Stock Purchase Agreement

STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 21, 1995
BY AND AMONG


ARGO BANCORP, INC.
BY AND THROUGH
OLF ACQUISITION CORP.


AND


ON-LINE FINANCIAL SERVICES, INC.,
SUPERIOR SAVINGS BANK,
I.S.C., INCORPORATED ("ISC"),
SAVINGS AND LOAN SERVICE BUREAU OF INDIANA ("SLI"),
O&H SERVICE BUREAU OF MICHIGAN ("OHM")
AND THE STOCKHOLDERS OF ISC, SLI AND OHM


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STOCK PURCHASE AGREEMENT


THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of September 21, 1995, by and among ARGO BANCORP, INC., a Delaware corporation, by and through its wholly owned subsidiary, OLF ACQUISITION CORP., an Illinois corporation (collectively "Purchaser"), and ON-LINE FINANCIAL SERVICES, INC., an Illinois corporation ("On-Line"), SUPERIOR SAVINGS BANK, a Wisconsin savings bank ("Superior"), I.S.C., INCORPORATED, an Illinois corporation ("ISC"), SAVINGS AND LOAN SERVICE BUREAU OF INDIANA, an Indiana corporation ("SLI"), O&H SERVICE BUREAU OF MICHIGAN ("OHM"), (ISC, SLI and OHM hereinafter collectively referred to as the "Service Corps"), and the entities listed on Schedules "A," "B" and "C" hereto (such entities hereinafter collectively referred to as the "Thrifts"), the Thrifts constituting all the stockholders of the Service Corps (Superior and the Thrifts hereinafter collectively referred to as the "Selling Entities").


W I T N E S S E T H:


WHEREAS, Purchaser desires to acquire and the owners thereof, direct or otherwise, desire to transfer, one hundred (100%) percent of the 26,120 issued and outstanding shares of the capital stock of On-Line, by: (i) the direct purchase by Purchaser of Superior's stockholdings in On-Line, and (ii) the purchase by Purchaser from the Thrifts of their stockholdings in the Service Corps which own the remaining shares of the capital stock of On-Line (Superior, ISC, SLI and OHM hereinafter collectively referred to as the "On-Line Stockholders"), on the terms and subject to the conditions set forth herein.


NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between On-Line, the On-Line Stockholders and the Thrifts (collectively the "On-Line Group"), and Purchaser as follows:


ARTICLE I
DEFINITIONS


1.1 CERTAIN DEFINITIONS. In addition to other terms defined in this Agreement, the following terms shall have the respective meanings set forth below:


"Accounts Receivable" as of any specified date shall mean the accounts, notes and other receivables (including without limitation any "accounts" as defined under the Uniform Commercial Code) of On-Line or the Service Corps, as the case may be, as of such date, including any indebtedness arising from the sale or license of products or merchandise or the provision of services by On-Line or the Service Corps and the right to payment of any interest or finance charges or similar fees or charges relating thereto.


"Affiliate" shall mean any Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the Person specified; provided, however, that each term shall not


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include, with respect to On-Line and the Service Corps, any shareholder of the Service Corps.


"Agent" shall mean Midwest Trust Services, Inc., an Illinois corporation, pursuant to the Powers of Attorney.


"Balance Sheets" shall mean the unaudited consolidated balance sheets for each of On-Line and the Service Corps, as the case may be, as of August 31, 1995.


"Balance Sheet Date" shall mean the last day of the fiscal month to which the Balance Sheets relate.


"Books and Records" shall mean all accounting, financial reporting, Tax, business, marketing, corporate and other files, documents, instruments, papers, books and records of a specified Person, including without limitation financial statements, budgets, ledgers, journals, deeds, titles, policies, manuals, minute books, stock certificates and books, stock transfer ledgers, Contracts, franchises, permits, agency lists, policyholder lists, supplier lists, reports, computer files, retrieval programs, operating data or plans and environmental studies or plans.


"Business" shall mean the business and operations of On-Line or the Service Corps, as the case may be, as presently conducted and as conducted at any time within the 12 calendar months immediately preceding the Effective Date.


"Business Day" shall mean a day on which federally chartered banks located in Chicago, Illinois, are not required or authorized to close and not be open for business (other than a Saturday or Sunday) under the Legislative Enactments of the United States.


"Charter" shall mean the Articles of Incorporation or Certificate of Incorporation of any Person.


"Closing" shall mean those events which occur on the Effective Date for the purpose of consummating the transactions contemplated by this Agreement in accordance with Article II.


