid and binding obligation of Selling Stockholder enforceable against Selling Stockholder in accordance with its terms. 2.27. Beneficial Ownership of Seller Equity Securities. Selling ------------------------------------------------ Stockholder beneficially owns all of the issued and outstanding shares of Seller Common Stock. Selling Stockholder does not own, directly or indirectly, any other Equity Securities of Seller. 2.28. Rights to Acquire Equity Securities. There is no subscription, ----------------------------------- option, warrant, call, right, contract, agreement, commitment, understanding or arrangement relating to the sale, delivery or transfer by Selling Stockholder of any shares of Seller Common Stock, including any right of conversion or exchange under any outstanding security or other instrument. 2.29 Title to Seller Common Stock. Selling Stockholder has good ---------------------------- and marketable title to all of the issued and outstanding 20 shares of Seller Common Stock, free and clear of all pledges, security interests, liens, charges, encumbrances, equities, claims and options of whatever nature. General Partner represents and warrants to and covenants with Buyer as follows: 2.30. Authorization. General Partner has the partnership power and ------------- authority to enter into this Agreement and, subject to the approval of this Agreement by a Majority in Interest of the Limited Partners, to carry out its obligations hereunder. The execution, delivery and performance of this Agreement by General Partner and the consummation by General Partner of the transactions contemplated hereby have been duly authorized by all requisite partnership action on the part of General Partner. Subject to approval by a Majority in Interest of the Limited Partners and the execution and delivery hereof by the parties hereto, this Agreement is a valid and binding obligation of General Partner enforceable against General Partner in accordance with its terms. ARTICLE III ----------- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER Buyer represents and warrants to and covenants with Seller as follows: 3.01. Organization and Authority. Buyer and each of its -------------------------- Subsidiaries is a corporation, savings bank, trust company or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified except as set forth on Schedule 3.01 and, except where the failure to be so qualified would not have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, has corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted, except, in the case of the Buyer Subsidiaries, where the failure to be so qualified would not have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. Buyer is registered as a unitary savings and loan holding company under HOLA. True and complete copies of the Certificate of Incorporation and Bylaws of Buyer and of the Charter and Bylaws of Buyer Bank, each as in effect on the date of this Agreement, have been provided to Seller. 3.02. Subsidiaries. Schedule 3.02 sets forth, among other things, a ------------ complete and correct list of all of Buyer's Subsidiaries (each a "Buyer Subsidiary" and collectively the "Buyer Subsidiaries"), all outstanding Equity Securities of each of which, except as set forth on Schedule 3.02, are owned directly or 21 indirectly by Buyer. Except as set forth on Schedule 3.02, all of the outstanding shares of capital stock of the Buyer Subsidiaries are validly issued, fully paid and nonassessable, and those shares owned by Buyer are owned free and clear of any Lien with respect thereto. Each of the Buyer Subsidiaries is a corporation or savings bank duly incorporated or organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or organization, and has corporate power and authority to own or lease its properties and assets and to carry on its business as it is now being conducted. Each of the Buyer Subsidiaries is duly qualified to do business in each jurisdiction where its ownership or leasing of property or the conduct of its business requires it so to be qualified, except where the failure to so qualify would not have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. Except as set forth on Schedule 3.02, Buyer does not own beneficially, directly or indirectly, any shares of any class of Equity Securities or similar interests of any corporation, bank, business trust, association or similar organization. Buyer Bank is chartered by the OTS. The deposits of Buyer Bank are insured by the SAIF or the BIF. Except as set forth on Schedule 3.02, neither Buyer nor any Buyer Subsid iary holds any interest in a partnership, limited liability company, joint venture or any other kind of business enterprise. 3.03. Capitalization of Buyer. The authorized capital stock of ----------------------- Buyer consists of (i) 20,000,000 shares of Buyer Common Stock, of which, as of May 8, 1997, 6,485,080 shares were issued and outstanding and (ii) 7,000,000 shares of preferred stock, par value $.01 per share ("Buyer Preferred Stock"), issuable in series, none of which, as of May 8, 1997, is issued or outstanding. As of May 8, 1997 Buyer had reserved (i) 1,654,715 shares of Buyer Common Stock for issuance under various employee stock option and incentive plans ("Buyer Stock Options") a list of which is set forth on Schedule 3.03. From May 8, 1997 through the date of this Agreement, no shares of Buyer Common Stock or other Equity Securities of Buyer have been issued excluding any such shares which may have been issued pursuant to stock-based employee benefit or incentive plans and programs or pursuant to the foregoing agreements. Except as set forth above and except pursuant to the Buyer Rights Agreement, there are no other Equity Securities of Buyer outstanding as of May 8, 1997. All of the issued and outstanding shares of Buyer Common Stock are validly issued, fully paid, and nonassessable, and have not been issued in violation of any preemptive right of any stockholder of Buyer. At the Effective Time, the Buyer Common Stock to be issued in the Merger will be duly authorized, validly issued, fully paid and non-assessable, and will not be issued in violation of any preemptive right. 3.04. Authorization. (a) Buyer has the corporate power and ------------- authority to enter into this Agreement and, subject to the approval of this Agreement by the stockholders of Buyer, to carry out its obligations hereunder. The execution, delivery and 22 performance of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by the Board of Directors of Buyer. Subject to approval by the stockholders of Buyer and the execution and delivery hereof by the parties hereto, this Agreement is a valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms. (b) Except as set forth on Schedule 3.04B neither the execution, delivery and performance by Buyer of this Agreement, nor the consummation by Buyer and Buyer Bank of the transactions contemplated hereby, nor compliance by Buyer with any of the provisions hereof, or compliance by Buyer Bank with any of the provisions of the Subsidiary Merger Agreement will (i) violate, conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any Lien upon any of the material properties or assets of Buyer or any Buyer Subsidiary under any of the terms, conditions or provisions of (x) its articles or certificate of incorporation, charter or bylaws, or (y) any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Buyer or any of the material properties or assets of Buyer or any Buyer Subsidiary is a party or by which it may be bound, or to which Buyer may be subject, or (ii) subject to compliance with the statutes and regulations referred to in paragraph (c) of this Section 3.04, to the best knowledge of Buyer, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Buyer or any of its Subsidiaries or any of their respective material properties or assets. (c) Other than in connection with or in compliance with the provisions of the DGCL, the Securities Act, the Exchange Act, the securities or blue sky laws of the various states or filings, consents, reviews, authorizations, approvals or exemptions required by the FDIC or under the HOLA or the HSR Act, or any required approvals of, or notice to, any other Regulatory Authority, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any public body or authority is necessary for the consummation by Buyer or Buyer Bank of the transactions contemplated by this Agreement. 3.05. Buyer Financial Statements. The consolidated balance sheets of -------------------------- Buyer and its Subsidiaries as of December 31, 1996, 1995 and 1994 and related consolidated statements of income, cash flows and changes in stockholders' equity for each of the three years in the three-year period ended December 31, 1996, together with the notes thereto, audited by Deloitte & Touche LLP ("Buyer Auditors") and included in an annual report on Form 10-K as 23 filed with the SEC (the "Buyer Financial Statements"), except as set forth on Schedule 3.05 have been prepared in accordance with GAAP, present fairly the consolidated financial position of Buyer and its Subsidiaries at the dates and the consolidated results of operations, changes in stockholders' equity and cash flows of Buyer and its Subsidiaries for the periods stated therein and are derived from the books and records of Buyer and its Subsidiaries, which are complete and accurate in all material respects and have been maintained in all material respects in accordance with applicable laws and regulations. Except as set forth on Schedule 3.05 neither Buyer nor any of its Subsidiaries has any material contingent li abilities that are not reflected in the Buyer Reports (defined below) or disclosed in the financial statements described above. 3.06. Buyer Reports. Except as set forth on Schedule 3.06, since ------------- January 1, 1994, each of Buyer and the Buyer Subsidiaries has filed all material reports, registrations and statements, together with any required material amendments thereto, that it was required to file with any Regulatory Authority. All such reports and statements filed with any such Regulatory Authority are collectively referred to herein as the "Buyer Reports." As of its respective date, each Buyer Report complied in all material respects with all the rules and regulations promulgated by the applicable Regulatory Authority and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.07. Properties and Leases. Except as set forth on Schedule 3.07 or --------------------- as may be reflected in the Buyer Financial Statements, except for any Lien for current taxes not yet de linquent and except with respect to assets classified as real estate owned, Buyer and its Subsidiaries have good title free and clear of any material Lien to all the real and personal property reflected in Buyer's consolidated balance sheet as of December 31, 1996 included in the most recent Buyer Form 10-K and, in each case, all real and personal property acquired since such date, except such real and personal property as has been disposed of in the ordinary course of business. All leases material to Buyer or any Buyer Subsidiary pursuant to which Buyer or any Buyer Subsidiary, as lessee, leases real or personal property, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any material existing default by Buyer or any Buyer Subsidiary or any event which, with notice or lapse of time or both, would constitute such a material default. Substantially all of Buyer's and Buyer Subsidiaries' buildings, structures and equipment in regular use have been well maintained in all material respects and are in good and serviceable condition, normal wear and tear excepted. 3.08. Taxes. Except as set forth on Schedule 3.08, Buyer ----- 24 and each Buyer Subsidiary have timely filed or will timely (including extensions) file all tax returns required to be filed at or prior to the Closing Date ("Buyer Returns"). Each of Buyer and its Subsidiaries has paid, or set up adequate reserves on the Buyer Financial Statements for the payment of, all taxes required to be paid in respect of the periods covered by such returns and has set up adequate reserves on the most recent financial statements Buyer has filed under the Exchange Act for the payment of all taxes anticipated to be payable in respect of all periods up to and including the latest period covered by such financial statements. Neither Buyer nor any Buyer Subsidiary will have any liability material to the Condition of Buyer and the Buyer Subsidiaries, taken as a whole, for any such taxes in excess of the amounts so paid or reserves so established and no material deficiencies for any tax, assessment or governmental charge have been proposed, asserted or assessed (tentatively or definitely) against any of Buyer or any Buyer Subsidiary which would not be covered by existing reserves. Neither Buyer nor any Buyer Subsidiary is delinquent in the payment of any material tax, assessment or governmental charge, nor, except as previously disclosed, has it requested any extension of time within which to file any tax re turns in respect of any fiscal year which have not since been filed and no requests for waivers of the time to assess any tax are pending. The federal and state income tax returns of Buyer and the Buyer Subsidiaries have been audited and settled by the IRS or ap propriate state tax authorities for all periods ended through December 31, 1989 or the period for assessment of taxes in respect of such periods has expired. There is no deficiency or refund litigation or matter in controversy with respect to Buyer Returns. Neither Buyer nor any Buyer Subsidiary has extended or waived any statute of limitations on the assessment of any tax due that is currently in effect. 3.09. Material Adverse Effect. Since December 31, 1996, there has ----------------------- been no Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, except as may have resulted or may result from changes to laws and regulations or changes in economic conditions applicable to thrift institutions generally or in general levels of interest rates affecting thrift institutions generally. 3.10. Commitments and Contracts. (a) Except as set forth on ------------------------- Schedule 3.10A, neither Buyer nor any Buyer Subsidiary is a party or subject to any of the following (whether written or oral, express or implied): (i) any material agreement, arrangement or commitment (A) not made in the ordinary course of business or (B) pursuant to which Buyer or any of its Subsidiaries is or may become obligated to invest in or contribute capital to any Buyer Subsidiary; 25 (ii) any agreement, indenture or other instrument not disclosed in the Buyer Financial Statements relating to the borrowing of money by Buyer or any Buyer Subsidiary or the guarantee by Buyer or any Buyer Subsidiary of any such obligation (other than trade payables or instruments related to transactions entered into in the ordinary course of business by any Buyer Subsidiary, such as deposits and Fed Funds borrowings); (iii) any contract, agreement or understanding with any labor union or collective bargaining organization; (iv) any contract containing covenants which limit the ability of Buyer or any Buyer Subsidiary to compete in any line of business or with any person or which involve any restriction of the geographical area in which, or method by which, Buyer or any Buyer Subsidiary may carry on its business (other than as may be required by law or any applicable Regulatory Authority); (v) any other contract or agreement which is a material contract within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC; or (vi) any lease with annual rental payments aggregating $250,000 or more. (b) Neither Buyer nor any Buyer Subsidiary is in violation of its certificate or articles of incorporation or charter documents or bylaws or in default under any material agreement, commitment, arrangement, lease, insurance policy or other instrument, whether entered into in the ordinary course of business or otherwise and whether written or oral, and there has not occurred any event that, with the lapse of time or giving of notice or both, would constitute such a default, except, in all cases, where such default would not have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. 3.11. Litigation and Other Proceedings. Except as set forth on Schedule -------------------------------- 3.11, neither Buyer nor any Buyer Subsidiary is a party to any pending or, to the best knowledge of Buyer, threatened claim, action, suit, investigation or proceeding, or is subject to any order, judgment or decree, except for matters which, in the aggregate, will not have, or reasonably could not be expected to have, a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, or which purports or seeks to enjoin or restrain the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, as of the date of this Agreement, there are no actions, suits, or proceedings pending or, to the best knowledge of Buyer, threatened against Buyer or any Buyer Subsidiary or any of their respective officers or directors 26 by any holder of Buyer Common Stock (or any former holder of Buyer Common Stock) or involving claims under the DGCL, the Securities Act, the Exchange Act, the CRA, or the fair lending laws. 3.12. Insurance. Each of Buyer and its Subsidiaries has taken all requisite --------- action (including without limitation the making of claims and the giving of notices) pursuant to its directors' and officers' liability insurance policy or policies in order to preserve all rights thereunder with respect to all matters (other than matters arising in connection with this Agreement and the transactions contemplated hereby) occurring prior to the Effective Time that are known to Buyer, except for such matters which, individually or in the aggregate, will not have and reasonably could not be expected to have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. Set forth on Schedule 3.12 is a list of all insurance policies maintained by or for the benefit of Buyer or its Subsidiaries or their directors, officers, employees or agents. 