EXHIBIT 2.2
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________________________________________________________________________________
AGREEMENT AND PLAN OF AFFILIATION
DATED AS OF THE 16TH DAY OF APRIL, 1998
BY AND AMONG
SUSQUEHANNA BANCSHARES, INC.,
SUSQUEHANNA INTERIM BANK
AND
FIRST CAPITOL BANK
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________________________________________________________________________________
TABLE OF CONTENTS
PAGE(S)
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ARTICLE I THE PLAN OF MERGER...................................................2
SECTION 1.1 The Merger; Closing; Effective Time..........................2
SECTION 1.2 Effect on Outstanding Shares.................................3
SECTION 1.3 Surrender and Exchange of Bank Certificates..................3
SECTION 1.4 Dissenters' Rights...........................................5
SECTION 1.5 Other Matters................................................5
SECTION 1.6 Bank Warrants................................................5
ARTICLE II CONDUCT PENDING THE MERGER..........................................6
SECTION 2.1 Conduct of Bank's Businesses Prior to the Effective Time.....6
SECTION 2.2 Forbearance by Bank..........................................6
SECTION 2.3 Cooperation..................................................7
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time........7
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................7
SECTION 3.1 Representations and Warranties of Bank.......................7
SECTION 3.2 Representations and Warranties of SBI and its Material
Subsidiaries................................................22
ARTICLE IV COVENANTS..........................................................29
SECTION 4.1 Acquisition Proposals.......................................29
SECTION 4.2 Securities Registration and Disclosure......................29
SECTION 4.3 Employees...................................................30
SECTION 4.4 Access and Information......................................32
SECTION 4.5 Certain Filings, Consents and Arrangements..................33
SECTION 4.6 Takeover Statutes...........................................33
SECTION 4.7 Additional Agreements.......................................34
SECTION 4.8 Publicity...................................................34
SECTION 4.10 Notification of Certain Matters............................34
SECTION 4.11 Insurance..................................................34
SECTION 4.12 Dividends..................................................34
SECTION 4.13 Indemnification; Insurance.................................34
AGREEMENT AND PLAN OF AFFILIATION dated as of the 16th day of April,
1998 (this "Plan" or this "Agreement"), is entered into by and among Susquehanna
Bancshares, Inc., a Pennsylvania corporation ("SBI"), Susquehanna Interim Bank,
a Pennsylvania state chartered bank ("Interim Bank"), and First Capitol Bank,
also a Pennsylvania state chartered bank ("Bank").
RECITALS:
WHEREAS, SBI is a multi-state, multi-institution bank holding company;
and
WHEREAS, Interim Bank will be a wholly-owned bank subsidiary of SBI
created solely for the purpose of facilitating the transactions described in
this Agreement; and
WHEREAS, Bank is an independent financial institution with a strong
record of performance; and
WHEREAS, the boards of directors of SBI and Bank have each determined
that it is in the best interest of their respective shareholders for SBI to
acquire Bank by means of a merger of Interim Bank with and into Bank (the
"Merger") as a result of which Bank will become a wholly-owned subsidiary of
SBI, all upon the terms and subject to the conditions set forth herein; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and to
set forth the conditions to the Merger; and
WHEREAS, as a condition and inducement to SBI's and Interim Bank's
willingness to enter into this Agreement, the following agreements of even date
herewith have been concurrently executed and delivered herewith: (i) a stock
option agreement (the "Stock Option Agreement") among SBI, Interim Bank and the
Bank; (ii) a voting agreement (a "Voting Agreement") between each of the
directors of the Bank and National Penn Investment Company ("National Penn") and
SBI; and (iii) a warrant substitution agreement (the "Warrant Substitution
Agreement") among SBI, the Bank, National Penn and Xxxxx X. Xxxxxxxx, a director
of the Bank; and
WHEREAS, Bank, SBI and Interim Bank desire to merge in the manner
provided for herein and to adopt this Agreement as a plan of reorganization and
to consummate such plan in accordance with the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Agreement and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
ARTICLE I
THE PLAN OF MERGER
SECTION 1.1 The Merger; Closing; Effective Time.
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(a) Subject to the terms and conditions of this Agreement and in
accordance with the applicable laws of the Commonwealth of Pennsylvania, at the
Effective Time (as defined in Section 1.1(c)), Interim Bank shall be merged with
and into Bank and the separate corporate existence of Interim Bank shall
thereupon cease. Bank shall be the surviving bank in the Merger (sometimes
hereinafter referred to as the "Surviving Bank") and shall continue to be
governed by the laws of the Commonwealth of Pennsylvania and shall continue to
be a Pennsylvania state chartered commercial bank, and the separate corporate
existence of Bank with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The name of the Surviving
Bank shall be "First Capitol Bank." The Merger shall have the effects specified
in the Pennsylvania Banking Code of 1965, as amended ("Banking Code") and the
Pennsylvania Business Corporation Law of 1988, as amended ("PBCL").