"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, together with any amendments and supplements thereto, providing for health care continuation coverage under Section 4980B of the Code or Section 601 et seq. of ERISA.


"Code" shall mean the United States Internal Revenue Code of 1986, as amended, including without limitation any successor revenue code of the United States federal government, together with the rules and regulations promulgated thereunder.


"Consents" shall mean consents, waivers, permits, clearances, approvals and other authorizations.


"Contract" shall mean any contract, agreement, understanding, lease, sublease, license, sublicense, distribution agreement, promissory note, evidence of indebtedness, indenture, instrument, mortgage, insurance policy, annuity or other binding commitment, whether written or oral and shall include any proposal or other offer to any Person to enter into any of the foregoing.


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"Designated On-Line Net Revenue" shall mean (a) during the period from the Effective Date to the first anniversary of the Effective Date, 10.5% of On-Line Net Revenue for such period, (b) during the period from first anniversary of the Effective Date to the third anniversary of the Effective Date, 15.5% of On-Line Net Revenue for such period, and (c) during the period from third anniversary of the Effective Date to the seventh anniversary of the Effective Date, 11.0% of On-Line Net Revenue for such period.


"Designated Funds" shall mean, during the period from the Effective Date to the seventh anniversary of the Effective Date, Designated On-Line Net Revenue for such period, provided, however, that the amount of Designated Funds during the period from the second anniversary of the Effective Date to the seventh anniversary of the Effective Date shall be reduced by the amount of any Balloon Note Payment (as defined in the Asset Notes) not theretofore automatically set off against Designated Funds when and as they are determined; provided, further, that Designated Funds shall not include any deferred revenue received by On-Line in any such period.


"Effective Date" shall mean the date on which the Closing actually occurs.


"Environmental Laws" shall mean all Legislative Enactments and Official Actions relating to industrial hygiene, environmental protection, air emissions, water discharges, or the use, transportation, generation, handling, treatment, storage, disposal, release or threatened release of any Regulated Material or the cleanup or remediation of any contamination by any Regulated Material.


"ERISA" shall mean the Employee Retirement Income Security Act of 1974.


"Expense Items" shall mean 110% of third party rebillable expenses, third-party passthroughs, third-party fees and third-party telecommunication services.


"Financial Statements" shall mean such of the following audited or unaudited statements as were prepared by or for On-Line in the ordinary and regular course of the business of On-Line for use by the officers and directors of On-Line in or with respect to the conduct of On-Line Business: (a) balance sheets for On-Line and related operating statements (such as with respect to results of operations, retained earnings and cash flows) for all fiscal years ending in the calendar years 1990, 1991, 1992, 1993, and 1994; and (b) balance sheets for On-Line and related operating statements (such as with respect to results of operations, retained earnings and cash flows) for the eleven months ending August 31, 1995.


"GAAP" shall mean generally accepted accounting principles which are recognized as such by the American Institute of Certified Public Accountants, which are consistently applied for all periods so as to fairly reflect the financial condition, the results of operations and the cash flows of the relevant Person or Persons.


"Intellectual Property" shall mean and include (a) Patent Rights, (b) Trademark Rights, (c) copyrights and registrations of claim to copyright, (d) Inventions, (e) Software and (f) Trade Secrets.


"Inventions" shall mean and include novel devices, processes, compositions of matter, methods, techniques, observations, discoveries, apparatuses, designs, expressions, theories and ideas, whether or not patentable.


"IRS" shall mean the United States Internal Revenue Service.


"Know-How" shall mean scientific, engineering, mechanical, electrical, financial, marketing or practical


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knowledge or experience useful in the operation of any of the On-Line Business.


"Legal Expenses" of a Person shall mean any and all reasonable out-of-pocket fees, costs and expenses of any kind (including attorneys' and experts' fees) incurred by a Person and its counsel in investigating, preparing for, prosecuting, defending against or providing evidence, producing documents or taking other action with respect to any threatened or asserted claim.


"Legislative Enactments" shall mean laws (including without limitation common law), ordinances, regulations and rules at any governmental level.


"Lien" shall mean any lien, mortgage, security interest, tax lien, financing statement, pledge, assessment, lease, sublease, adverse claim, levy, charge, hypothecation or other encumbrance of any kind or nature whatsoever including without limitation any conditional retention Contract or other Contract to give or to refrain from giving any of the foregoing.


"Official Action" shall mean any domestic or foreign decision, order, writ, injunction, decree, judgment, award or any determination by any Tribunal.