3.13. Compliance with Laws. (a) Except as set forth on Schedule 3.13A, -------------------- Buyer and each of its Subsidiaries have all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Regulatory Authorities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of Buyer and its Subsidiaries; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the best knowledge of Buyer no suspension or cancellation of any of them is threatened; and all such filings, applications and registrations are current. (b) Except as set forth on Schedule 3.13B and except for failures to comply or defaults which individually or in the aggregate would not have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, (i) each of Buyer and its Subsidiaries has complied with all laws, regulations and orders (including without limitation zoning ordinances, building codes, ERISA), and securities, tax, environmental, civil rights, and occupational health and safety laws and regulations and including without limitation in the case of any Buyer Subsidiary that is a bank or savings association, banking organization, banking corporation or trust company, all statutes, rules, regulations and policy statements pertaining to the conduct of a banking, deposit-taking, lending or related business, or to the exercise of trust powers) and governing instruments applicable to them and to the conduct of their business, and (ii) neither Buyer nor any Buyer Subsidiary is in default under, and no event has occurred which, with the lapse of time or notice or both, could result in the de fault under, the terms of any judgment, order, writ, decree, permit, or license of any Regulatory Authority or court, whether federal, state, municipal, or local and whether at law or in 27 equity. Except as set forth on Schedule 3.13B, as of the date of this Agreement, neither Buyer nor any Buyer Subsidiary is subject to or reasonably likely to incur a liability as a result of its ownership, operation, or use of any Property of Buyer (whether directly or to the best knowledge of Buyer, as a consequence of such Property being part of the investment portfolio of Buyer or any Buyer Subsidiary) (A) that is contaminated by or contains any Toxic Substance or (B) on which any Toxic Substance has been stored, disposed of, placed or used in the construction thereof. Except as set forth on Schedule 3.13B, no claim, action, suit, or proceeding is pending against Buyer or any Buyer Subsidiary relating to Property of Buyer before any court or other Regulatory Authority or arbitration tribunal relating to hazardous substances, pollution, or the environment, and there is no outstanding judgment, order, writ, injunction, decree, or award against or affecting Buyer or any Buyer Subsidiary with respect to the same. Except for statutory or regulatory restrictions of general application, no Regulatory Authority has placed any restriction on the business of Buyer or any Buyer Subsidiary which reasonably could be expected to have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. (c) From and after January 1, 1994, neither Buyer nor any Buyer Subsidiary has received any notification or communication which has not been resolved from any Regulatory Authority (i) asserting that any Buyer or any Subsidiary of Buyer, is not in substantial compliance with any of the statutes, regulations or ordinances that such Regulatory Authority enforces, except with respect to matters which (A) are set forth on Schedule 3.13C or in any writing previously furnished to Seller and (B) reasonably could not be expected to have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, (ii) threatening to revoke any license, franchise, permit or governmental authorization that is material to the Condition of Buyer and its Subsidiaries, taken as a whole, including without limitation such company's status as an insured depositary institution under the FDIA, or (iii) requiring or threatening to require Buyer or any of its Subsidiaries, or indicating that Buyer or any of its Subsidiaries may be required to enter into a cease and desist order, agreement or memorandum of un derstanding or any other agreement restricting or limiting or purporting to direct, restrict or limit in any manner the op erations of Buyer or any of its Subsidiaries, including, without limitation, any restriction on the making of distributions or payment of dividends. No such cease and desist order, agreement or memorandum of understanding or other agreement is currently in effect. (d) Except as set forth on Schedule 3.13D, neither Buyer nor any Buyer Subsidiary is required by Section 32 of the FDIA to give prior notice to any federal banking agency of the proposed addition of an individual to its board of directors or the employment of an individual as a senior executive officer. 28 3.14. Labor. No work stoppage involving Buyer or any Buyer Subsidiary is ----- pending or, to the best knowledge of Buyer, threatened, which reasonably could be expected to have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole. Neither Buyer nor any Buyer Subsidiary is involved in or, to the best knowledge of Buyer, threatened with or affected by any labor dispute, arbitration, lawsuit or administrative proceeding. Employees of neither Buyer nor any Buyer Subsidiary are represented by any labor union or any collective bargaining organization. 3.15. Material Interests of Certain Persons. (a) Except as set forth on ------------------------------------- Schedule 3.15A, to the best knowledge of Buyer no officer or director of Buyer or any Subsidiary of Buyer or any "associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of any such officer or director has any material interest in any material contract or property (real or personal, tangible or intangible), used in, or pertaining to the business of, Buyer or any Subsidiary of Buyer, which would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC. (b) Except as set forth on Schedule 3.15B, there are no loans from Buyer or any Buyer Subsidiary to any present officer, director, employee or any associate or related interest of any such person which was or would be required under any rule or regulation to be approved by or reported to Buyer's or Buyer Bank's Board of Directors ("Buyer Insider Loans"). All outstanding Buyer Insider Loans from Buyer or Buyer Bank were approved by or reported to the appropriate board of directors in accordance with applicable law and regulations. 3.16. Allowance for Loan Losses; Non-performing Assets. ------------------------------------------------ (a) The allowances for loan losses contained in the Buyer Financial Statements were established in accordance with the past practices and experiences of Buyer and its Subsidiaries, and the allowance for loan losses shown on the consolidated condensed balance sheet of Buyer and its Subsidiaries contained in the most recent Buyer Form 10-K is adequate in all material respects under the requirements of GAAP to provide for possible losses on loans (including without limitation accrued interest receivable) and credit commitments (including without limitation stand-by letters of credit) outstanding as of the date of such balance sheet. (b) As of December 31, 1996, the aggregate amount of all Buyer Nonperforming Assets (as defined below) on the books of Buyer and its Subsidiaries does not exceed $24,310,000. "Buyer Non-performing Assets" shall mean (i) all loans and leases(A) that are contractually past due 90 days or more in the payment of principal and/or interest, (B) that are on nonaccrual status, (C) where a reasonable doubt exists, in the reasonable judgment of Buyer, as to the timely future collectibility of principal and/or interest, 29 whether or not interest is still accruing or the loan is less than 90 days past due, (D) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower's ability to pay in accordance with such initial terms, (E) where a specific reserve allocation exists in connection therewith, or (F) that have been classified "doubtful", "loss" or the equivalent thereof by any Regulatory Authority and (ii) all assets classified as real estate acquired through foreclosure or repossession and other assets acquired through foreclosure or repossession. 3.17. Employee Benefit Plans. (a) Except as set forth on Schedule 3.17A, ---------------------- neither Buyer nor any Buyer Subsidiary is a party to any existing employment, management, consulting, deferred compensation, change-in-control or other similar contract. Schedule 3.17A lists all pension, retirement, supplemental retirement, savings, profit sharing, stock option, stock purchase, stock ownership, stock appreciation right, deferred compensation, consulting, bonus, medical, disability, workers' compensation, vacation, group insurance, severance and other material employee benefit, incentive and welfare policies, contracts, plans and arrangements, and all trust agreements related thereto, maintained (currently or at any time in the last five years) by or contributed to by Buyer or any Buyer Subsidiary in respect of any of the present or former directors, officers, or other employees of and/or consultants to Buyer or any Buyer Subsidiary (collectively "Buyer Employee Plans"). (b) All Buyer Employee Plans have been maintained and operated materially in accordance with their terms and with the material requirements of all applicable statutes, orders, rules and final regulations, including without limitation ERISA and the IRC. All contributions required to be made to Buyer Employee Plans have been made. (c) With respect to each of the Buyer Employee Plans which is a pension plan (as defined in Section 3(2) of ERISA) (the "Buyer Pension Plans"): (i) each Buyer Pension Plan which is intended to be "qualified" within the meaning of Section 401(a) of the IRC has been determined to be so qualified by the IRS and, to the knowledge of Buyer such determination letter may still be relied upon, and each related trust is exempt from taxation under Section 501(a) of the IRC; (ii) the actuarial present value of all benefits under each Buyer Pension Plan which is subject to Title IV of ERISA, valued using the assumptions in the most recent actuarial report, did not, in each case, as of the last applicable annual valuation date (as indicated on Schedule 3.17A), exceed the value of the assets of the Buyer Pension Plan allocable to such vested or accrued benefits; (iii) to the best knowledge of Buyer there has been no "prohibited transaction," as such term is defined in Section 4975 of the IRC or Section 406 of ERISA, which could 30 subject any Buyer Pension Plan or associated trust, or the Buyer or any Buyer Subsidiary to any material tax or penalty; (iv) except as set forth on Schedule 3.17C, no Buyer Pension Plan subject to Title IV of ERISA or any trust created thereunder has been terminated, nor have there been any "reportable events" with respect to any Buyer Pension Plan, as that term is defined in Section 4043 of ERISA for which the 30-day notice requirement has not been waived on or after January 1, 1985; and (v) no Buyer Pension Plan or any trust created thereunder has incurred any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA (whether or not waived). Except as set forth on Schedule 3.17C, no Buyer Pension Plan is a "multiemployer plan" as that term is defined in Section 3(37) of ERISA. With respect to each Buyer Pension Plan that is described in Section 4063 (a) of ERISA (a "Multiple Employer Pension Plan"): (i) neither Buyer nor any Buyer Subsidiary would have any liability or obligation to post a bond under Section 4063 of ERISA if Buyer and all Buyer Subsidiaries were to withdraw from such Multiple Employer Pension Plan; and (ii) neither Buyer nor any Buyer Subsidiary would have any liability under Section 4064 of ERISA if such Multiple Employer Pension Plan were to terminate. (d) Except as set forth on Schedule 3.17D, neither Buyer nor any Buyer Subsidiary has any liability for any post-retirement health, medical or similar benefit of any kind whatsoever, except as required by statute or regulation. (e) Except as set forth on Schedule 3.17E, neither Buyer nor any Buyer Subsidiary has any material liability under ERISA or the IRC as a result of its being a member of a group described in Sections 414(b), (c), (m) or (o) of the IRC. (f) Except as set forth on Schedule 3.17F neither the execution nor delivery of this Agreement, nor the consummation of any of the transactions contemplated hereby, will (i) result in any material payment becoming due to any director or employee of Buyer or any Buyer Subsidiary from any of such entities, (ii) materially increase any benefit otherwise payable under any of the Buyer Employee Plans or (iii) result in the acceleration of the time of payment of any such benefit. 3.18. Conduct of Buyer to Date. From and after January 1, 1997 through the ------------------------ date of this Agreement, except as set forth on Schedule 3.18 or in Buyer Financial Statements or Buyer Reports: (i) Buyer and the Buyer Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course consistent with past practices; (ii) neither Buyer nor any Buyer Subsidiary has incurred any material obligation or liability (absolute or contingent), except normal trade or business obligations or liabilities incurred in the ordinary course of business, or subjected to Lien any of its assets or properties other than in the ordinary course of business consistent with past 31 practice; (iii) neither Buyer nor any Buyer Subsidiary has discharged or satisfied any material Lien or paid any material obligation or liability (absolute or contingent), other than in the ordinary course of business; (iv) neither Buyer nor any Buyer Subsidiary has sold, assigned, transferred, leased, exchanged, or otherwise disposed of any of its material properties or assets other than for a fair consideration in the ordinary course of business; (v) except as required by contract or law or in the ordinary course of business, neither Buyer nor any Buyer Subsidiary has (A) increased the rate of compensation of, or paid any bonus to, any of its directors, officers, or other employees, except merit, promotion or annual increases and bonuses in accordance with existing policy, (B) entered into any new, or amended or supplemented any existing employment, management, consulting, deferred compensation, severance, or other similar contract, (C) entered into, terminated, or substantially modified any of the Buyer Employee Plans or (D) agreed to do any of the foregoing; (vi) neither Buyer nor any Buyer Subsidiary has suffered any material damage, destruction, or loss, whether as the result of fire, explosion, earthquake, accident, casualty, labor trouble, requisition, or taking of property by any Regulatory Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other casualty or event, and whether or not covered by insurance; and (vii) neither Buyer nor any Buyer Subsidiary has canceled or compromised any debt, except for debts charged off or compromised in accordance with the past practice of Buyer and its Subsidiaries. 3.19. Proxy Statement, etc. None of the information regarding Buyer or any -------------------- Buyer Subsidiary supplied or to be supplied by Buyer for inclusion or included in (i) the Registration Statement, (ii) the Proxy Statement or (iii) any other documents to be filed with any Regulatory Authority in connection with the transactions contemplated hereby will, at the respective times such documents are filed with any Regulatory Authority and, in the case of the Registration Statement, when it becomes effective and,, with respect to the Proxy Statement, when mailed, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Buyer Meeting and the Selling Stockholder Meeting, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Buyer Meeting. All documents which Buyer or any Buyer Subsidiary is responsible for filing with any Regulatory Authority in connection with the Merger will comply as to form in all material respects with the provisions of applicable law. 3.20. State Takeover Statutes. Except as set forth on Schedule 3.20, the ----------------------- transactions contemplated by this Agreement are not subject to any applicable state takeover law. 32 3.21. Accounting, Tax and Regulatory Matters. Neither Buyer nor any Buyer -------------------------------------- Subsidiary has taken or agreed to take any action or has any knowledge of any fact or circumstance that would (i) prevent the transactions contemplated hereby from qualifying as a reorganization within the meaning of Section 368 of the IRC or (ii) materially impede or delay receipt of any approval referred to in Section 6.01(b) or the consummation of the transactions contemplated by this Agreement. 3.22. Brokers and Finders. Except for Hovde Financial, Inc., neither Buyer ------------------- nor any Buyer Subsidiary nor any of their respective directors, officers or employees has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted directly or indirectly for Buyer or any Buyer Subsidiary in connection with this Agreement or the transactions contemplated hereby. Schedule 3.22 discloses bona fide estimates of the amounts of all fees and expenses expected to be paid by Buyer to all third parties in connection with the Merger. 