(b) The closing of the Merger (the "Closing") shall take place at such
place and time and on such date following three (3) business days' notice to
Bank, as shall be agreed upon by all parties, which date shall not be later than
the 30th business day after (i) the last approval of required governmental
authorities is granted and any related waiting periods expire, (ii) the lifting,
discharge or dismissal of any stay of any such governmental approval or of any
injunction against the Merger and (iii) all shareholder approvals required by
the parties hereunder are received.
(c) Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VI hereof,
Interim Bank and Bank will request that the Pennsylvania Department of Banking
("Banking Department") cause the articles of merger (the "Articles of Merger")
to be delivered and properly filed with the Department of State of the
Commonwealth of Pennsylvania (the "Department of State"). The Merger shall
become effective at the time specified by the Department of Banking in its
transmittal to the Department of State, which, at the request of SBI, shall be
at 12:01 a.m. on the business day of the Closing (the "Effective Time"). The
"Effective Date" when used herein means the day on which the Effective Time for
the Merger occurs.
(d) At the Effective Time, the articles of incorporation and bylaws of
Interim Bank in effect immediately prior to the Effective Time shall be the
articles of incorporation and bylaws of the Surviving Bank. At the Effective
Time, the directors and officers of Bank immediately prior to the Effective Time
shall be and become the directors and officers of the Surviving Bank with such
additions or deletions to which senior management of SBI and Bank shall mutually
agree.
(e) At the meeting of the SBI Board of Directors next following the
Effective Time, Xxxx X. Xxxxxxx, Xx. shall become a director of SBI.
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SECTION 1.2 Effect on Outstanding Shares.
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(a) At the Effective Time, by virtue of the Merger, automatically and
without any action on the part of the holder thereof, subject to the provisions
of Section 1.3 hereof with respect to the payment of fractional shares in cash
and Section 1.4 hereof with respect to dissenters' rights, if any, each share of
common stock, par value $10.00 share, of Bank (the "Bank Common Stock") issued
and outstanding at the Effective Time (other than (i) shares the holders of
which (each a "Dissenting Shareholder") are exercising appraisal rights pursuant
to the PBCL (the "Dissenters' Shares"), if any, and (ii) shares held directly or
indirectly by SBI, other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall become and be converted into
the right to receive shares of Common Stock par value $2.00 per share, of SBI
("SBI Common Stock") determined in conformity with the Exchange Ratio set forth
at Schedule 1.2 hereof (such SBI Common Stock, determined on the basis of the
Exchange Ratio, as to each Bank shareholder and, collectively, to all Bank
shareholders is the "Merger Consideration"). As of the Effective Time, each
share of Bank Common Stock held directly or indirectly by SBI, other than shares
held in a fiduciary capacity or in satisfaction of a debt previously contracted,
shall be canceled and retired and cease to exist, and no exchange or payment
shall be made with respect thereto.
(b) The shares of common stock of Interim Bank issued and outstanding
immediately prior to the Effective Time, by virtue of and after the Merger,
shall be converted into and thereafter constitute the issued and outstanding
shares of the capital stock of the Surviving Bank.
(c) If prior to the Effective Time, the number of outstanding shares
of SBI Common Stock shall have been increased or decreased through a
reclassification, stock dividend, stock split or reverse stock split, or other
similar change, appropriate adjustment shall be made to the Exchange Ratio.
SECTION 1.3 Surrender and Exchange of Bank Certificates.
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(a) Within five (5) business days after the Effective Time, SBI shall
cause to be sent to each person who immediately prior to the Effective Time was
a holder of record of Bank Common Stock transmittal materials and instructions
for surrendering certificates for Bank Common Stock ("Old Certificates") in
exchange for a certificate for the number of whole shares of SBI Common Stock to
which such person is entitled under Section 1.2 hereof.
(b) No certificates for fractional shares of SBI Common Stock shall be
issued in connection with the Merger. In lieu thereof, SBI shall issue to any
holder of Bank Common Stock certificates otherwise entitled to a fractional
share, upon surrender of such certificates in accordance with the instructions
furnished by SBI, a check for an amount of cash equal to the fraction of a share
of SBI Common Stock represented by the certificates so surrendered multiplied by
the Average Closing Price per share of SBI Common Stock as determined in
conformity with Schedule 1.2 and as defined therein.
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(c) If the record date of any dividend on SBI Common Stock occurs
after the Effective Time, the declaration shall include dividends on all whole
shares of SBI Common Stock into which shares of Bank Common Stock have been
converted under this Agreement, but no former holder of Bank Common Stock shall
be entitled to receive payment of any such dividend until surrender of the
shareholder's Old Certificates shall have been effected in accordance with the
instructions furnished by SBI. Upon surrender for exchange of a shareholder's
Old Certificates, such shareholder shall be entitled to receive from SBI an
amount equal to all such dividends, without interest thereon and less the amount
of taxes, if any, which may have been imposed or paid thereon, declared, and for
which the payment date has occurred, on the whole shares of SBI Common Stock
into which the shares represented by such Old Certificates have been converted.
(d) After the Effective Time, there shall be no transfer on the stock
transfer books of Bank, Surviving Bank or SBI of shares of Bank Common Stock.