"Ownership Interests" shall mean the ownership interests in any Person, whether classified as debt, equity, profit-sharing or some other type of ownership interest, including without limitation capital stock, bonds, notes or other securities.


"On-Line Net Revenue" shall mean revenue from information processing services ("Customer Contracts") accrued by Purchaser (or any person related to Purchaser as defined in Section 267(b) of the Code) from those customers of On-Line disclosed on Schedule D ("Effective Date Customer Contracts"). On-Line Net Revenue shall include additional amounts attributable to "add-on" business with respect to those customers disclosed on Schedule D. On-Line Net Revenue shall be reduced by Expense Items properly allocable to such revenues. With respect to any Contract with such customer renewed or entered into by Purchaser (or a person related to Purchaser) after the Effective Date, On-Line Net Revenue shall be accrued using the method of accounting described in Section 467 of the Code.


"Patent Rights" shall mean and include all domestic and foreign patents (including without limitation certificates of invention and other patent equivalents), patent applications and patents issuing therefrom as well as any division, continuation or continuation in part thereof, and any reissue, extension, revival or renewal of any patent.


"PBGC" shall mean the Pension Benefit Guaranty Corporation, an agency of the United States government.


"Permit" shall mean any permit, license, exemption, waiver or other authorization required under any Environmental Law.


"Person" shall mean any natural person, corporation, general partnership, limited partnership, joint venture, proprietorship, trust, association, unincorporated association or Tribunal.


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"Personal Property" shall mean that personal property owned or leased (as lessor, sublessor, lessee or sublessee) by On-Line and used in the current conduct of On-Line Business.


"Powers of Attorney" shall mean the separate powers of attorney executed and delivered by Superior and each Thrift, substantially in the form of Exhibit A hereto, in each case effective not later than the date hereof.


"Purchased Stock" shall mean (i) three hundred (300) shares of the common capital stock of On-Line, $10.00 par value, owned and held by Superior; (ii) sixteen thousand five hundred (16,500) shares of the common capital stock of ISC, $1.00 par value, owned and held by the entities listed on Schedule "A" hereto; (iii) four thousand one hundred seventy five (4,175) shares of the common capital stock of SLI, no par value, owned and held by the entities listed on Schedule "B" hereto; and (iv) five hundred (500) shares of the common capital stock of OHM, $100.00 par value, owned and held by the entities listed on Schedule "C" hereto.


"Real Property" shall mean that real property (together with the fixtures and improvements thereon) owned or leased (as lessor, sublessor, lessee or sublessee) by On-Line and used in the current conduct of On-Line Business, as more fully described in Schedule 4.20(a).


"Regulated Material" shall mean any substance, waste, or material as to which the use, handling, disposal, storage, transportation, generation, release or threatened release is prohibited, limited or regulated under any Legislative Enactment or Official Action.


"Software" shall mean the expression of an organized set of instructions in a natural or coded language which is contained on a physical media of any nature (e.g., written, electronic, magnetic, optical or otherwise) and which may be used with a computer or other automated data processing equipment device of any nature which is based on digital technology, to make such computer or other device operate in a particular manner and for a certain purpose, as well as any related documentation for such set of instructions. The term shall include computer programs in source and object code, test or other significant data libraries, user documentation for computer programs, and any of the following which is contained on a physical media of any nature and which is used in the design, development, modification, enhancement, testing, installation, maintenance, diagnosis or assurance of the performance of a computer program: narrative descriptions, notes, specifications, designs, flowcharts, parameter descriptions, logic flow diagrams, masks, input and output formats, file layouts, database formats, test programs, installation and operating instructions, diagnostic and maintenance instructions, and other similar materials and information.


"Tax Return" shall mean any report, return, information statements or returns, estimates or other information required to be supplied to, or filed with, the IRS or any other tax Tribunal, and any amendment thereto, with respect to Taxes.


"Taxes" shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, receipts, ad valorem, value added, purchases, premium, excise, real property, personal property, windfall profit, sales, stamp, use, licensing, withholding, employment, payroll, share, capital, surplus, franchise, occupational or other taxes imposed by a Tribunal, together with any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with, any such tax or any contest or dispute thereof, and "Tax" shall mean any of the foregoing.


"Trade Payables" shall mean a present or current (as opposed to an accrued or future) obligation or liability resulting from the acquisition of goods or the use of services.