3.23. Interest Rate Risk Management Instruments. (a) Set forth on Schedule ----------------------------------------- 3.23A is a list, as of the date hereof, of all interest rate swaps, caps, floors, and option agreements and other interest rate risk management arrangements to which Buyer or any of its Subsidiaries is a party or by which any of their properties or assets may be bound. (b) All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements to which Buyer or any of its Subsidiaries is a party or by which any of their properties or assets may be bound were entered into in the ordinary course of business and, to the best knowledge of Buyer, in accordance with prudent banking practice and applicable rules, regulations and policies of Regulatory Authorities and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations and are in full force and effect. Buyer and each of its Subsidiaries has duly performed in all material respects all of its obligations thereunder to the extent that such obligations to perform have accrued, and there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder. 3.24. Accuracy of Information. To the best knowledge of Buyer, the ----------------------- statements of Buyer contained in this Agreement, the Schedules and any other written document executed and delivered by or on behalf of Buyer pursuant to the terms of this Agreement are true and correct in all material respects, and such statements and documents do not omit any material fact necessary to make the statements contained therein not misleading. ARTICLE IV ---------- 33 CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME 4.01. Conduct of Businesses Prior to the Effective Time. Except as ------------------------------------------------- otherwise contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, each of Buyer and Seller shall, and shall cause each of their respective Subsidiaries to, conduct its business according to the ordinary and usual course consistent with past practices and shall cause each such Subsidiary to use, consistent with the provisions of Sections 4.02 and 4.04, its best efforts to maintain and preserve its business organization, employees and advantageous business relationships and retain the services of its officers and key employees. 4.02. Forbearances of Seller. Except as set forth on Schedule 4.02 or as ---------------------- otherwise contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, Seller shall not and shall not permit any of the Seller Subsidiaries to, without the prior written consent of Buyer: (a) declare, set aside or pay any dividends or other distributions, directly or indirectly, in respect of its capital stock (other than dividends from a Subsidiary of Seller to Seller or another Subsidiary of Seller), except that Seller may (i) declare and pay cash dividends on the Seller Common Stock in the aggregate of not more than $2.4 million per calendar quarterly period and (ii) distribute management fees in the aggregate of not more than $250,000 per calendar quarterly period; (b) enter into or amend any employment, severance or similar agreement or arrangement with any, director, officer or employee, or modify any of the Seller Employee Plans or grant any salary or wage increase including incentive or bonus payments), except normal individual increases in compensation to rank and file employees consistent with past practice, or as required by law or contract; provided, that Seller may (i) pay management performance bonuses at times and in amounts consistent with past practice, which shall be in amounts in the aggregate equal to bonuses granted with respect to services in 1996 and (ii) make severance and retention payments pursuant to all employment, severance or similar agreements or arrangements in effect as of the date hereof or subsequent to the date hereof (including, without limitation, all employment contracts) in an aggregate amount not to exceed $5.5 million, subject to cut-back in individual payments, if necessary, except as set forth on Schedule 4.02B to assure that no payment to any person will be, when aggregated with all other payments and benefits to be received by such person, an excess parachute payment under Section 280G of the IRC; 34 (c) authorize, recommend, propose or announce an intention to authorize, so recommend or propose, or enter into an agreement in principle with respect to, any merger, consolidation or business combination (other than the Merger), any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities or any release or relinquishment of any material contract rights; or (d) propose or adopt any amendments to its Certificate of Incorporation or other charter document or Bylaws; or (e) issue, sell, grant, confer or award any of its Equity Securities or effect any split or adjust, combine, reclassify or otherwise change its capitalization as it existed on the date of this Agreement; or (f) purchase, redeem, retire, repurchase, or exchange, or otherwise acquire or dispose of, directly or indirectly, any of its Equity Securities, whether pursuant to the terms of such Equity Securities or otherwise; or (g) (i) without first consulting with Buyer, enter into, renew or increase any loan or credit commitment (including stand-by letters of credit) to, or invest or agree to invest in any person or entity or modify any of the material provisions or renew or otherwise extend the maturity date of any existing loan or credit commitment (collectively, "Lend to") in an amount in excess of (A) $1,000,000 in respect of commercial transactions, including commercial real estate transactions ("Commercial Transactions") and (B) $1,000,000 in respect of residential real estate transactions, or in an amount which, or when aggregated with any and all loans or credit commitments to such person or entity, would be in excess of (A) $1,000,000 in respect of commercial transactions, including Commercial Transactions and (B) $1,000,000 in respect of residential real estate transactions; (ii) without first obtaining the written consent of Buyer, lend to any person or entity in an amount in excess of $1,000,000 in respect of Commercial Transactions or in an amount which, when aggregated with any and all loans or credit commitments to such person or entity, would be in excess of $1,000,000 in respect of Commercial Transactions; (iii) Lend to any person other than in accordance with lending policies as in effect on the date hereof; provided that in the case of clauses (ii) and -------- (iii) Seller or any Seller Subsidiary may make any such loan in the event (A) Seller or any Seller Subsidiary has delivered to Buyer or its designated representative a notice of its intention to make such loan and such information as Buyer or its designated representative may reasonably require in respect thereof and (B) Buyer or its designated representative shall not have reasonably objected 35 to such loan by giving written or facsimile notice of such objection within two business days following the delivery to Buyer of the notice of intention and information as aforesaid; or (iv) Lend to any person or entity any of the loans or other extensions of credit to which or investments in which are on a "watch list" or similar internal report of Seller or any Seller Subsidiary (except those denoted "pass" thereon), in an amount in excess of $500,000; provided, however, that nothing in this -------- ------- paragraph shall prohibit Seller or any Seller Subsidiary from honoring any contractual obligation in existence on the date of this Agreement. Notwithstanding the provisions of clauses (i) and (ii) of this Section 4.02(g), Seller shall be authorized without first consulting with Buyer or obtaining Buyer's prior written consent, to increase the aggregate amount of any credit facilities theretofore established in favor of any person or entity (each a "Pre-Existing Facility"), provided that the aggregate amount of any and all such increases with respect to any Pre-Existing Facility shall not without Buyer's prior written consent, which consent shall not be unreasonably withheld or delayed, be in excess of the lesser of 5% of such Pre-Existing Facility or $25,000; or; (h) directly or indirectly (including through its officers, directors, employees, other representatives or the partners of the Selling Stockholder (including any general or limited partner of the General Partner of the Selling Stockholder)) initiate, solicit or encourage any discussions, inquiries or proposals with any third party relating to the disposition of any significant portion of the business or assets of Seller or any Seller Subsidiary or the acquisition of Equity Securities of Seller or any Seller Subsidiary or the merger of Seller or any Seller Subsidiary with any person (other than Buyer, Seller or another Seller Subsidiary) or any similar transaction (each such transaction being referred to herein as an "Acquisition Transaction"), or provide any such person with information or assistance or negotiate with any such person with respect to an Acquisition Transaction, and Seller shall promptly notify Buyer orally of all the relevant details relating to all inquiries, indications of interest and proposals which it may receive with respect to any Acquisition Transaction and promptly confirm the same to Buyer in writing; or (i) take any action that would (A) materially impede or delay the consummation of the transactions contemplated by this Agreement or the ability of Buyer or Seller to obtain any approval of any Regulatory Authority required for the transactions contemplated by this Agreement or to perform its covenants and agreements under this Agreement or (B) prevent the transactions contemplated hereby from qualifying as a 36 reorganization within the meaning of Section 368 of the IRC; or (j) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an accommodation become responsible or liable for the obligations of any other individual, partnership, corporation or other entity or pay without prior approval of Buyer, which shall not be unreasonably withheld, any Merger Fees in excess of the amount set forth on Schedule 2.23; or (k) materially restructure or materially change its investment securities portfolio, without prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported, or execute any individual investment transaction for its own account (i) in securities backed by the full faith and credit of the United States or an agency thereof in excess of $1,000,000 and (ii) in any other investment securities in excess of $500,000; or (l) make any awards or agree to make any awards under Seller Employee Plans which have not been previously disclosed to Buyer in Section 2.17A; or (m) agree in writing or otherwise to take any of the foregoing actions or engage in any activity, enter into any transaction or take or omit to take any other act which would make any of the representations and warranties in Article II of this Agreement untrue or incorrect in any material respect if made anew after engaging in such activity, entering into such transaction, or taking or omitting such other act. 4.03 Forbearances of Selling Stockholder. During the period from the ----------------------------------- date of this Agreement to the Effective Time, Selling Stockholder shall not, without the prior written consent of Buyer authorize, recommend, propose or announce an intention to authorize, so recommend or propose, or enter into an agreement in principle with respect to any sale, pledge or other transfer of any part of the capital stock of Seller. 4.04. Forbearances of Buyer. Except as set forth on Schedule 4.04 or as --------------------- otherwise contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, Buyer shall not and shall not permit any of the Buyer Subsidiaries to, without the prior written consent of Seller: (a) declare, set aside or pay any dividends or other distributions, directly or indirectly, in respect of its capital stock (other than dividends from any of the Buyer 37 Subsidiaries to Buyer or to another of the Buyer Subsidiaries), except that Buyer may pay its regular quarterly dividends in amounts as it shall determine from time to time and may effect any stock split in the form of a stock dividend as discussed in the Proxy Statement of Buyer for the 1997 annual meeting of shareholders of Buyer, or such additional stock split in the form of a stock dividend after consultation with Seller; (b) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof except for an acquisition which involves the payment of consideration by Buyer in an amount equal to less than 25% of the Market Value of the issued and outstanding shares of Buyer Common Stock as of the date the definitive agreement relating to such acquisition is executed by all applicable parties (the "Execution Date"). "Market Value" shall mean the Closing Price on the last business day preceding the Execution Date multiplied by the number of issued and outstanding shares of Buyer Common Stock on the Execution Date; (c) take any action that would (A) materially impede or delay the consummation of the transactions contemplated by this Agreement or the ability of Seller or Buyer to obtain any approval of any Regulatory Authority required for the transactions contemplated by this Agreement or to perform its covenants and agreements under this Agreement or (B) prevent the transactions contemplated hereby from qualifying as a reorganization within the meaning of Section 368 of the Code; or (d) agree in writing or otherwise to take any of the foregoing actions or engage in any activity, enter into any transaction or intentionally take or omit to take any other action which would make any of the representations and warranties in Article III of this Agreement untrue or incorrect in any material respect if made anew after engaging in such activity, entering into such transaction, or taking or omitting such other action. ARTICLE V --------- ADDITIONAL AGREEMENTS 5.01. Access and Information. Buyer and its Subsidiaries, on the one hand, ---------------------- and Seller and its Subsidiaries, on the other hand, shall each afford to each other, and to the other's accountants, counsel and other representatives, reasonable access 38 during normal business hours, during the period prior to the Effective Time, to all their respective properties, books, contracts, commitments and records and, during such period, each shall furnish promptly to the other (i) a copy of each report, schedule and other document filed or received by it during such period pursuant to the requirements of federal and state securities laws and (ii) all other information concerning its business, properties and personnel as such other party may reasonably request. Each party hereto shall, and shall cause its advisors and representatives to, (A) hold confidential all information obtained in connection with any transaction contemplated hereby with respect to the other party which is not otherwise public knowledge, (B) return all documents (including copies thereof) obtained hereunder from the other party to such other party and (C) use its best efforts to cause all information obtained pursuant to this Agreement or in connection with the negotiation of this Agreement to be treated as confidential and not use, or knowingly permit others to use, any such information unless such information becomes generally available to the public. 5.02. Registration Statement Regulatory Matters. (a) Buyer shall prepare ----------------------------------------- and, subject to the review and consent of Seller with respect to matters relating to Seller, file with the SEC as soon as is reasonably practicable the Registration Statement (or the equivalent in the form of preliminary proxy material) with respect to the shares of Buyer Common Stock to be issued in the Merger after the Effective Time and distributed pursuant to the Distribution. Buyer shall use all reasonable efforts to cause the Registration Statement to become effective. Buyer shall also take any action required to be taken under any applicable state blue sky or securities laws in connection with the issuance of such shares, and Seller and its Subsidiaries shall furnish Buyer all information concerning Seller and its Subsidiaries and the Selling Stockholder thereof as Buyer may reasonably request in connection with any such action. Buyer shall use its best efforts to cause the shares of Buyer Common Stock to be issued in the Merger to be approved for listing on the Nasdaq subject to official notice of issuance, prior to the Effective Time. (b) Seller and Buyer shall cooperate and use their respective best efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and Regulatory Authorities necessary to consummate the transactions contemplated by this Agreement and, as and if directed by Buyer, to consummate such other mergers, consolidations or asset transfers or other transactions by and among Buyer's Subsidiaries and Seller's Subsidiaries concurrently with or following the Effective Time, provided, however, that the foregoing shall not (A) alter or -------- ------- change the Merger Consideration, (B) adversely affect the tax treatment to Selling Stockholder as a result of receiving the Merger Consideration or (C) materially impede or delay receipt of any approval referred to in Section 39 6.01(b) or the consummation of the transactions contemplated by this Agreement. 5.03. Approval of Merger and Distribution. Buyer shall call the Buyer ----------------------------------- Meeting and Selling Stockholder and the General Partner shall call the Seller Stockholder Meeting, in each case to be held as soon as practicable after the Registration Statement becomes effective for the purpose of voting upon this Agreement and the Merger and, in the case of the Selling Stockholder Meeting, the Distribution. In connection therewith, Buyer shall prepare the Proxy Statement and, with the approval of each of Buyer and Seller, the Proxy Statement shall be filed with the SEC and mailed to the stockholders of Buyer and the Limited Partners and BUC Holders. The Board of Directors of Buyer shall submit for approval of Buyer's stockholders the matters to be voted upon in order to authorize the Merger. The General Partner shall submit for approval of the Limited Partners and BUC Holders the matters to be voted upon in order to authorize the Merger and the Distribution. The Board of Directors of Buyer hereby does and will recommend this Agreement and the transactions contemplated hereby to stockholders of Buyer and will use its best efforts to obtain any vote of Buyer's stockholders that is necessary for the approval and adoption of this Agreement and consummation of the transactions contemplated hereby. The General Partner of Selling Stockholder hereby does and will recommend the Distribution and this Agreement and the transactions contemplated hereby to the Limited Partners and BUC Holders and will use its best efforts to obtain any vote of the Limited Partners and BUC Holders that is necessary for the approval and adoption of the Distribution and this Agreement and consummation of the transactions contemplated hereby. 