If Old Certificates are presented for transfer after the Effective Time, they
shall be canceled and certificates representing whole shares of SBI Common Stock
(and a check in lieu of any fractional share) shall be issued in exchange
therefor as provided herein.
(e) In the event that any Old Certificates have not been surrendered
for exchange in accordance with this Section on or before the second anniversary
of the Effective Time, SBI may at any time thereafter, with or without notice to
the holders of record of such Old Certificates, sell for the accounts of any or
all of such holders any or all of the shares of SBI Common Stock which such
holders are entitled to receive under Section 1.2 hereof (the "Unclaimed
Shares"). Any such sale may be made by public or private sale or sale at any
broker's board or on any securities exchange in such manner and at such times as
SBI shall determine. If, in the opinion of counsel for SBI, it is necessary or
desirable, any Unclaimed Shares may be registered for sale under the Securities
Act of 1933, as amended (the "Securities Act") and applicable state laws. SBI
shall not be obligated to make any sale of Unclaimed Shares if it shall
determine not do so, even if notice of sale of the Unclaimed Shares has been
given. The net proceeds of any such sale of Unclaimed Shares shall be held for
holders of the unsurrendered Old Certificates whose Unclaimed Shares have been
sold, to be paid to them upon surrender of the Old Certificates. From and after
any such sale, the sole right of the holders of the unsurrendered Old
Certificates whose Unclaimed Shares have been sold shall be the right to collect
the net sale proceeds held by SBI for their respective accounts, and such
holders shall not be entitled to receive any interest on such net sale proceeds
held by SBI.
(f) If outstanding certificates for shares of Bank Common Stock are
not surrendered prior to the date on which such certificates would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of SBI (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the
foregoing, neither SBI nor its agents or any other person shall be liable to any
former holder of Bank Common Stock for any property delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
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(g) In the event any Old Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Old Certificate to be lost, stolen or destroyed and the posting by such
person of a bond in such amount as SBI may direct as indemnity against any claim
that may be made against it with respect to such Certificate, SBI will issue in
exchange for such lost, stolen or destroyed Old Certificate, the shares of SBI
Common Stock into which such Old Certificates has been converted pursuant to
this Agreement.
SECTION 1.4 Dissenters' Rights. In accordance with the provisions of
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Sections 1607 and 1222 of the Banking Code and Section 1571 of the PBCL, the
Bank shareholders are entitled to exercise dissenters rights.
SECTION 1.5 Other Matters.
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(a) Notwithstanding any term of this Agreement to the contrary, SBI
may, in its discretion at any time prior to the Effective Time, designate a
direct or indirect wholly-owned subsidiary to substitute for Interim Bank as a
constituent corporation in the Merger by written notice to Bank so long as the
exercise of this right does not materially, adversely affect the interests of
the Bank shareholders or cause a material delay in consummation of the
transactions contemplated herein. For purposes of this Section 1.5(a), the
directors of the Bank shall solely determine whether the exercise of this right
by SBI would constitute a material adverse effect on the interests of the Bank
shareholders. SBI shall also have the right to cause Interim Bank or such
substitute to be the Surviving Bank of the Merger described at Section 1.1(a),
so long as the exercise of such right does not have a material adverse effect on
the interests of the holders of the capital stock of Bank or cause a material
delay in, or otherwise adversely affect, consummation of the transactions
contemplated herein; if such right is exercised, this Agreement shall be deemed
to be modified to accord such change.
(b) Subject to Section 5.3, nothing in this Agreement shall be deemed
to restrict the ability of SBI or any of its subsidiaries to merge with or with
and into another entity so long as such other transaction shall not materially,
adversely affect the parties' ability to consummate the Merger or cause a
material delay in, or otherwise adversely affect, consummation of the
transactions contemplated herein.
SECTION 1.6 Bank Warrants. Bank hereby represents and warrants that
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no warrants, options or other right to acquire capital stock of Bank are
presently outstanding other than warrants to purchase 11,250 shares of Bank
Common Stock which are held by Xxxxx X. Xxxxxxxx (the "Xxxxxxxx Warrant") and by
virtue of a stock purchase agreement dated July 25, 1988 by and between Bank and
National Penn, pursuant to which National Penn has preemptive rights to purchase
shares of Bank Common Stock if the Xxxxxxxx Warrant is exercised ("Preemptive
Rights Agreement"). In order to induce SBI to execute this Agreement, the
Warrant Substitution Agreement has been executed and delivered, in the form
attached hereto as Exhibit 1.6, for the purpose of superseding and governing the
rights of the parties under the Xxxxxxxx Warrant and the Preemptive Rights
Agreement.
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ARTICLE II
CONDUCT PENDING THE MERGER
SECTION 2.1 Conduct of Bank's Businesses Prior to the Effective Time.
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Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, Bank shall (and the word "it" in this
Article II refers to Bank and each subsidiary of Bank) (i) conduct its business
in the usual, regular and ordinary course consistent with past practice, (ii)
use reasonable efforts to maintain and preserve intact in all material respects
its business organization, assets, leases, properties, employees and
advantageous business relationships and use its reasonable efforts to retain the
services of its officers and key employees, and (iii) not knowingly take any
action which would materially or adversely affect or delay its ability to obtain
any necessary approvals, consents or waivers of any governmental authority
required for the transactions contemplated hereby or to perform its covenants
and agreements on a timely basis under this Agreement, and (iv) not knowingly
take any action that is reasonably likely to have a Material Adverse Effect (as
defined in Section 7.1 hereof) on Bank.