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"Trade Secrets" shall mean any formula, design, device or compilation of information which is used or held for use in the On-Line Business, which gives the holder thereof an advantage or opportunity for advantage over competitors which do not have or use the same, and which is not generally known by the public. Trade Secrets can include, by way of example, information contained on drawings and other documents, and information relating to research, development or testing.


"Trademark Rights" shall mean and include all domestic and foreign trademarks (whether registered or at common law), trade names, service marks, assumed names, trade dress, and logos used in the On-Line Business and registrations for and applications to register any of the same.


"Tribunal" shall mean any government, any arbitration or other alternative dispute resolution panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States or any foreign or domestic state, province, commonwealth, nation, territory, possession, country, parish, town, township, village or municipality.


"WARN Act" shall mean the Federal Workers Adjustment and Retraining Act, P.L. 100-379, 102 Stat. 890.


1.2 OTHER. All references in this document to this "Agreement" include all documents, Schedules and Exhibits referred to herein. Any term referred to in a Schedule hereto is deemed to be disclosed on any other applicable Schedule. All references in this Agreement to the "knowledge" of any Person refer to the actual knowledge of the officers specifically referred to herein or if none, the executive officers (or persons occupying comparable positions) of such Person. When used with respect to a group of Persons, "knowledge" includes the knowledge of any Person in such group. References to any Legislative Enactment shall be construed to include any successor Legislative Enactment and any amendments or supplements to any of the foregoing, together with, in each case, the rules and regulations promulgated thereunder, but only to the extent that such are in effect at the time, as the context requires with respect to the taking of an action or the making of a representation or warranty. All terms defined in this Agreement shall have such meanings ascribed thereto when used in any certificate, Schedule, Exhibit, report or other document made or delivered pursuant to this Agreement, unless the context shall otherwise clearly require.


ARTICLE II
THE CLOSING


2.1 TIME AND PLACE OF CLOSING. The Closing will take place on the Effective Date at 10:00 a.m. (as prevailing in the Central Time Zone) at the offices of On-Line, 900 Commerce Drive, Oak Brook, Illinois, or at such other time and place on the Effective Date as may be mutually agreed upon by Purchaser and the Agent. The Closing shall be effective as of 12:01 a.m. on the Effective Date. The Effective Date shall be the date which is 5 Business Days after the last to occur of the dates on which the conditions set forth in Articles XII and XIII are satisfied (or such other date as Purchaser and the Agent may agree upon in writing).


2.2 ACQUISITION OF THE SHARES. (a) At the Closing, on the terms and subject to the conditions set forth in this Agreement, and on the basis of the representations and warranties, covenants and agreements set forth in this Agreement, the Selling Entities shall assign, transfer and convey to Purchaser and Purchaser shall acquire from the Selling Entities immediately following the distribution to the Selling Entities as provided in Section 10.14 hereof, all the Purchased Stock in exchange for the following (collectively, the "Purchase Price"): (i) the distributions to the Selling


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Entities provided pursuant to Section 11.6 hereof; (ii) the amount (the "Asset Amount") of the positive aggregate Net Book Value (as defined in Section 2.2(c) of the assets of On-Line and the Service Corps, as such assets are reflected in accordance with GAAP on the Closing Balance Sheet, and (iii) such amount (the "Contingent Payment") equal to the difference between $10 million and the Asset Amount, but payable solely from and to the extent of Designated Funds that are realized by On-Line (or any successor thereto) during, and determined with respect to, the period from the Effective Date to the seventh anniversary of the Effective Date (such period, the "Revenue Period"). The Asset Amount shall be payable to the Agent in accordance with the terms of the promissory notes (the "Asset Notes") in the form of Exhibit B. The Contingent Payment shall not accrue interest or other charges with respect to the dates on which any part thereof may be paid. Designated Funds shall be payable against the Asset Notes and the Contingent Payment only on and after 60 calendar days after the last day of On-Line's fiscal year end (which year end Purchaser shall cause to be changed to December 31st subsequent to the Effective Date) with respect to which the amount of Designated Funds are determinable. No part of the Contingent Payment shall be payable until all of the Asset Amount shall have been paid or be payable.


The Purchase Price shall be payable to the Selling Entities in the following percentages:


ISC Stockholders 74.8%
SLI Stockholders 22.2%
OHM Stockholders 1.9%
Superior 1.1%


With respect to any and each payment of the Purchase Price to the Agent on behalf of the Selling Entities, each Selling Entity agrees that the Agent shall receive such payment as the agent for, and on behalf of, such Selling Entity.