5.04. Current Information. During the period from the date of this ------------------- Agreement to the Effective Time, each party shall promptly furnish the other with copies of all monthly and other interim financial statements produced in the ordinary course of business as the same become available and shall cause one or more of its designated representatives to confer on a regular and frequent basis with representatives of the other party. Further, Seller shall furnish to Buyer within five business days of the end of each month a description of all loans (including, without limitation, the name of the borrower, the loan amount and a description of the collateral) originated by Seller Bank during such month. Each party shall promptly notify the other party of any material change in its business or operations and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving such party or the transactions contemplated hereby and shall keep the other party fully informed of such events. 5.05. Agreements of Affiliates. As soon as practicable after the date of ------------------------ this Agreement, Seller shall deliver to Buyer a 40 letter identifying all persons and entities whom Seller believes to be, at the time this Agreement is submitted to a vote of the Limited Partners, "affiliates" of Seller for purposes of Rule 145 under the Securities Act. Seller shall use its best efforts to cause each person or entity who is so identified as an "affiliate" to deliver to Buyer as soon as practicable thereafter and in any event no later than ten calendar days after the date hereof, a written agreement providing that from the date of such agreement each such person will agree not to sell, pledge, transfer or otherwise dispose of any BUCs held by such person or any shares of Buyer Common Stock to be received by such person in the Distribution except in compliance with the applicable provisions of the Securities Act. Prior to the Effective Time, Seller shall amend and supplement such letter and use its best efforts to cause each additional person or entity who is identified as an "affiliate" to execute a written agreement as set forth in this Section 5.05. 5.06. Expenses. Each party hereto shall bear its own expenses incident to -------- preparing, entering into and carrying out this Agreement and to consummating the Merger. 5.07. Miscellaneous Agreements and Consents. (a) Subject to the terms and ------------------------------------- conditions herein provided, each of the parties hereto agrees to use its respective 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 transactions contemplated by this Agreement as expeditiously as possible, including without limitation using its respective best efforts to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby. Each party shall, and shall cause each of its respective subsidiaries to, use its best efforts to obtain consents of all third parties and Regulatory Authorities necessary, or in the opinion of Buyer desirable, for the consummation of the transactions contemplated by this Agreement. (b) Subject to applicable laws, regulations and requirements of Regulatory Authorities, Seller, immediately prior to the Effective Time, shall (i) consult and cooperate with Buyer regarding the implementation of those policies and procedures established by Buyer for its governance and that of its Subsidiaries and not otherwise referenced in Section 5.15 hereof, including, without limitation, policies and procedures pertaining to the accounting, asset/liability management, audit, credit, human resources, treasury and legal functions, and (ii) at the request of Buyer, conform Seller's existing policies and procedures in respect of such matters to Buyer's policies and procedures or in the absence of any existing Seller policy or procedure regarding any such function, introduce Buyer's policies or procedures in respect thereof, unless to do so would cause Seller or any of the Seller 41 Subsidiaries to be in violation of any law, rule or regulation of any Regulatory Authority having jurisdiction over Seller and/or the Seller Subsidiary affected thereby; provided, however, that prior to the date that it shall be a --------- ------- requirement hereunder for such policies and procedures to be established, Buyer shall certify to Seller that Buyer's representations and warranties are true and correct as of such date, that the approval conditions to its obligations contemplated by Section 6.01(b) have been satisfied or waived (except to the extent that any waiting period associated therewith may then have commenced but not expired) and that Buyer is otherwise in compliance with this Agreement; and provided, further that Seller shall not be required to take any such action that is not consistent with GAAP and regulatory accounting principles. 5.08. Employee Benefits. The Seller Employee Plans shall not be terminated ----------------- by reason of the Merger but shall continue thereafter as plans of the Surviving Bank until such time as the employees of Seller and the Seller Subsidiaries are integrated into Buyer's employee benefit plans that are available to other employees of Buyer and Buyer Subsidiaries, subject to the terms and conditions specified in such plans and to such changes therein as may be necessary to reflect the consummation of the Merger. Buyer shall take such steps as are necessary or required to integrate the employees of Seller and the Seller Subsidiaries in Buyer's employee benefit plans available to other employees of Buyer and Buyer Subsidiaries as soon as practicable after the Effective Time, (i) with full credit for prior service with Seller or any of the Seller Subsidiaries for all purposes other than determining the amount of benefit accruals under any defined benefit plan, (ii) without any waiting periods, evidence of insurability, or application of any pre-existing condition limitations, and (iii) with full credit for claims arising prior to the Effective Time for purposes of deductibles, out-of-pocket maximums, benefit maximums, and all other similar limitations for the applicable plan year during which the Merger is consummated. Except as otherwise disclosed, each of Buyer and Seller shall use all reasonable efforts to insure that no amounts paid or payable by Seller, Seller Subsidiaries, Buyer or Buyer Subsidiaries to or with respect to any director, former director, employee or former employee of Seller or any Seller Subsidiary will fail to be deductible for federal income tax purposes by reason of Section 162(m), 280G or any other Section of the IRC. 5.09. Equity Appreciation Plan and Long Term Incentive Compensation Plan. ------------------------------------------------------------------ Seller shall take all necessary action to insure that the EAP and the Long Term Incentive Compensation Plan (the "LTIP") shall be paid on or before the Effective Time and terminate as of the Effective Time. 5.10. Press Releases. Except as may be required by law, Seller and Buyer -------------- shall consult and agree with each other as to the 42 form and substance of any proposed press release relating to this Agreement or any of the transactions contemplated hereby. 5.11. State Takeover Statutes. Seller and Buyer will each take all steps ----------------------- necessary to exempt the transactions contemplated by this Agreement and any agreement contemplated hereby from, and if necessary challenge the validity of, any applicable state takeover law. 5.12. D&O Indemnification. From and after the Effective Time, Buyer agrees ------------------- to indemnify and hold harmless the past and present employees, agents, directors or officers of Seller or the Seller Subsidiaries for all acts or omissions occurring at or prior to the Effective Time to the same extent such persons are indemnified and held harmless (A) under their respective Certificate of Incorporation, Charter or Bylaws in the form in effect at the date of this Agreement, (B) by operation of law, or (C) by virtue of any contract, resolution or other agreement or document existing at the date of this Agreement, and such duties and obligations shall continue in full force and effect for so long as they would (but for the Merger) otherwise survive and continue in full force and effect. Buyer will provide, or cause to be provided, for a period of not less than six years from the Effective Time, to the extent available at a cost not in excess of 200% of the current annual premium cost, single premium tail coverage, on behalf of the officers and directors of Seller and Seller Subsidiaries immediately prior to the Effective Time, with policy limits equal to Seller's existing annual coverage limits. 5.13. Best Efforts. Each of Buyer and Seller undertakes and agrees to use ------------ its best efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368 of the IRC (including, if necessary, to take reasonable steps to restructure the transactions contemplated by this Agreement to so qualify). Each of Buyer and Seller agrees to not take any action that would materially impede or delay the consummation of the transactions contemplated by this Agreement or the ability of Buyer or Seller to obtain any approval of any Regulatory Authority required for the transactions contemplated by this Agreement or to perform its covenants and agreements under this Agreement. 5.14. Insurance. Each of Buyer and Seller shall cause each of its --------- respective Subsidiaries to, use its best efforts to maintain its existing insurance. 5.15. Conforming Entries. (a) Notwithstanding that Seller believes that ------------------ Seller and the Seller Subsidiaries have established all reserves and taken all provisions for possible loan losses required by GAAP and applicable laws, rules and regulations, Seller recognizes that Buyer may have adopted different loan, accrual and reserve policies (including loan classifications and levels of reserves for possible loan losses). Subject to 43 applicable laws, regulations and the requirements of Regulatory Authorities, from and after the date of this Agreement to the Effective Time, Seller and Buyer shall consult and cooperate with each other with respect to conforming the loan accrual and reserve policies of Seller and the Seller Subsidiaries to those policies of Buyer, as specified in each case in writing to Seller, based upon such consultation and as herein after provided. (b) Subject to applicable laws, regulations and the requirements of Regulatory Authorities, in addition, from and after the date of this Agreement to the Effective Time, Seller and Buyer shall consult and cooperate with each other with respect to determining appropriate Seller accruals, reserves and charges to establish and take in respect of excess equipment write-off or write-down of various assets and other appropriate charges and accounting adjustments taking into account the parties' business plans following the Merger, as specified in each case in writing to Seller based upon such consultation and as hereinafter provided. (c) Subject to applicable laws, regulations and the requirements of Regulatory Authorities, Seller and Buyer shall consult and cooperate with each other with respect to determining, as specified in a written notice from Buyer to Seller, based upon such consultation and as hereinafter provided, the amount and the timing for recognizing for financial accounting purposes Seller's expenses of the Merger and the restructuring charges relating to or to be incurred in connection with the Merger. (d) Subject to applicable laws, regulations and the requirements of Regulatory Authorities, Seller shall (i) establish and take such reserves and accruals at such time as Buyer shall reasonably request to conform Seller's loan, accrual and reserve policies to Buyer's policies, and (ii) establish and take such accruals, reserves and charges in order to implement such policies in respect of excess facilities and equipment capacity, severance costs, litigation matters, write-off or write-down of various assets and other appropriate accounting adjustments, and to recognize for financial accounting purposes such expenses of the Merger and restructuring charges related to or to be incurred in connection with the Merger, in each case at such times as are reasonably requested by Buyer; provided, however, that such reserves, accruals and charges are not be -------- ------- taken until immediately prior to the Effective Time and that on the date such reserves, accruals and charges are to be taken, Buyer shall certify to Seller that Buyer's representations and warranties are true and correct as of such date, that the approval conditions to its obligations contemplated by Section 6.01(b) have been satisfied or waived and that Buyer is otherwise in compliance with this Agreement; and provided, further that Seller shall not be required to take any such action that is not consistent with GAAP and regulatory accounting principles. 44 (e) No reserves, accruals or charges taken in accordance with Section 5.15(d) above may be a basis to assert a violation of a breach of a representation, warranty or covenant of Seller herein. 5.16. Environmental Reports. Seller shall cooperate with Buyer so that --------------------- Buyer may as soon as reasonably practicable obtain, at Buyer's expense, a report of a phase one environmental investigation on all real property owned, leased or operated by Seller or any of the Seller Subsidiaries as of the date hereof and within ten days after the acquisition or lease of any real property acquired or leased by Seller or any of the Seller Subsidiaries after the date hereof. If advisable in light of the phase one report with respect to any parcel of real property referred to above, in the reasonable opinion of Buyer, Seller shall also cooperate with Buyer so that Buyer may obtain, at Buyer's expense, a phase two investigation report to such designated parcels. 5.17. Seller Bank Securities. Seller Bank shall call for redemption at the ---------------------- earliest practicable date permitted pursuant to the related certificate of designation all issued and outstanding shares of Seller Bank Preferred Stock. 5.18. Agreement with FDIC. Seller shall use its best efforts to obtain the ------------------- termination on or prior to the Effective Time of all agreements, instruments or other obligations to which Seller or any Seller Subsidiary and the FDIC is a party. Seller shall use its best efforts to have received a letter from the FDIC on or before the Effective Time to the effect that upon the Merger the FDIC has no claim or rights against any Seller Subsidiary, the Surviving Corporation or any Surviving Corporation Subsidiary and neither the Seller, any Seller Subsidiary, the Surviving Corporation nor any Surviving Corporation Subsidiary has any obligations to the FDIC pursuant to the Assistance Agreement, Limited Partnership Agreement, this Agreement, the Merger, or otherwise, except for payment for unredeemed shares of Series A Preferred Stock of Seller Bank in an amount not to exceed $100 per share. 5.19. Directors of Buyer. The Board of Directors of Buyer shall take all ------------------ requisite corporate action so that at the Effective Time the directors of Buyer shall include Stephen T. McLin and another person selected by Seller acceptable to Buyer. 5.20. Indemnification of Buyer. From and after the Effective Time, Selling ------------------------ Stockholder and the General Partner, jointly and severally, agree to indemnify and hold harmless Buyer and each Buyer Subsidiary and their past and present employees, agents, directors or officers against any loss, liability, claim, damage and expense whatsoever, as incurred, for all acts or omissions by Selling Stockholder or the General Partner arising out of the Distribution and for all claims of the FDIC arising out of the Assistance Agreement or other rights or entitlements of the 45 FDIC as successor to the Federal Savings and Loan Insurance Corporation (the "FSLIC") in connection with the acquisition of Seller Bank from the FSLIC (except for payment for unredeemed shares of Series A Preferred Stock of Seller Bank in an amount not to exceed $100 per share). 5.21. Selling Stockholder and General Partner Approval. Selling Stockholder, ------------------------------------------------ as sole stockholder of Seller, and General Partner as general partner of Selling Stockholder, shall approve this Agreement, the Merger and the Distribution in accordance with applicable law. 5.22. Distribution. The Distribution will be conducted by Selling ------------ Stockholder pursuant to the terms of the Limited Partnership Agreement, the Delaware Revised Uniform Limited Partnership Act and otherwise in accordance with applicable law, and will occur immediately after the Effective Time. Selling Stockholder will not vote any shares of Buyer Common Stock prior to the Distribution. 