SECTION 2.2 Forbearance by Bank. During the period from the date of
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this Agreement to the Effective Time, Bank shall not, without the prior written
consent of SBI:
(a) other than in the ordinary course of business consistent with past
practice in all material respects, (i) make any advance or loan, (ii) incur any
indebtedness for borrowed money, except in replacement of existing or maturing
debt, or (iii) assume, guarantee, endorse or otherwise as an accommodation
become responsible for, the obligations of any other individual, corporation or
other person;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend or make any distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation rights or grant,
sell or issue to any individual, corporation or other person any shares of its
capital stock (other than in connection with the agreements and a stock purchase
warrant set forth on Annex 2.2(b)) or any right to acquire, or securities
evidencing a right to convert into or acquire any shares of its capital stock;
(c) other than in the ordinary course of business, consistent with
past practice and pursuant to policies, if any, currently in effect, (i) sell,
transfer, mortgage, encumber or otherwise dispose of any of its properties,
leasehold interests or assets which are material to Bank or its subsidiaries, to
any individual, corporation or other entity, (ii) cancel, release or assign any
indebtedness of any such person, or (iii) assign any contracts or agreements as
in force at the date of this Agreement;
(d) increase in any manner the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by law
or by any existing plan
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or agreement to any such employees, or become a party to, amend or commit itself
to any pension, retirement, profit-sharing or welfare benefit plan or agreement
or employment agreement with or for the benefit of any employee, other than
general or individual increases in compensation in the ordinary course of
business consistent with past practice not in excess of 4%, on an aggregated
basis, in any 12-month period, and payment of bonuses in the ordinary course, or
voluntarily accelerate the vesting of any stock options or other compensation or
benefit;
(e) amend its articles of incorporation, or its bylaws, except as
expressly contemplated by this Agreement or required by law or regulation, in
each case as concurred in by its counsel;
(f) except as set forth in Annex 2.2(f) hereto, change its method of
accounting as in effect at December 31, 1997, except as required by changes in
generally accepted accounting principles or required by law or regulation, in
each case, as concurred in by its independent auditors; or
(g) permit or allow its direct or indirect ownership of the capital
stock of any subsidiary described in the annex hereto to be less than 100% of
their respective total capital stock.
SECTION 2.3 Cooperation. Bank shall cooperate with SBI and SBI shall
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cooperate with Bank in completing the transactions contemplated hereby and each
shall not knowingly take, or cause to be taken, or knowingly agree or make any
commitment to take, any action (i) that would cause any of the representations
or warranties of it that are set forth in Article III hereof not to be true and
correct in all material respects, or (ii) in the case of Bank, that is
inconsistent with or prohibited by Section 2.1 or Section 2.2.
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time.
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Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, SBI shall not knowingly take any action
and shall not knowingly cause its Material Subsidiaries (as hereinafter defined
in Section 3.2(d) hereof) to take any action that is reasonably likely to have a
Material Adverse Effect on SBI, on a consolidated basis.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Bank. Bank represents
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and warrants to SBI (and the word "it" in this Article III refers to Bank and
each subsidiary of Bank), that, except as specifically disclosed in the Annex of
disclosure schedules included herewith, to the best of its knowledge:
(a) Corporate Organization and Qualification. Bank is a corporation
duly incorporated, validly existing and duly subsisting under the laws of the
Commonwealth of
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Pennsylvania and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by Bank requires such qualification, except for such failure to
qualify or be in such good standing which, when taken together with all other
such failures, would not have a Material Adverse Effect on Bank and its
subsidiaries, taken as a whole. Bank is a Pennsylvania state chartered bank and
is a member of the Federal Reserve System. Bank has the requisite corporate and
other power and authority (including all federal, state, local and foreign
governmental authorizations) to carry on its businesses as now being conducted
and to own its properties and assets. Bank has made available to SBI a complete
and correct copy of the articles of incorporation and bylaws of Bank and such
articles and bylaws are in full force and effect as of the date hereof.
(b) Authorized Capital. The authorized capital stock of Bank consists
of 2,000,000 shares of common stock, par value $10.00 per share, of which
505,933 shares were issued and outstanding as of the date of this Agreement and
500,000 shares of preferred stock, par value $10.00 per share, of which none
were issued as of the date of this Agreement. No other equity securities are
authorized for issuance by the Bank. All of the outstanding shares of capital
stock of Bank have been duly authorized and are validly issued, fully paid and
nonassessable. Bank does not have any shares of capital stock reserved for
issuance except pursuant to the Xxxxxxxx Warrant, the Preemptive Rights
Agreement and the Stock Option Agreement. Bank does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with shareholders on any matter. The outstanding shares of
capital stock of Bank have not been issued in violation of any preemptive
rights. Except as set forth in Annex 3.1(b) or in Annex 3.1(m) and as provided
in the Stock Option Agreement, there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of Bank. After the Effective Time neither SBI nor Interim Bank will
have any obligation to issue, transfer or sell any shares of capital stock
pursuant to any Employee Plan (as defined in Section 3.1(m)).