(b) In such amounts as any of the following are not accrued on the Closing Balance Sheet, the Purchase Price and the remaining principal amount of the Asset Notes (and, if required, amounts due as the Contingent Payment) shall be adjusted by the following items, prorated (if applicable) to the Effective Date: (i) increased by security deposits and prepaid license fees and expenses from which the Business of On-Line and the Service Corps directly derives quantifiable economic benefit, prorated to the Effective Date; and (ii) decreased by advance user deposits, deferred income, real estate taxes, personal property taxes, ad valorem taxes, rent, and other unpaid expenses payable in arrears including employee compensation and related expenses.


(c) Not more than 90 calendar days after the Effective Date, the Selling Entities shall prepare and promptly deliver to Purchaser audited consolidated Balance Sheets of On-Line and the Service Corps as of the Effective Date (the "Closing Balance Sheet"), which shall have been prepared in accordance with GAAP, applied on a consistent basis with the application thereof in preparing the Balance Sheets. The Selling Entities shall also then state the amount of the net book value reflected in the Closing Balance Sheet (the "Net Book Value"). Within the 60 calendar days following delivery of the Closing Balance Sheet to Purchaser, Purchaser, at its sole expense, may audit or review the Closing Balance Sheet and may propose any adjustments Purchaser believes should be made to the Closing Balance Sheet. If the Selling Entities and Purchaser fail to agree on any adjustment to the Closing Balance Sheet proposed by Purchaser, then an independent accounting firm mutually selected by Purchaser and the Selling Entities shall make a determination of the appropriateness of any such proposed adjustment which determination shall be final and binding on all parties. After delivery of the Closing Balance Sheet and completion of any such audit or review, proposed adjustments and further determination, the remaining principal amount of the Asset Notes and (if required) amounts due as the Contingent Payment shall be adjusted, dollar for dollar, as follows: (i) increased by the amount by which the Net Book Value as of the Effective Date exceeds the Asset Amount; or (ii) decreased by the amount by which Asset Amount


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exceeds the Net Book Value as of the Effective Date.


(d) Except as provided in Sections 14.2 and 10.18, notwithstanding anything to the contrary contained in this Agreement or the Asset Notes, the Selling Entities agree that in addition to adjustments pursuant to Sections 2.2(b) or 2.2(c), Purchaser shall be entitled to credit and offset against any payments due to any of the Selling Entities by Purchaser as a result of the transactions contemplated hereby (including by way of the Asset Notes and the Contingent Payment), an aggregate amount equal to all amounts due to Purchaser by any of the Selling Entities under this Agreement or any other agreement furnished or to be furnished by any of the Selling Entities to Purchaser pursuant thereto, including, without limitation, (i) amounts due pursuant to Article XIV, (ii) amounts of any expenses relating to the period prior to the Effective Date that have been deferred to the period after the Effective Date, (iii) amounts of any revenue relating to the period after the Effective Date that was received by On-Line prior to the Effective Date, (iv) if not otherwise taken into account in determining the Purchase Price, the amount of any decrease in Net Book Value from that initially determined pursuant to Section 2.2(b), and (v) payments to the Selling Entities pursuant to Section 11.6. No such offset shall be made without thirty (30) business days prior written notice to the Agent, which notice shall state the nature of the items comprising the offset and shall include copies of all supporting documentation evidencing same. Any such offset shall be made first against the Asset Notes and then against the Contingent Payment. The exercise of such right to offset if made in good faith by Purchaser shall not constitute a breach or violation of the provisions of this Agreement or any other agreement contemplated hereby and shall not be construed to be the sole and exclusive remedy of Purchaser.


(e) If a Service Corp is unable to procure: (i) the unanimous written consent of all of its shareholders to the terms of this Agreement and (ii) the tender to Purchaser by such shareholders of all their stockholdings in such Service Corp, then Purchaser, upon delivery of written notice to Agent, within ten (10) days of its obtaining knowledge of such Service Corps's inability to procure the foregoing items (i) and (ii), shall have the option to proceed with the transactions contemplated by this Agreement, as modified by this subparagraph 2(e), with the parties who are then signataries to this Agreement. In such event, Purchaser and such Service Corp shall agree upon an amount to be withheld from that portion of the Purchase Price payable to such Service Corp pursuant to the terms of Section 2.2(a) and such amount shall be deposited (out of the proceeds to be distributed to such Service Corp pursuant to Section 10.14) in a joint order escrow between Purchaser and the Agent, at a mutually agreed upon financial institution, upon terms agreed upon by Purchaser, such Servic ...