5.23 EAP and LTIP Distributions. In the event that the approval conditions -------------------------- to Buyer's obligations contemplated by Section 6.01(b) have been satisfied or waived and Buyer shall notify Seller pursuant to Section 1.03 hereof at least five business days prior to December 31, 1997 that the Effective Time shall occur on a date after December 31, 1997, then at the written request of Buyer, Seller shall cause Seller Bank to make all distributions pursuant to the EAP and the LTIP on or prior to December 31, 1997. ARTICLE VI ---------- CONDITIONS 6.01. Conditions to Each Party's Obligation To Effect the Merger. The ---------------------------------------------------------- respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: (a) This Agreement, including the Merger (and in the case of the Selling Stockholder, the Distribution) shall have received the requisite approval of stockholders of Buyer in accordance with the applicable provisions of the Bylaws of Buyer and the DGCL and the requisite approval of the Limited Partners and BUC Holders of Selling Stockholder in accordance with the applicable provisions of the Limited Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act. (b) All requisite approvals of this Agreement and the transactions contemplated hereby shall have been received from the Regulatory Authorities without the imposition of any 46 condition which differs from conditions customarily imposed by such Regulatory Authorities in orders approving acquisitions of the type contemplated hereby and in the good faith opinion of Buyer, compliance with which would materially adversely affect the reasonably anticipated benefits to Buyer. (c) The Registration Statement shall have been declared effective and shall not be subject to a stop order or any threatened stop order. (d) Neither Seller nor Buyer shall be subject to any order, decree or injunction, and there shall be no pending or threatened order decree or injunction, of a court or agency of competent jurisdiction which enjoins or prohibits the consummation of any of the Transactions. (e) There shall be no legislative, statutory or regulatory action (whether federal or state) pending which prohibits or threatens to prohibit consummation of the Transactions or which otherwise materially adversely affects the Transactions. (f) Each of Buyer and Seller shall have received, from counsel reasonably satisfactory to it, an opinion reasonably satisfactory in form and substance to it to the effect that the Merger will constitute a reorganization within the meaning of Section 368 of the IRC and that no gain or loss will be recognized by Selling Stockholder to the extent it receives Buyer Common Stock solely in exchange for Seller Common Stock. 6.02. Conditions to Obligations of Seller To Effect the Merger. The -------------------------------------------------------- obligations of Seller to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following additional conditions: (a) Representations and Warranties. The representations and warranties of ------------------------------ Buyer set forth in Article III of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time (as though made on and as of the Effective Time except (i) to the extent such representations and warranties are by their express provisions made as of a specified date or period which shall, subject to clause (iii), be true and correct as of such date or period, and (ii) for the effect of transactions contemplated by this Agreement) and (iii) where the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, does not result or would not reasonably be expected to result in a Material Adverse Effect. Seller shall have received a certificate of the chairman or vice chairman of Buyer to that effect. 47 (b) Performance of Obligations. Buyer shall have performed in all material -------------------------- respects all obligations required to be performed by it under this Agreement prior to the Effective Time, and Seller shall have received a certificate of the chairman or vice chairman of Buyer to that effect. 6.03. Conditions to Obligations of Buyer To Effect the Merger. The ------------------------------------------------------- obligations of Buyer to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following additional conditions: (a) Representations and Warranties. The representations and warranties of ------------------------------ Seller, Selling Stockholder and General Partner set forth in Article II of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time (as though made on and as of the Effective Time except (i) to the extent such representations and warranties are by their express provisions made as of a specific date or period which shall, subject to clause (iii), be true and correct as of such date or period, and (ii) for the effect of transactions contemplated by this Agreement) and (iii) where the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, does not result or would not reasonably be expected to result in a Material Adverse Effect. Buyer shall have received a certificate of the President of Seller, the General Partner and the general partner of the General Partner, as appropriate, to that effect. (b) Performance of Obligations. Seller, General Partner and Selling -------------------------- Stockholder shall have performed in all material respects all obligations required to be performed by them under this Agreement prior to the Effective Time, and Buyer shall have received a certificate of the President of Seller, the General Partner and the general partner of the General Partner, as appropriate, to that effect. ARTICLE VII ----------- TERMINATION, AMENDMENT AND WAIVER 7.01. Termination. This Agreement may be terminated at any time prior to ----------- the Effective Time, whether before or after any requisite approval by stockholders of Buyer or the Limited Partners and BUC Holders: (a) by mutual consent by the Board of Directors of Buyer and the Board of Directors of Seller; (b) by the Board of Directors of Buyer or the Board of Directors of Seller at any time after the date that is 12 48 months after the date of this Agreement or such later date as mutually agreed upon by the parties if the Merger shall not theretofore have been consummated (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein); (c) by the Board of Directors of Buyer or the Board of Directors of Seller if (i) the OTS has denied approval of the Merger and such denial has become final and nonappealable, (ii) stockholders of Buyer shall not have approved this Agreement at the Buyer Meeting following a favorable recommendation of Buyer's Board of Directors or (iii) the Limited Partners or the BUC Holders shall not have approved this Agreement at the Selling Stockholder Meeting following a favorable recommendation of the General Partner; (d) by the Board of Directors of Buyer in the event of a material breach by Seller or Selling Stockholder of any representation, warranty covenant or other agreement contained in this Agreement, which breach is not cured within 30 days after written notice thereof to Seller by Buyer; (e) by the Board of Directors of Seller in the event of a material breach by Buyer of any representation, warranty, covenant or other agreement contained in this Agreement, which breach is not cured within 30 days after written notice thereof is given to Buyer by Seller; (f) by the Board of Directors of Seller, no earlier than the fifth trading day or later than the third full trading day immediately preceding the Closing Date, if the Average Price is less than $42.00 (subject to adjustment pursuant to Section 1.10), provided that the Board of Directors of Seller will have no right to terminate pursuant to this paragraph (f) unless Seller shall have given, during the three trading day period referred to above, one full trading day's prior written notice of its intention to terminate pursuant to this Section 7.01(f) and (y) Buyer during such one full trading day notice period shall not have given written notice (an "Adjustment Election") to Seller that the Buyer Stock Price shall be calculated pursuant to clause (a) of the second sentence of Section 1.07(ii)(1). 7.02. Effect of Termination. In the event of termination of this Agreement --------------------- as provided in Sections 7.01(a) through 7.01(c) and Section 7.01(f) above, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Buyer or Seller or their respective officers or directors except as set forth in the second sentence of Section 5.0l and in Section 5.06. In the event that this Agreement is terminated by a party (the "Aggrieved Party") solely by reason of the material breach by 49 the other party ("Breaching Party") of any of its representations, warranties, covenants or agreements contained herein then the Aggrieved Party shall be entitled to such remedies and relief against the Breaching Party as are available at law or in equity. Moreover, the Aggrieved Party without terminating this Agreement shall be entitled to a decree of specific performance against the Breaching Party provided that the Aggrieved Party is not in material breach hereunder. 7.03. Amendment. This Agreement and the Schedules hereto may be amended by --------- the parties hereto, by action taken by or on behalf of their respective Boards of Directors or at any time before or after approval of this Agreement by the stockholders of Buyer and the Limited Partners and BUC Holders; provided, --------- however, that after any such approval no such modification shall alter or change - ------- the amount or the composition of the Merger Consideration. This Agreement may not be amended except by an instrument in writing signed on behalf of each of Buyer and Seller. 7.04. Severability. Any term, provision, covenant or restriction contained ------------ in this Agreement held by a court or a Regulatory Authority of competent jurisdiction or the Board to be invalid, void or unenforceable, shall be ineffective to the extent of such invalidity, voidness or unenforceability, but neither the remaining terms, provisions, covenants or restrictions contained in this Agreement nor the validity or enforceability thereof in any other jurisdiction shall be affected or impaired thereby. Any term, provision, covenant or restriction contained in this Agreement that is so found to be so broad as to be unenforceable shall be interpreted to be as broad as is enforceable. 7.05. Waiver. Any term, condition or provision of this Agreement may be ------ waived in writing at any time by the party which is, or whose securityholders are, entitled to the benefits thereof. ARTICLE VIII ------------ GENERAL PROVISIONS 8.01. Non-Survival of Representations, Warranties and Agreements. No ---------------------------------------------------------- investigation by the parties hereto made heretofore or hereafter shall affect the representations and warranties of the parties which are contained herein and each such representation and warranty shall survive such investigation. Except as set forth below in this Section 8.01, all representations, warranties and agreements in this Agreement of Buyer and Seller or in any instrument delivered by Buyer or Seller pursuant to or in connection with this Agreement shall expire at the Effective Time or upon termination of this Agreement in accordance with its terms or, in the case of any other such instrument, in accordance with the terms of such instrument. In the event of consummation of the 50 Merger, the agreements contained in or referred to in Sections 5.02(b), 5.07, 5.08, 5.09, 5.12, 5.20 and 5.22 shall survive the Effective Time. In the event of termination of this Agreement in accordance with its terms, the agreements contained in or referred to in the second sentence of Section 5.01, Section 5.06 and Section 7.02 shall survive such termination. 8.02. Notices. All notices and other communications hereunder shall be in ------- writing and shall be deemed to be duly received (i) on the date given if delivered personally or (ii) upon confirmation of receipt, if by facsimile transmission or (iii) on the date received if mailed by registered or certified mail (return receipt requested), or (iv) on the business date after being delivered to a reputable overnight delivery service, if by such service, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Buyer: Bay View Capital Corporation 2121 South El Camino Real San Mateo, California 94403-1897 Attention: Robert J. Flax, Executive Vice President Copies to: Silver, Freedman & Taff, L.L.P. 1100 New York Avenue, N.W. Seventh Floor Washington, D.C. 20005 Attention: Barry P. Taff, P.C. Christopher R. Kelly, P C. Telecopy: (202) 682-0354 (ii) if to Seller: AMERICA FIRST EUREKA HOLDINGS, INC. C/O AMERICA FIRST FINANCIAL CORP. 555 California Street, Suite 4490 San Francisco, CA 94104 Attention: Stephen T. McLin Telecopy: 415-362-7100 Copies to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Edward D. Herlihy, Esq Telecopy: (212) 403-2000 51 8.03. Miscellaneous. This Agreement (including the Schedules and other ------------- written documents referred to herein or provided hereunder) (i) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, including any confidentiality agreement between the parties hereto, (ii) except for the provisions of Section 5.08, 5.09, 5.12 and 5.20, is not intended to confer upon any person not a party hereto any rights or remedies hereunder, (iii) shall not be assigned by operation of law or otherwise and (iv) shall be governed in all respects by the laws of the State of Delaware. Nothing in this Agreement shall be construed to require any party (or any subsidiary or affiliate of any party) to take any action or fail to take any action in violation of applicable law, rule or regulation. This Agreement may be executed in counterparts which together shall constitute a single agreement. 52 IN WITNESS WHEREOF, Buyer, Seller, General Partner and Selling Stockholder have caused this Agreement to be signed and, by such signature, acknowledged by their respective partners or officers thereunto duly authorized, and such signatures to be duly attested to, all as of the date first written above. Attest: BAY VIEW CAPITAL CORPORATION - ------- /s/ Robert J. Flax By: /s/ Edward H. Sondker - ---------------------------------- ----------------------------- Name: Robert J. Flax Name: Edward H. Sondker Title: Secretary Title: President and Chief Executive Officer Attest: AMERICA FIRST EUREKA HOLDINGS, - ------- INC. /s/ George H. Krauss By: /s/ Stephen T. McLin - ---------------------------------- ----------------------------- Name: George H. Krauss Name: Stephen T. McLin Title: Chairman of the Board Title: Chief Executive Officer and President Attest: AMERICA FIRST FINANCIAL FUND - ------- 1987-A LIMITED PARTNERSHIP By: American First Capital Associates Limited Partnership Five, a general partner By: AFCA-5 Management Corporation, a general partner /s/ Stephen T. McLin By: /s/ George H. Krauss - ---------------------------------- ----------------------------- Name: Stephen T. McLin Name: George H. Krauss Title: Chairman of the Board and Secretary 53 Attest: - ------- AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE By: AFCA-5 Management Corporation, a general partner /s/ Stephen T. McLin By: /s/ George H. Krauss - ---------------------------------- ----------------------------- Name: Stephen T. McLin Name: George H. Krauss Title: Chairman of the Board and Secretary 54 EX-99 3 EXHIBIT 99.1 EXHIBIT 99.1 OPTION AGREEMENT ---------------- OPTION AGREEMENT ("Option Agreement") dated May 8, 1997, among BAY VIEW CAPITAL CORPORATION ("Buyer"), a Delaware corporation registered as a savings and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"), AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP, a Delaware limited partnership ("Selling Stockholder"), and AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE, a Delaware limited partnership and the General Partner of Selling Stockholder (the "General Partner"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Board of Directors of Buyer and the General Partner of Selling Stockholder have approved an Agreement and Plan of Merger dated as of even date herewith (the "Agreement") providing for, among other things, the merger of America First Eureka Holdings, Inc., ("Seller") with and into Buyer; WHEREAS, as a condition to Buyer entering into the Merger Agreement, Buyer has required that Selling Stockholder agree, and Selling Stockholder has agreed, to grant to Buyer the option set forth herein to purchase from Selling Stockholder authorized but unissued Beneficial Unit Certificates ("BUCs"). NOW, THEREFORE, in consideration of the premises herein contained, the parties agree as follows: 1. Definitions. ----------- Capitalized terms used but not defined herein shall have the same meanings as in the Agreement. 2. Grant of Option. --------------- Subject to the terms and conditions set forth herein, Selling Stockholder hereby grants to Buyer an option (the "Option") to purchase from Selling Stockholder up to 1,196,107 authorized but unissued BUCs at a price of $31.08 per unit (the "Purchase Price") payable in cash as provided in Section 4 hereof. 