(c) Subsidiaries. The Bank has no subsidiaries.
(d) Corporate Authority. Subject only to approval of this Agreement
by the holders of the number of votes required by Bank's articles of
incorporation or bylaws cast by all holders of Bank Common Stock (without any
minority, class or series voting requirement), and, subject to the regulatory
approvals specified in Section 5.1(b) hereof, Bank has the requisite corporate
power and authority, and legal right, and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions applicable to Bank contemplated hereby. This Agreement has been
duly and validly executed and delivered by Bank and constitutes the valid and
binding obligations of Bank, enforceable against Bank in accordance with its
terms, except to the extent enforcement is limited by bankruptcy, insolvency and
other similar laws affecting creditors' rights or the application by a court of
equitable principles.
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(e) No Violations. The execution, delivery and performance of this
Agreement by it does not, the execution, delivery and performance of the Stock
Option Agreement by it will not, and the consummation of the transactions
contemplated hereby by it will not, constitute (i) subject to receipt of the
required regulatory approvals specified in Section 5.1(b), a breach or violation
of, or a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, to which it (or any of its respective
properties) is subject, which breach, violation or default would have a Material
Adverse Effect on it, or enable any person to enjoin the Merger, (ii) a breach
or violation of, or a default under Bank's articles of incorporation or bylaws,
(iii) a breach of any duty owed by Bank to any person holding an interest in
Bank, or (iv) except as disclosed in Annex 3.1(e), a breach or violation of, or
a default under (or an event which with due notice or lapse of time or both
would constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of it under any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which it is a party, or to which any of their respective
properties or assets may be bound or affected, except for any of the foregoing
that, individually or in the aggregate, would not have a Material Adverse Effect
on it or enable any person to enjoin the Merger; and the consummation of the
transactions contemplated hereby or, upon its execution and delivery, the Stock
Option Agreement, will not require any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument, other than (i) the required approvals,
consents and waivers of governmental authorities referred to in Section 5.1(b)
and (ii) the approval of its shareholders referred to in Section 3.1(d), (iii)
any such approval, consent or waiver that already has been obtained and (iv) any
other approvals, consents or waivers, the absence of which, individually or in
the aggregate, would not result in a Material Adverse Effect on it or enable any
person to enjoin the Merger.
(f) Reports.
i. Bank's audited statement of financial condition as of and
for the year ended December 31, 1997, and the unaudited statement of financial
condition as of and for the nine-month period ended September 30, 1997,
previously provided to SBI and each statement of financial condition provided
after the date hereof to SBI (including in each case any related notes and
schedules) as required by Section 4.4 hereof fairly presents or will fairly
present the financial position of Bank as of its date and each of the statements
of income and stockholders' equity and of cash flows provided therewith
(including in each case any related notes and schedules), fairly presents or
will fairly present the results of operations, stockholders' equity and cash
flows, as the case may be, of Bank for the periods set forth therein (subject,
in the case of unaudited interim statements, to year-end audit adjustments that
are not material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein.
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ii. Except as set forth in Annex 3.1(f), it has timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
January 1, 1993 with (A) the Banking Department, (B) the Federal Deposit
Insurance Corporation (the "FDIC"), (C) the Board of Governors of the Federal
Reserve System (the "Board"), and (D) any other regulatory authority
(collectively, the "Bank Regulatory Agencies"), and all other material reports
and statements required to be filed by it since January 1, 1993, including,
without limitation, any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States or any Bank Regulatory Agency
and has paid all fees and assessments due and payable in connection therewith,
and no such report, registration or statement contains any material misstatement
or omission or is otherwise in material noncompliance with any law, regulation
or requirement.
(g) Absence of Certain Changes or Events. Since January 1, 1998, to
the date hereof, it has not incurred any material liability, except in the
ordinary course of its business consistent with past practice, nor has there
been any change in the financial condition, properties, assets, business,
results of operations or prospects of it which, individually or in the
aggregate, has had, or might reasonably be expected to result in, a Material
Adverse Effect on it.
(h) Taxes. Its federal income tax returns have been examined and
closed or otherwise closed by operation of law through December 31, 1993. All
federal, state, local and foreign tax returns required to be filed by it or on
its behalf have been timely filed or requests for extensions have been timely
filed and any such extension shall have been granted and not have expired, and,
to the knowledge of management, all such filed returns are complete and accurate
in all material respects. All taxes shown on such returns, and all taxes
required to be shown on returns for which extensions have been granted, have
been paid in full or adequate provision has been made for any such taxes on its
balance sheet (in accordance with generally accepted accounting principles)
other than those taxes which are being contested in appropriate forums in
proceedings which are being diligently pursued. Adequate provision has been
made on its balance sheet (in accordance with generally accepted accounting
principles consistently applied) for all federal, state, local and foreign tax
liabilities for periods subsequent to those for which returns have been filed.