3. Exercise of Option. ------------------ (a) Buyer may exercise the Option, in whole or in part, at any time or from time to time if a Purchase Event (as defined below) shall have occurred; provided, however, that (i) to the extent the Option shall not have been - -------- ------- exercised, it shall terminate and be of no further force and effect upon the earliest to occur of (A) the Effective Time of the Merger, (B) the termination of the Agreement in accordance with Sections 7.01(a) through 7.01(c) or Sections 7.01(e) through 7.01(f) thereof, and (C) three years following the termination of the Agreement in accordance with Section 7.01(d) thereof, provided that if -------- such termination follows an Extension Event (as defined below), the Option shall not terminate until the date that is 12 months following such termination; (ii) if the Option cannot be exercised on such day because of any injunction, order or similar restraint issued by a court of competent jurisdiction, the Option shall expire on the 30th business day after such injunction, order or restraint shall have been dissolved or when such injunction, order or restraint shall have become permanent and no longer subject to appeal, as the 2 case may be; and (iii) that any such exercise shall be subject to compliance with applicable law, including the HOLA. (b) As used herein, a "Purchase Event" shall mean any of the following events: (i) Selling Stockholder or any of its Subsidiaries, without having received prior written consent from Buyer, shall have entered into, authorized, recommended, proposed or publicly announced its intention to enter into, authorize, recommend, or propose, an agreement, arrangement or understanding with any person (other than Buyer or any of its Subsidiaries) to (A) effect a merger or consolidation or similar transaction involving Seller or any of its Subsidiaries (other than internal mergers, reorganizing actions, consolidations or dissolutions involving only existing Subsidiaries of Seller), (B) purchase, lease or otherwise acquire 15% or more of the assets of Seller or any of its Subsidiaries, or (C) purchase or otherwise acquire (including by way of merger, consolidation, share exchange or similar transaction) Beneficial Ownership (as defined below) of BUCs representing more than 15% of the voting power of Selling Stockholder or any of its Subsidiaries; (ii) any person (other than Buyer or any Subsidiary of Buyer or any person acting in concert with Buyer, or Seller or any Subsidiary of Seller in a fiduciary capacity) shall have acquired Beneficial Ownership or the right to acquire Beneficial Ownership of more than 15% of the voting power of Selling Stockholder; or 3 (iii) The General Partner shall have withdrawn or modified in a manner adverse to Buyer the recommendation of the General Partner with respect to the Agreement or the Distribution, in each case after an Extension Event; or (iv) the Limited Partners of Seller shall not have approved the Agreement or the Distribution at the Selling Stockholder Meeting, or such Meeting shall not have been held or shall have been canceled prior to termination of the Agreement in accordance with its terms, in each case after an Extension Event. (c) As used herein, the term "Extension Event" shall mean any of the following events : (i) a Purchase Event of the type specified in clauses (b) (i) and (b) (ii) above; (ii) any person (other than Buyer or any of its Subsidiaries) shall have "commenced" (as such term is defined in Rule 14d-2 under the Exchange Act), or shall have filed a registration statement under the Securities Act with respect to, a tender offer or exchange offer to purchase BUCs such that, upon consummation of such offer, such person would have Beneficial Ownership or the right to acquire Beneficial Ownership of more than 15% of the voting power of Selling Stockholder; or, (iii) any person (other than Buyer or any Subsidiary of Buyer, or Selling Stockholder or any Subsidiary of Selling Stockholder in a fiduciary capacity) shall have publicly announced its willingness, or shall have publicly announced a proposal, or publicly disclosed an intention to make a 4 proposal, (x) to make an offer described in clause (ii) above or (y) to engage in a transaction described in clause (i) above. (d) As used herein, the terms "Beneficial Ownership" and "Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3 under the Exchange Act. (e) In the event Buyer wishes to exercise the Option, it shall deliver to Selling Stockholder a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of BUCs it intends to purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 calendar days from the Notice Date for the closing of such purchase (the "Closing Date"). 4. Payment and Delivery of Certificates. ------------------------------------ (a) At the closing referred to in Section 3 hereof, Buyer shall pay to Selling Stockholder the aggregate purchase price for the BUCs purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Selling Stockholder. (b) At such closing, simultaneously with the delivery of cash as provided in Section 4(a), Selling Stockholder shall deliver to Buyer a certificate or certificates representing the number of BUCs purchased by Buyer, registered in the name of Buyer or a nominee designated in writing by Buyer, and Buyer shall deliver to Selling Stockholder a letter agreeing that Buyer shall not offer to sell, pledge or otherwise dispose of such BUCs in violation of applicable law or the provisions of this Option Agreement. 5 (c) If at the time of issuance of any BUCs pursuant to any exercise of the Option, Selling Stockholder shall have issued any BUC purchase rights or similar securities to holders of BUCs, then each such BUC shall also represent rights with terms substantially the same as and at least as favorable to Buyer as those issued to other holders of BUCs. (d) Certificates for BUCs delivered at any closing hereunder shall be endorsed with a restrictive legend which shall read substantially as follows: The transfer of the Beneficial Unit Certificates represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and ___________________, a copy of which is on file at the principal office of _____________, and to resale restrictions arising under the Securities Act of 1933 and any applicable state securities laws. A copy of such agreement will be provided to the holder hereof without charge upon receipt by ___________________ of a written request therefor. It is understood and agreed that the above legend shall be removed by delivery of substitute certificate(s) without such legend if Buyer shall have delivered to Selling Stockholder an opinion of counsel, in form and substance reasonably satisfactory to Selling Stockholder and its counsel, to the effect that such legend is not required for purposes of the Securities Act and any applicable state securities laws. 5. Authorization, etc. ------------------- (a) Selling Stockholder hereby represents and warrants to Buyer that: (i) Selling Stockholder has full partnership authority to execute and deliver this Option Agreement and, subject to Section 11(i), to consummate the transactions contemplated hereby; 6 (ii) such execution, delivery and consummation have been authorized by the General Partner, and no other partnership proceedings are necessary therefor; (iii) this Option Agreement has been duly and validly executed and delivered and represents a valid and legally binding obligation of Selling Stockholder, enforceable against Selling Stockholder in accordance with its terms; and (iv) Selling Stockholder has taken all necessary partnership action to authorize and reserve and, subject to Section 11(i), permit it to issue and, at all times from the date hereof through the date of the exercise in full or the expiration or termination of the Option, shall have reserved for issuance upon exercise of the Option, 1,196,107 BUCs of Selling Stockholder, all of which, upon issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be delivered free and clear of all claims, liens, encumbrances, restrictions (other than federal and state securities restrictions) and security interests and not subject to any preemptive rights. (b) Buyer hereby represents and warrants to Selling Stockholder that: (i) Buyer has full corporate authority to execute and deliver this Option Agreement and, subject to Section 11(i), to consummate the transactions contemplated hereby; (ii) such execution, delivery and consummation have been authorized by all requisite corporate action by Buyer, and no other corporate proceedings are necessary therefor; 7 (iii) this Option Agreement has been duly and validly executed and delivered and represents a valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms; and (iv) any BUC or other securities acquired by Buyer upon exercise of the Option will not be taken with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in compliance with the Securities Act. 6. Adjustment upon Changes in Capitalization. ----------------------------------------- In the event of any change in the securities of Selling Stockholder by reason of dividends, split-ups, recapitalizations or the like, the type and number of BUCs subject to the Option, and the purchase price per unit, as the case may be, shall be adjusted appropriately. In the event that any additional BUCs are issued after the date of this Option Agreement (other than pursuant to an event described in the preceding sentence or pursuant to this Option Agreement), the number of BUCs subject to the Option shall be adjusted so that, after such issuance, it equals at least 19.9% of the number of BUCs then issued and outstanding (without considering any shares subject to or issued pursuant to the Option). 7. Repurchase. ---------- (a) Subject to Section 11(i), at the request of Buyer at any time commencing upon the occurrence of a Purchase Event and ending 13 months immediately thereafter (the "Repurchase Period"), Selling Stockholder (or any successor entity thereof) shall repurchase the Option from Buyer together with all (but not less than all, subject 8 to Section 10) BUCs purchased by Buyer pursuant thereto with respect to which Buyer then has Beneficial Ownership, at a price (per unit, the "Per Unit Repurchase Price") equal to the sum of: (i) The exercise price paid by Buyer for any BUCs acquired pursuant to the Option; (ii) The difference between (A) the "Market/Tender Offer Price" for BUCs (defined as the higher of (x) the highest price per unit at which a tender or exchange offer has been made for BUCs or (y) the highest closing mean of the "bid" and the "ask" price per BUC reported by the Nasdaq, the automated quotation system of the National Association of Securities Dealers, Inc., for any day within that portion of the Repurchase Period which precedes the date Buyer gives notice of the required repurchase under this Section 7) and (B) the exercise price as determined pursuant to Section 2 hereof (subject to adjustment as provided in Section 6), multiplied by the number of BUCs with respect to which the Option has not been exercised, but only if the Market/Tender Offer Price is greater than such exercise price; (iii) The difference between the Market/Tender Offer Price and the exercise price paid by Buyer for any BUC purchased pursuant to the exercise of the Option, multiplied by the number of units so purchased, but only if the Market/Tender Offer Price is greater than such exercise price; and (iv) Buyer's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by the Merger 9 Agreement, including, without limitation, legal, accounting and investment banking fees. (b) In the event Buyer exercises its rights under this Section 7, Selling Stockholder shall, within ten business days thereafter, pay the required amount to Buyer by wire transfer of immediately available funds to an account designated by Buyer and Buyer shall surrender to Selling Stockholder the Option and the certificates evidencing the BUCs purchased thereunder with respect to which Buyer then has Beneficial Ownership, and Buyer shall warrant that it has sole record and Beneficial Ownership of such certificates and that the same are free and clear of all liens, claims, charges, restrictions and encumbrances of any kind whatsoever. (c) In determining the Market/Tender Offer Price, the value of any consideration other than cash shall be determined by an independent nationally recognized investment banking firm selected by Buyer and reasonably acceptable to Selling Stockholder. 8. Repurchase at Option of Selling Stockholder and First Refusal. ------------------------------------------------------------- (a) Except to the extent that Buyer shall have previously exercised its rights under Section 7, at the request of Selling Stockholder during the six- month period commencing 13 months following the first occurrence of a Purchase Event, Selling Stockholder may repurchase from Buyer, and Buyer shall sell to Selling Stockholder, all (but not less than all, subject to Section 10) of the BUCs acquired by Buyer pursuant hereto and with respect to which Buyer has Beneficial Ownership at the time of such repurchase at a price per unit equal to the greater of (i) 110% of 10 the Market/Tender Offer Price per BUC, (ii) the Per Unit Repurchase Price or (iii) the sum of (A) the aggregate Purchase Price of the BUCs so repurchased plus (B) interest on the aggregate Purchase Price paid for the BUCs so repurchased from the date of purchase to the date of repurchase at the highest rate of interest announced by Buyer Bank as its prime or base lending or reference rate during such period, less any dividends received on the BUCs so repurchased, plus (C) Buyer's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by the Agreement, including, without limitation, legal, accounting and investment banking fees. Any repurchase under this Section 8(a) shall be consummated in accordance with Section 7(b). (b) If, at any time after the occurrence of a Purchase Event and prior to the earlier of (i) the expiration of 18 months immediately following such Purchase Event or (ii) the expiration or termination of the Option, Buyer shall desire to sell, assign, transfer or otherwise dispose of the Option or all or any of the BUCs acquired by it pursuant to the Option, it shall give Selling Stockholder written notice of the proposed transaction (an "Offeror's Notice"), identifying the proposed transferee, and setting forth the terms of the proposed transaction. An Offeror's Notice shall be deemed an offer by Buyer to Selling Stockholder, which may be accepted within ten business days of the receipt of such Offeror's Notice, on the same terms and conditions and at the same price at which Buyer is proposing to transfer the Option or such BUCs to a third party. The purchase of the Option or any such BUCs by Selling Stockholder shall be closed within ten business days of the date of the acceptance of the offer and the purchase 11 price shall be paid to Buyer by wire transfer of immediately available funds to an account designated by Buyer. In the event of the failure or refusal of Selling Stockholder to purchase the Option or all the BUCs covered by the Offeror's Notice or if any Regulatory Authority disapproves Selling Stockholder's proposed purchase of the Option or such BUCs, Buyer may, within 60 days from the date of the Offeror's Notice, sell all, but not less than all, of the Option or such BUCs to such third party at no less than the price specified and on terms no more favorable to the purchaser than those set forth in the Offeror's Notice. The requirements of this Section 8(b) shall not apply to (i) any disposition as a result of which the proposed transferee would Beneficially Own not more than 2% of the voting power of Selling Stockholder or (ii) any disposition of BUCs by a person to whom Buyer has sold BUCs issued upon exercise of the Option. 9. Registration Rights. ------------------- At any time after a Purchase Event, Selling Stockholder shall, if requested by any holder or beneficial owner of BUCs issued upon exercise of the Option (except any beneficial holder who acquired all of such holder's BUCs in a transaction exempt from the requirements of Section 8(b) by reason of clause (i) thereof) (each a "Holder"), as expeditiously as possible file a registration statement on a form for general use under the Securities Act if necessary in order to permit the sale or other disposition of the BUCs that have been acquired upon exercise of the Option in accordance with the intended method of sale or other disposition requested by any such Holder (it being understood and agreed that any such sale or other disposition shall be effected on a widely 12 distributed basis so that, upon consummation thereof, no purchaser or transferee shall Beneficially Own more than 2% of the BUCs then outstanding). Each such Holder shall provide all information reasonably requested by Selling Stockholder for inclusion in any registration statement to be filed hereunder. Selling Stockholder shall use its best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sales or other dispositions. The registration effected under this Section 9 shall be at Selling Stockholder's expense except for underwriting commissions and the fees and disbursements of such Holders' counsel attributable to the registration of such BUCs. In no event shall Selling Stockholder be required to effect more than one registration hereunder. The filing of the registration statement hereunder may be delayed for such period of time as may reasonably be required to facilitate any public distribution by Selling Stockholder of BUCs or if a special audit of Selling Stockholder would otherwise be required in connection therewith. If requested by any such Holder in connection with such registration, Selling Stockholder shall become a party to any underwriting agreement relating to the sale of such certificates, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements for parties similarly situated. Upon receiving any request for registration under this Section 9 from any Holder, Selling Stockholder agrees to send a copy thereof to any other person known to Selling 13 Stockholder to be entitled to registration rights under this Section 9, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. 10. Severability. ------------ Any term, provision, covenant or restriction contained in this Option Agreement held by a court or a Regulatory Authority of competent jurisdiction to be invalid, void or unenforceable, shall be ineffective to the extent of such invalidity, voidness or unenforceability, but neither the remaining terms, provisions, covenants or restrictions contained in this Option Agreement nor the validity or enforceability thereof in any other jurisdiction shall be affected or impaired thereby. Any term, provision, covenant or restriction contained in this Option Agreement that is so found to be so broad as to be unenforceable shall be interpreted to be as broad as is enforceable. If for any reason such court or Regulatory Authority determines that applicable law will not permit Buyer or any other person to acquire, or Selling Stockholder to repurchase or purchase, the full number of BUCs provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is the express intention of the parties hereto to allow Buyer or such other person to acquire, or Selling Stockholder to repurchase or purchase, such lesser number BUCs as may be permissible, without any amendment or modification hereof. 