There is no audit examination, deficiency, or refund litigation pending or, to
the knowledge of Bank, threatened, with respect to any taxes that could result
in a determination that would have a Material Adverse Effect on it. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to it have been paid in full or
adequate provision has been made for any such taxes on its balance sheet (in
accordance with generally accepted accounting principles). It has not executed
an extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.
(i) Litigation and Liabilities. Except as set forth in Annex 3.1(i),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise, including, without limitation, those relating to environmental and
occupational safety and health
10
matters, or any other facts or circumstances of which its management is aware
that could reasonably be expected to result in any claims against or obligations
or liabilities of it, that, alone or in the aggregate, are reasonably likely to
have a Material Adverse Effect on it or to hinder or delay, in any material
respect, consummation of the transactions contemplated by this Agreement.
(j) Absence of Regulatory Actions. It is not a party to any cease and
desist order, written agreement or memorandum of understanding with, or a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of, federal or state
governmental authorities, including, without limitation, the Bank Regulatory
Agencies, charged with the supervision or regulation of financial or depository
institutions or engaged in the insurance of bank deposits nor has it been
advised by any Bank Regulatory Agency that such body is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolution or similar
undertaking.
(k) Agreements.
i. Except for the Stock Option Agreement and as set forth in
Annex 3.1(k) attached hereto, as of the date of this Agreement it is not a party
to, or bound by, any oral or written:
(A) "material contract" as such term is defined in Item
601(b)(10) of Regulation S-K promulgated by the Securities and Exchange
Commission (the "SEC");
(B) consulting agreement not terminable on thirty (30)
days' or less notice involving the payment of more than $10,000 per annum, in
the case of any such agreement;
(C) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this
Agreement;
(D) agreement with respect to any officer providing any
term of employment or compensation guarantee extending for a period longer than
one year or for a payment in excess of $50,000;
(E) agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
11
(F) agreement containing covenants that limit its ability
to compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, it may carry on
its business (other than as may be required by law or any regulatory agency);
(G) agreement, contract or understanding, other than this
Agreement, regarding the capital stock of Bank or committing to dispose of some
or all of the capital stock or substantially all of the assets of Bank; or
(H) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
ii. It is not in default under or in violation of any provision
of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject, other than such defaults or
violations as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on it.
(l) Labor Matters. It is not the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike, other labor dispute or organizational effort involving
it pending or threatened.
(m) Employee Benefit Plans. Annex 3.1(m) contains a complete list of
all pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other employee incentive and welfare
contracts and plans, and all trust agreements related thereto, that it maintains
or to which it contributes for any of its present or former directors, officers,
or other employees (hereinafter referred to collectively as the "Employee
Plans").
i. All of the Employee Plans comply in all material respects
with all applicable requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), the Code and other applicable laws; it has not
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Employee Plan which is likely to
result in any material penalties, taxes or other events under Section 502(i) of
ERISA or Section 4975 of the Code which would have a Material Adverse Effect on
it.
ii. No liability to the Pension Benefit Guaranty Corporation
has been or is expected by it to be incurred with respect to any Employee Plan
which is subject to Title IV of ERISA ("Pension Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a)(15) of ERISA) currently or
formerly maintained by it or any entity which is considered one employer with
Bank under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate").
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iii. No Pension Plan or single-employer plan of an ERISA
Affiliate had an "accumulated funding deficiency" (as defined in Section 302 of
ERISA (whether or not waived)) as of the last date of the end of the most recent
plan year ending prior to the date hereof; all contributions to any Pension Plan
or single-employer plan of an ERISA Affiliate that were required by Section 302
of ERISA and were due prior to the date hereof have been made on or before the
respective dates on which such contributions were due; the fair market value of
the assets of each Pension Plan or single-employer plan of an ERISA Affiliate
exceeds the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such Pension Plan or single-employer plan of an
ERISA Affiliate as of the end of the most recent plan year with respect to the
respective Pension Plan or single-employer plan of an ERISA Affiliate ending
prior to the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such Pension Plan or single-
employer plan of an ERISA Affiliate as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the reporting
requirement has not been waived has been required to be filed for any Pension
Plan or single-employer plan of an ERISA Affiliate within the 12-month period
ending on the date hereof.
iv. Neither has it provided, nor is it required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
v. Neither it nor any ERISA Affiliate has contributed to any
"multi-employer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980.
vi. Each Employee Plan of it which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service ("IRS")
covering the requirements of the Tax Equity and Fiscal Responsibility Act of
1982, the Retirement Equity Act of 1984 and the Deficit Reduction Act of 1984
and the Tax Reform Act of 1986; it is not aware of any circumstances likely to
result in revocation of any such favorable determination letter; each such
Employee Plan has been amended to reflect the requirements of subsequent
legislation applicable to such plans; and each Qualified Plan has complied at
all relevant times in all material respects with all applicable requirements of
Section 401(a) of the Code.
vii. Each Qualified Plan which is an "employee stock ownership
plan" (as defined in Section 4975(e)(7) of the Code) has at all relevant times
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the Code and the regulations thereunder.
viii. Neither it nor any ERISA Affiliate has committed any act or
omission or engaged in any transaction that has caused it to incur, or created a
material risk that it may incur, liability for any excise tax under Sections
4971 through 4980B, 4980D or 4980E of the Code, other than excise taxes which
heretofore have been paid and fully reflected in its financial statements.
13
ix. There is no pending or threatened litigation, administrative
action or proceeding relating to any Employee Plan other than routine claims for
benefits.
x. Except as disclosed in Annex 3.1(m), there has been no
announcement or legally binding commitment by it to create an additional
Employee Plan, or to amend an Employee Plan except for amendments required by
applicable law which do not materially increase the cost of such Employee Plan,
and it does not have any obligations for retiree health and life benefits under
any Employee Plan that cannot be terminated without incurring any liability
thereunder except as required to be maintained by the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA").
xi. Except as disclosed in Annex 3.1(m), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any payment or series of payments by Bank to any
person which is an "excess parachute payment" (as defined in Section 280G of the
Code) under any Employee Plan, increase any benefits payable under any Employee
Plan, or accelerate the time of payment or vesting of any such benefit.
xii. Except as disclosed in Annex 3.1(m), all required annual
reports have been filed timely with respect to each Employee Plan, and it has
made available to SBI a true and correct copy of (A) reports on the applicable
form of the Form 5500 series filed with the IRS for plan years beginning after
1987, (B) such Employee Plan, including amendments thereto, (C) each trust
agreement and insurance contract relating to such Employee Plan, including
amendments thereto, (D) the most recent summary plan description for such
Employee Plan, including amendments thereto, if the Employee Plan is subject to
Title I of ERISA, and (E) the most recent actuarial report or valuation if such
Employee Plan is a Pension Plan and (F) the most recent determination letter
issued by the IRS if such Employee Plan is a Qualified Plan.
(n) Title to Assets. It has good and marketable title to its properties
and assets (other than property as to which it is lessee), except for (i) such
items shown in the Bank consolidated financial statements or notes thereto; (ii)
liens on real property for current real estate taxes not yet delinquent or (iii)
such defects in title which would not, individually or in the aggregate, have a
Material Adverse Effect on it. With respect to any property leased by it, there
are no defaults by it, or any of the other parties thereto, or any events which,
with the giving of notice or lapse of time or both, would become defaults by it
or any of the other parties thereto, under any of such leases, except for such
defaults or events which would not, individually or in the aggregate, have a
Material Adverse Effect on it; and all such leases are in full force and effect
and are enforceable against it, as the case may be, and there is no circumstance
existing as of the date of this Agreement which causes or would cause such
leases to be unenforceable against any of the other parties thereto except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally as well as principles
of equity to the extent enforcement by a court of equity is required.
14
(o) Compliance with Laws. It has all permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted and the absence of which could,
individually or in the aggregate, have a Material Adverse Effect on it; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them is
threatened.
(p) Fees. Except as set forth in Annex 3.1(p) attached hereto,
neither it nor any of its respective officers, directors, employees or agents,
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 it in connection with the Agreement
or the transactions contemplated hereby.
(q) Environmental Matters.
i. Except as disclosed in Annex 3.1(q):
(A) It, its Participation Facilities and its Loan
Properties (each as defined at subparagraph (ii) below) are, and have been, in
material compliance with all Environmental Laws (as defined below), except where
non-compliance would, either individually or in the aggregate, not have a
Material Adverse Effect on Bank or any of its subsidiaries taken as a whole.
There are no Participation Facilities or other real estate owned ("OREO")
located in the States of California, Connecticut, Rhode Island, Vermont,
Massachusetts, New Hampshire, or Maine.
(B) It, its Participation Facilities and its Loan
Properties hold all permits, licenses, registrations and other authorizations
(the "Environmental Permits") necessary under the Environmental Laws, and all
such Environmental Permits are currently in effect. The Environmental Permits
for properties owned or leased by it and for its Participation Facilities are
listed in Annex 3.1(q)(B), and any thereof that will expire or terminate as a
result of the transactions contemplated by this Agreement are so designated. It,
its Participation Facilities and its Loan Properties are in material compliance
with all the terms and conditions of such Environmental Permits and have not
materially violated any of them. Neither it, its Participation Facilities nor
its Loan Properties have received any notice of any proposal to amend, revoke,
reissue or replace any Environmental Permit, nor have any events occurred (other
than a change in applicable law) that could form a reasonable basis for any such
action. It, its Participation Facilities, and its Loan Properties have filed
timely and complete applications for renewal of any such Environmental Permits
that are required prior to the Closing.
(C) There is no suit, claim, action, demand, penalty,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum against it or any Participation Facility (x) for alleged
15
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at or on
a site owned, leased or operated by it or any Participation Facility.
(D) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened before any court, governmental agency or board or other forum
relating to or against any Loan Property (or it in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the release
into the environment of any Hazardous Material or oil, whether or not occurring
at or on a site owned, leased or operated by any Loan Property, except as to
such matters which, either individually or in the aggregate, would not have a
Material Adverse Effect on Bank and any of its subsidiaries taken as a whole.