11. Miscellaneous. ------------- (a) Expenses. Each of the parties hereto shall pay all costs and expenses -------- incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of 14 its own financial consultants, investment bankers, accountants and counsel, except as otherwise provided herein. (b) Entire Agreement. Except as otherwise expressly provided herein, this ---------------- Option Agreement and the Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral. (c) Successors; No Third Party Beneficiaries. The terms and conditions of ---------------------------------------- this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Option Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Option Agreement, except as expressly provided herein. (d) Assignment. Other than as provided in Sections 8 and 9 hereof, neither ---------- of the parties hereto may sell, transfer, assign or otherwise dispose of any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person (whether by operation of law or otherwise), without the express written consent of the other party. (e) Notices. All notices or other communications which are required or ------- permitted hereunder shall be in writing and sufficient if delivered in accordance with Section 8.02 of the Agreement (which is incorporated herein by reference). (f) Counterparts. This Option Agreement may be executed in counterparts, ------------ and each such counterpart shall be deemed to be an 15 original instrument, but both such counterparts together shall constitute but one agreement. (g) Specific Performance. The parties hereto agree that if for any reason -------------------- Buyer or Selling Stockholder shall have failed to perform its obligations under this Option Agreement, then either party hereto seeking to enforce this Option Agreement against such non-performing party shall be entitled to specific performance and injunctive and other equitable relief, and the parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. This provision is without prejudice to any other rights that either party hereto may have against the other party hereto for any failure to perform its obligations under this Option Agreement. (h) Governing Law. This Option Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware applicable to agreements made and entirely to be performed within such state. Nothing in this Option Agreement shall be construed to require any party (or any subsidiary or affiliate of any party) to take any action or fail to take any action in violation of applicable law, rule or regulation. (i) Regulatory Approvals; Section 16(b). If, in connection with (A) the ----------------------------------- exercise of the Option under Section 3 or a sale by Buyer to a third party under Section 8, (B) a repurchase by Selling Stockholder under Section 7 or a repurchase or purchase by Selling Stockholder under Section 8, prior notification to or approval of the OTS or any other Regulatory Authority is required, then the required notice or application for approval shall be promptly filed 16 and expeditiously processed and periods of time that otherwise would run pursuant to such Sections shall run instead from the date on which any such required notification period has expired or been terminated or such approval has been obtained, and in either event, any requisite waiting period shall have passed. In the case of clause (A) of this subsection (i), such filing shall be made by Buyer, and in the case of clause (B) of this subsection (i), such filing shall be made by Selling Stockholder, provided that each of Buyer and Selling Stockholder shall use its best efforts to make all filings with, and to obtain consents of, all third parties and Regulatory Authorities necessary to the consummation of the transactions contemplated hereby. Periods of time that otherwise would run pursuant to Sections 3, 7 or 8 shall also be extended to the extent necessary to avoid liability under Section 16(b) of the Exchange Act. (j) No Breach of Agreement Authorized. Nothing contained in this Option --------------------------------- Agreement shall be deemed to authorize Selling Stockholder to issue any BUCs in breach of, or otherwise breach any of, the provisions of the Agreement. (k) Waiver and Amendment. Any provision of this Agreement may be waived at -------------------- any time by the party that is entitled to the benefits of such provision. This Option Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. 17 IN WITNESS WHEREOF, each of the parties hereto has executed this Option Agreement as of the date first written above. BAY VIEW CAPITAL CORPORATION By:/s/ Edward H. Sondker ----------------------------- Name: Edward H. Sondker Title: President and Chief Executive Officer AMERICA FIRST FINANCIAL FUND 1987-A LIMITED PARTNERSHIP By: American First Capital Associates Limited Partnership Five, a general partner By: AFCA-5 Management Corporation, a general partner By:/s/ George H. Krauss ----------------------------- Name: George H. Krauss Title: Chairman of the Board and Secretary AMERICA FIRST CAPITAL ASSOCIATES LIMITED PARTNERSHIP FIVE By: AFCA-5 Management Corporation, a general partner By:/s/ George H. Krauss ----------------------------- Name: George H. Krauss Title: Chairman of the Board and Secretary 18 EX-99 4 EXHIBIT 99.2 EXHIBIT 99.2 OPTION AGREEMENT ---------------- OPTION AGREEMENT ("Option Agreement") dated May 8, 1997, among BAY VIEW CAPITAL CORPORATION ("Buyer"), a Delaware corporation registered as a savings and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"), and AMERICA FIRST EUREKA HOLDINGS, INC., a Delaware corporation ("Seller"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Board of Directors of Buyer and the Board of Directors of Seller have approved an Agreement and Plan of Merger dated as of even date herewith (the "Agreement") providing for, among other things, the merger of Seller with and into Buyer; WHEREAS, as a condition to Seller entering into the Merger Agreement, Seller has required that Buyer agree, and Buyer has agreed, to grant to Seller the option set forth herein to purchase authorized but unissued shares of Buyer Common Stock. NOW, THEREFORE, in consideration of the premises herein contained, the parties agree as follows: 1. Definitions. ----------- Capitalized terms used but not defined herein shall have the same meanings as in the Agreement. 2. Grant of Option. --------------- Subject to the terms and conditions set forth herein, Buyer hereby grants to Seller an option (the "Option") to purchase from Buyer up to 1,290,530 authorized and unissued shares of Buyer Common Stock at a price of $51 3/4 per share (the "Purchase Price") payable in cash as provided in Section 4 hereof. 3. Exercise of Option. ------------------ (a) Seller may exercise the Option, in whole or in part, at any time or from time to time if a Purchase Event (as defined below) shall have occurred; provided, however, that (i) to the extent the Option shall not have been - -------- ------- exercised, it shall terminate and be of no further force and effect upon the earliest to occur of (A) the Effective Time of the Merger, (B) the termination of the Agreement in accordance with Sections 7.01(a) through 7.01(d) or Section 7.01(f) thereof, and (C) three years following the termination of the Agreement in accordance with Section 7.01(e) thereof, provided that if such -------- termination follows an Extension Event (as defined below), the Option shall not terminate until the date that is 12 months following such termination; (ii) if the Option cannot be exercised on such day because of any injunction, order or similar restraint issued by a court of competent jurisdiction, the Option shall expire on the 30th business day after such injunction, order or restraint shall have been dissolved or when such injunction, order or restraint shall have become permanent and no longer subject to appeal, as the case may be; and 2 (iii) that any such exercise shall be subject to compliance with applicable law, including the HOLA. (b) As used herein, a "Purchase Event" shall mean any of the following events: (i) Buyer or any of its Subsidiaries, without having received prior written consent from Seller, shall have entered into, authorized, recommended, proposed or publicly announced its intention to enter into, authorize, recommend, or propose, an agreement, arrangement or understanding with any person (other than Seller or any of its Subsidiaries, Selling Stockholder or General Partner) to (A) effect a merger or consolidation or similar transaction involving Buyer or any of its Subsidiaries (other than internal mergers, reorganizing actions, consolidations or dissolutions involving only existing Subsidiaries of Buyer), (B) purchase, lease or otherwise acquire 15% or more of the assets of Buyer or any of its Subsidiaries, or (C) purchase or otherwise acquire (including by way of merger, consolidation, share exchange or similar transaction) Beneficial Ownership (as defined below) of Common Stock representing more than 15% of the voting power of Buyer or any of its Subsidiaries; (ii) any person (other than Seller or any of its Subsidiaries, Selling Stockholder or General Partner or any person acting in concert with any such parties, or Buyer or any Subsidiary of Buyer in a fiduciary capacity) shall have acquired Beneficial Ownership or the right to acquire Beneficial Ownership of more than 15% of the voting power of Buyer; or 3 (iii) Buyer's Board of Directors shall have withdrawn or modified in a manner adverse to Seller the recommendation of the Board of Directors with respect to the Agreement, in each case after an Extension Event; or (iv) the holders of Buyer Common Stock shall not have approved the Agreement at the Buyer Meeting, or such Meeting shall not have been held or shall have been canceled prior to termination of the Agreement in accordance with its terms, in each case after an Extension Event. (c) As used herein, the term "Extension Event" shall mean any of the following events: (i) a Purchase Event of the type specified in clauses (b) (i) and (b) (ii) above; (ii) any person (other than Seller or any of its Subsidiaries, Selling Stockholder or General Partner) shall have "commenced" (as such term is defined in Rule 14d-2 under the Exchange Act), or shall have filed a registration statement under the Securities Act with respect to, a tender offer or exchange offer to purchase shares of Buyer Common Stock such that, upon consummation of such offer, such person would have Beneficial Ownership or the right to acquire Beneficial Ownership of more than 15% of the voting power of Buyer; or, (iii) any person (other than Seller or any Subsidiary of Seller, Selling Stockholder or General Partner, or Buyer or any Subsidiary of Buyer in a fiduciary capacity) shall have publicly announced its willingness, or shall have publicly announced a proposal, or publicly disclosed an intention to 4 make a proposal, (x) to make an offer described in clause (ii) above or (y) to engage in a transaction described in clause (i) above. (d) As used herein, the terms "Beneficial Ownership" and "Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3 under the Exchange Act. (e) In the event Seller wishes to exercise the Option, it shall deliver to Buyer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares of Buyer Common Stock it intends to purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 calendar days from the Notice Date for the closing of such purchase (the "Closing Date"). 4. Payment and Delivery of Certificates. ------------------------------------ (a) At the closing referred to in Section 3 hereof, Seller shall pay to Buyer the aggregate purchase price for the shares of Buyer Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Buyer. (b) At such closing, simultaneously with the delivery of cash as provided in Section 4(a), Buyer shall deliver to Seller a certificate or certificates representing the number of shares of Buyer Common Stock purchased by Seller, registered in the name of Seller or a nominee designated in writing by Seller, and Seller shall deliver to Buyer a letter agreeing that Seller shall not offer to sell, pledge or otherwise dispose of such shares in violation of applicable law or the provisions of this Option Agreement. 5 (c) If at the time of issuance of any Buyer Common Stock pursuant to any exercise of the Option, Buyer shall have issued any share purchase rights or similar securities to holders of Buyer Common Stock, then each such share of Buyer Common Stock shall also represent rights with terms substantially the same as and at least as favorable to Seller as those issued to other holders of Buyer Common Stock. (d) Certificates for Buyer Common Stock delivered at any closing hereunder shall be endorsed with a restrictive legend which shall read substantially as follows: The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and ___________________, a copy of which is on file at the principal office of _____________, and to resale restrictions arising under the Securities Act of 1933 and any applicable state securities laws. A copy of such agreement will be provided to the holder hereof without charge upon receipt by ___________________ of a written request therefor. It is understood and agreed that the above legend shall be removed by delivery of substitute certificate(s) without such legend if Seller shall have delivered to Buyer an opinion of counsel, in form and substance reasonably satisfactory to Buyer and its counsel, to the effect that such legend is not required for purposes of the Securities Act and any applicable state securities laws. 5. Authorization, etc. ------------------- (a) Buyer hereby represents and warrants to Seller that: (i) Buyer has full corporate authority to execute and deliver this Option Agreement and, subject to Section 11(i), to consummate the transactions contemplated hereby; 6 (ii) such execution, delivery and consummation have been authorized by the Board of Directors, and no other corporate actions are necessary therefor; (iii) this Option Agreement has been duly and validly executed and delivered and represents a valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms; and (iv) Buyer has taken all necessary corporate action to authorize and reserve and, subject to Section 11(i), permit it to issue and, at all times from the date hereof through the date of the exercise in full or the expiration or termination of the Option, shall have reserved for issuance upon exercise of the Option, 1,290,530 shares of Buyer Common Stock, all of which, upon issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be delivered free and clear of all claims, liens, encumbrances, restrictions (other than federal and state securities restrictions) and security interests and not subject to any preemptive rights. (b) Seller hereby represents and warrants to Buyer that: (i) Seller has full corporate authority to execute and deliver this Option Agreement and, subject to Section 11(i), to consummate the transactions contemplated hereby; (ii) such execution, delivery and consummation have been authorized by all requisite corporate action by Seller, and no other corporate proceedings are necessary therefor; (iii) this Option Agreement has been duly and validly executed and delivered and represents a valid and legally 7 binding obligation of Seller, enforceable against Seller in accordance with its terms; and (iv) any Buyer Common Stock or other securities acquired by Seller upon exercise of the Option will not be taken with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in compliance with the Securities Act. 6. Adjustment upon Changes in Capitalization. ----------------------------------------- In the event of any change in Buyer Common Stock by reason of dividends, split-ups, recapitalizations or the like, the type and number of shares subject to the Option, and the purchase price per share, as the case may be, shall be adjusted appropriately. In the event that any additional shares of Buyer Common Stock are issued after the date of this Option Agreement (other than pursuant to an event described in the preceding sentence or pursuant to this Option Agreement), the number of Shares of Buyer Common Stock subject to the Option shall be adjusted so that, after such issuance, it equals at least 19.9% of the number of shares of Buyer Common Stock then issued and outstanding (without considering any shares subject to or issued pursuant to the Option). 7. Repurchase. ---------- (a) Subject to Section 11(i), at the request of Seller at any time commencing upon the occurrence of a Purchase Event and ending 13 months immediately thereafter (the "Repurchase Period"), Buyer (or any successor entity thereof) shall repurchase the Option from Seller together with all (but not less than all, subject to Section 10) shares of Buyer Common Stock purchased by Seller pursuant thereto with respect to which Seller then has Beneficial Ownership, 8 at a price (per share, the "Per share Repurchase Price") equal to the sum of: (i) The exercise price paid by Seller for any shares of Buyer Common Stock acquired pursuant to the Option; (ii) The difference between (A) the "Market/Tender Offer Price" for share of Buyer Common Stock (defined as the higher of (x) the highest price per share at which a tender or exchange offer has been made for shares of Buyer Common Stock or (y) the highest closing mean of the "bid" and the "ask" price per share of Buyer Common Stock reported by the Nasdaq, the automated quotation system of the National Association of Securities Dealers, Inc., for any day within that portion of the Repurchase Period which precedes the date Seller gives notice of the required repurchase under this Section 7) and (B) the exercise price as determined pursuant to Section 2 hereof (subject to adjustment as provided in Section 6), multiplied by the number of shares of Buyer Common Stock with respect to which the Option has not been exercised, but only if the Market/Tender Offer Price is greater than such exercise price; (iii) The difference between the Market/Tender Offer Price and the exercise price paid by Seller for any shares of Buyer Common Stock purchased pursuant to the exercise of the Option, multiplied by the number of shares so purchased, but only if the Market/Tender Offer Price is greater than such exercise price; and (iv) Seller's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by the Merger 9 Agreement, including, without limitation, legal, accounting and investment banking fees. (b) In the event Seller exercises its rights under this Section 7, Buyer shall, within ten business days thereafter, pay the required amount to Seller by wire transfer of immediately available funds to an account designated by Seller and Seller shall surrender to Buyer the Option and the certificates evidencing the shares of Buyer Common Stock purchased thereunder with respect to which Seller then has Beneficial Ownership, and Seller shall warrant that it has sole record and Beneficial Ownership of such certificates and that the same are free and clear of all liens, claims, charges, restrictions and encumbrances of any kind whatsoever. (c) In determining the Market/Tender Offer Price, the value of any consideration other than cash shall be determined by an independent nationally recognized investment banking firm selected by Seller and reasonably acceptable to Buyer. 8. Repurchase at Option of Buyer and First Refusal. ----------------------------------------------- (a) Except to the extent that Seller shall have previously exercised its rights under Section 7, at the request of Buyer during the six-month period commencing 13 months following the first occurrence of a Purchase Event, Buyer may repurchase from Seller, and Seller shall sell to Buyer, all (but not less than all, subject to Section 10) of the Buyer Common Stock acquired by Seller pursuant hereto and with respect to which Seller has Beneficial Ownership at the time of such repurchase at a price per share equal to the greater of (i) 110% of the Market/Tender Offer Price per share, (ii) the Per Share Repurchase Price or (iii) the sum of (A) 10 the aggregate Purchase Price of the shares so repurchased plus (B) interest on the aggregate Purchase Price paid for the shares so repurchased from the date of purchase to the date of repurchase at the highest rate of interest announced by Seller Bank as its prime or base lending or reference rate during such period, less any dividends received on the shares so repurchased, plus (C) Seller's reasonable out-of-pocket expenses incurred in connection with the transactions contemplated by the Agreement, including, without limitation, legal, accounting and investment banking fees. Any repurchase under this Section 8(a) shall be consummated in accordance with Section 7(b). (b) If, at any time after the occurrence of a Purchase Event and prior to the earlier of (i) the expiration of 18 months immediately following such Purchase Event or (ii) the expiration or termination of the Option, Seller shall desire to sell, assign, transfer or otherwise dispose of the Option or all or any of the share of Buyer Common Stock acquired by it pursuant to the Option, it shall give Buyer written notice of the proposed transaction (an "Offeror's Notice"), identifying the proposed transferee, and setting forth the terms of the proposed transaction. An Offeror's Notice shall be deemed an offer by Seller to Buyer, which may be accepted within ten business days of the receipt of such Offeror's Notice, on the same terms and conditions and at the same price at which Seller is proposing to transfer the Option or such shares to a third party. The purchase of the Option or any such shares by Buyer shall be closed within ten business days of the date of the acceptance of the offer and the purchase price shall be paid to Seller by wire transfer of immediately available funds to an 11 account designated by Seller. In the event of the failure or refusal of Buyer to purchase the Option or all the shares covered by the Offeror's Notice or if any Regulatory Authority disapproves Buyer's proposed purchase of the Option or such shares, Seller may, within 60 days from the date of the Offeror's Notice, sell all, but not less than all, of the Option or such shares to such third party at no less than the price specified and on terms no more favorable to the purchaser than those set forth in the Offeror's Notice. The requirements of this Section 8(b) shall not apply to (i) any disposition as a result of which the proposed transferee would Beneficially Own not more than 2% of the voting power of Buyer or (ii) any disposition of Buyer Common Stock by a person to whom Seller has sold Buyer Common Stock issued upon exercise of the Option. 9. Registration Rights. ------------------- At any time after a Purchase Event, Buyer shall, if requested by any holder or beneficial owner of shares of Buyer Common Stock issued upon exercise of the Option (except any beneficial holder who acquired all of such holder's shares in a transaction exempt from the requirements of Section 8(b) by reason of clause (i) thereof) (each a "Holder"), as expeditiously as possible file a registration statement on a form for general use under the Securities Act if necessary in order to permit the sale or other disposition of the shares of Buyer Common Stock that have been acquired upon exercise of the Option in accordance with the intended method of sale or other disposition requested by any such Holder (it being understood and agreed that any such sale or other disposition shall be effected on a widely distributed basis so 12 that, upon consummation thereof, no purchaser or transferee shall Beneficially Own more than 2% of the shares of Buyer Common Stock then outstanding). Each such Holder shall provide all information reasonably requested by Buyer for inclusion in any registration statement to be filed hereunder. Buyer shall use its best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sales or other dispositions. The registration effected under this Section 9 shall be at Buyer's expense except for underwriting commissions and the fees and disbursements of such Holders' counsel attributable to the registration of such Buyer Common Stock. In no event shall Buyer be required to effect more than one registration hereunder. The filing of the registration statement hereunder may be delayed for such period of time as may reasonably be required to facilitate any public distribution by Buyer of Buyer Common Stock or if a special audit of Buyer would otherwise be required in connection therewith. If requested by any such Holder in connection with such registration, Buyer shall become a party to any underwriting agreement relating to the sale of such certificates, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements for parties similarly situated. Upon receiving any request for registration under this Section 9 from any Holder, Buyer agrees to send a copy thereof to any other person known to Buyer to be entitled to registration rights under this Section 9, in each case by promptly mailing the same, postage 13 prepaid, to the address of record of the persons entitled to receive such copies. 10. Severability. ------------ Any term, provision, covenant or restriction contained in this Option Agreement held by a court or a Regulatory Authority of competent jurisdiction to be invalid, void or unenforceable, shall be ineffective to the extent of such invalidity, voidness or unenforceability, but neither the remaining terms, provisions, covenants or restrictions contained in this Option Agreement nor the validity or enforceability thereof in any other jurisdiction shall be affected or impaired thereby. Any term, provision, covenant or restriction contained in this Option Agreement that is so found to be so broad as to be unenforceable shall be interpreted to be as broad as is enforceable. If for any reason such court or Regulatory Authority determines that applicable law will not permit Seller or any other person to acquire, or Buyer to repurchase or purchase, the full number of shares of Buyer Common Stock provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is the express intention of the parties hereto to allow Seller or such other person to acquire, or Buyer to repurchase or purchase, such lesser number of shares as may be permissible, without any amendment or modification hereof. 11. Miscellaneous. ------------- (a) Expenses. Each of the parties hereto shall pay all costs and expenses -------- incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel, except as otherwise provided herein. 14 (b) Entire Agreement. Except as otherwise expressly provided herein, this ---------------- Option Agreement and the Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral. (c) Successors; No Third Party Beneficiaries. The terms and conditions of ---------------------------------------- this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Option Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Option Agreement, except as expressly provided herein. (d) Assignment. Other than as provided in Sections 8 and 9 hereof, neither ---------- of the parties hereto may sell, transfer, assign or otherwise dispose of any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person (whether by operation of law or otherwise), without the express written consent of the other party. (e) Notices. All notices or other communications which are required or ------- permitted hereunder shall be in writing and sufficient if delivered in accordance with Section 8.02 of the Agreement (which is incorporated herein by reference). (f) Counterparts. This Option Agreement may be executed in counterparts, ------------ and each such counterpart shall be deemed to be an original instrument, but both such counterparts together shall constitute but one agreement. 15 (g) Specific Performance. The parties hereto agree that if for any reason -------------------- Seller or Buyer shall have failed to perform its obligations under this Option Agreement, then either party hereto seeking to enforce this Option Agreement against such non-performing party shall be entitled to specific performance and injunctive and other equitable relief, and the parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. This provision is without prejudice to any other rights that either party hereto may have against the other party hereto for any failure to perform its obligations under this Option Agreement. (h) Governing Law. This Option Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware applicable to agreements made and entirely to be performed within such state. Nothing in this Option Agreement shall be construed to require any party (or any subsidiary or affiliate of any party) to take any action or fail to take any action in violation of applicable law, rule or regulation. (i) Regulatory Approvals; Section 16(b). If, in connection with (A) the ----------------------------------- exercise of the Option under Section 3 or a sale by Seller to a third party under Section 8, (B) a repurchase by Buyer under Section 7 or a repurchase or purchase by Buyer under Section 8, prior notification to or approval of the OTS or any other Regulatory Authority is required, then the required notice or application for approval shall be promptly filed and expeditiously processed and periods of time that otherwise would run pursuant to such Sections shall run instead from the date on which any such 16 required notification period has expired or been terminated or such approval has been obtained, and in either event, any requisite waiting period shall have passed. In the case of clause (A) of this subsection (i), such filing shall be made by Seller, and in the case of clause (B) of this subsection (i), such filing shall be made by Buyer, provided that each of Seller and Buyer shall use its best efforts to make all filings with, and to obtain consents of, all third parties and Regulatory Authorities necessary to the consummation of the transactions contemplated hereby. Periods of time that otherwise would run pursuant to Sections 3, 7 or 8 shall also be extended to the extent necessary to avoid liability under Section 16(b) of the Exchange Act. (j) No Breach of Agreement Authorized. Nothing contained in this Option --------------------------------- Agreement shall be deemed to authorize Buyer to issue any shares of Buyer Common Stock in breach of, or otherwise breach any of, the provisions of the Agreement. (k) Waiver and Amendment. Any provision of this Agreement may be waived at -------------------- any time by the party that is entitled to the benefits of such provision. This Option Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. 17 IN WITNESS WHEREOF, each of the parties hereto has executed this Option Agreement as of the date first written above. BAY VIEW CAPITAL CORPORATION By: /s/ Edward H. Sondker -------------------------- Name: Edward H. Sondker Title: President and Chief Executive Officer AMERICA FIRST EUREKA HOLDINGS, INC. By: /s/ Stephen T. McLin --------------------------- Name: Stephen T. McLin Title: Chief Executive Officer and President 18 EX-99 5 EXHIBIT 99.3 EXHIBIT 99.3 MAY 8, 1997 AMERICA FIRST EUREKA HOLDINGS AND BAY VIEW CAPITAL CORPORATION SIGN DEFINITIVE MERGER AGREEMENT (San Francisco, CA) The general partner of America First Financial Fund 1987-A Limited Partnership (NASDAQ: AFFFZ) announced today that it has entered into a definitive agreement with Bay View Capital Corporation (NASDAQ: BVCC) with respect to a merger of its subsidiary America First Eureka Holdings with Bay View. Under the terms of the agreement, the partnership will receive $90 million in cash and $210 million in Bay View common stock (subject to a minimum of 4,038,461 shares and a maximum of 5,000,000 shares) for all of its interest in America First Eureka Holdings, which owns EurekaBank, FSB. If the market price of Bay View common stock (based on the average closing prices over a specified period) is less than $42.00 per share, America First Eureka has the right to terminate the agreement unless the total value of the shares of Bay View common stock it will receive is $210 million in addition to the cash portion of $90 million. The closing is expected to take place either December 31, 1997 or January 1, 1998 and is subject to customary conditions, including approval by the AFFFZ unitholders. The general partner of AFFFZ intends to wind up the affairs of AFFFZ upon completion of the merger in accordance with the terms of the AFFFZ limited partnership agreement, including the discharge of all of the liabilities of AFFFZ and the distribution of the remaining assets of AFFFZ to its partners as appropriate. While no definite estimate of the per-unit liquidating distribution can be made now, management expects that approximately $250 million of the $300 million in cash and stock to be received in the merger will be paid to unitholders, or approximately $41.50 per unit, after satisfaction of all other liabilities of the partnership required to be satisfied in connection with its liquidation. The general partner will receive approximately $36 million in connection with the merger and dissolution in profit participation interest. The FDIC will receive approximately $12.8 million in cash, representing its participation in the sales proceeds, in addition to payments of $50 million that it has or will receive with respect to the preferred stock it holds in EurekaBank. The transaction is structured to be tax-free to the unitholders with respect to the shares of Bay View common stock to be received in exchange for the AFFFZ units. "This transaction represents a completion of a commitment which I made to our nearly 11,000 investors nine years ago when we bought EurekaBank in May, 1988," said Stephen T. McLin, Chairman of the Board of EurekaBank and President and Chief Executive officer of America First Eureka Holdings. "We started with $100 million in proceeds from our initial offering, we will have paid a total of $98 million in dividends to our unitholders, and the unitholders will receive in excess of $250 million in proceeds from this transaction, for a total return of nearly $350 million. The FDIC will have received $50 million in payment for the preferred stock it holds and an additional $12.8 million in participation payments. It is a tribute to the management team and employees of EurekaBank that these spectacular results have been accomplished." EurekaBank was acquired from the FSLIC in May, 1988. Since that time, the institution has been fully revitalized and become known for its asset quality, operating excellence, and strong earnings performance. "The job done by the people at EurekaBank over the past nine years has been nothing short of exceptional," said Byron A. Scordelis, President and Chief Executive Officer of EurekaBank. "Our results have been outstanding by every measure, and we are pleased that they have been translated into excellent performance for our investors. We now look forward with enthusiasm to working with the Bay View team as we bring our two banks together." America First Eureka Holdings is headquartered in San Francisco, California. Its wholly owned subsidiary, EurekaBank, is a $2.2 billion asset federal savings bank located in Foster City, California with 36 branches in the greater San Francisco Bay Area. -----END PRIVACY-ENHANCED MESSAGE-----