(E) There is no reasonable basis for any suit, claim,
action, demand, executive or administrative order, directive or proceeding of a
type described in Section 3.1(q)(i)(D) or (C).
(F) The properties currently or formerly owned or operated
(including, without limitation, in a fiduciary capacity) by it (including,
without limitation, soil, groundwater or surface water on, under or adjacent to
the properties, and buildings thereon) do not contain any Hazardous Material
other than as permitted under applicable Environmental Law (provided, however,
that with respect to properties formerly owned or operated by it, such
representation is limited to the period it owned or operated such properties).
(G) It has not received any notice, demand letter,
executive or administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law.
(H) There are no underground storage tanks on, in or under,
and during the period of its ownership and operation no underground storage
tanks have been closed or removed from, any properties or Participation Facility
which are or have been in its ownership.
(I) During the period of (l) its ownership or operation
(including without limitation in a fiduciary capacity) of any of its respective
current properties, (m) its participation in the management of any Participation
Facility, or (n) its holding of a security interest in a Loan Property, there
has been no release of Hazardous Material or oil in, on, under or affecting such
properties, except as permitted under applicable Environmental Law. Prior to the
period of (x) its ownership or operation of any of its respective current
properties, (y) its participation in the management of any Participation
Facility, or (z) its holding of a security interest in a Loan Property, there
was no release of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility or Loan Property, except as permitted under
applicable Environmental Law.
16
(J) There has not been and is not any Environmental
Condition (as hereinafter defined) at or relating to any property at which
wastes have been deposited or disposed by or at the behest or direction of it,
its Participation Facilities or its Loan Properties, nor has it, its
Participation Facilities or its Loan Properties received written notice of any
such Environmental Condition. For purposes of this Agreement the term
"Environmental Condition" means any condition or circumstance, that (i) requires
abatement or remediation under any Environmental Law currently in effect, (ii)
gives rise to any civil or criminal liability under any Environmental Law
currently in effect, or (iii) constitutes a public or private nuisance based on
the presence of Hazardous Materials, under laws applicable on the date of
Closing.
(K) There are no environmental liens on any properties
owned or leased by it or on its Loan Properties ("Properties") and no government
actions which could subject the Properties to such liens have been taken, are
pending, or threatened.
(L) No notice or restriction relating to the presence of
Hazardous Materials is required to be placed in the deed to any property subject
to this Agreement and no property subject to this Agreement has such a notice or
restriction in its deed.
(M) The only Loan Properties or Participation Facilities in
which it participates in management are those described in Annex 3.1(q) hereto.
ii. The following definitions apply for purposes of this Section
3.1(q): (a) "Loan Property" means any property in which it holds a security
interest, as to which property all representations in this Section 3.1(q) are
given to the best knowledge, without inquiry, and where required by the context,
include the owner or operator of such property, but only with respect to such
property; (b) "Participation Facility" means any facility in which it
participates in the management (including all property on which it conducts
operations of its business, or which is held as trustee or in any other
fiduciary capacity) and, where required by the context, includes the owner or
operator of such property, but only with respect to such property; (c)
"Environmental Law" means (i) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, directive, executive or administrative order,
judgment, decree, injunction, requirement or agreement with any governmental
entity, relating to (A) the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, structures, soil, surface land,
subsurface land, plant and animal life or any other natural resource), or to
human health or safety, or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as amended
and as now in effect; "Environmental Law" includes, without limitation, the
federal Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the federal Clean Air
Act, the federal Clean Water Act, the federal Resource Conservation and Recovery
Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the
federal Solid Waste Disposal Act and the federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
17
Safety and Health Act of 1970, the Federal Hazardous Materials Transportation
Act, or any so-called "Superfund" or "Superlien" law enacted by any state having
jurisdiction over any Loan Property or Participation Facility, each as amended
and as now or hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (d) "Hazardous Material"
means any substance which is detrimental to human health or safety or to the
environment, currently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyls, any of which is regulated by, or subject to
regulation under, any Environmental Law.
(r) Allowance. The allowance for loan and lease losses shown on
Bank's statement of financial condition as of December 31, 1997 was, and the
allowance for loan and lease losses shown on Bank's statement of financial
condition for periods ending after the date of this Agreement and before the
Closing Date will be, in the opinion of management of Bank, adequate, as of the
date thereof, under generally accepted accounting principles applicable to
commercial banks and all other applicable regulatory requirements for all losses
reasonably anticipated in the ordinary course of business as of the date thereof
based on information available as of such date. It has disclosed to SBI in
writing prior to the date hereof the amounts of all loans, leases, advances,
credit enhancements, other extensions of credit, commitments and interest-
bearing assets of it that it has classified internally as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets," "Concerned Loans" or words of similar
import, and it shall promptly after the end of each quarter after the date
hereof and on the Effective Date inform SBI of the amount of each such
classification. The OREO and in-substance foreclosures included in any of its
non-performing assets are carried net of reserves at the lower of cost or market
value based on current independent appraisals or current management appraisals.
(s) Anti-takeover Provisions Applicable. The provisions of Chapter 25
of the PBCL relating to protection of shareholders do not apply to Bank, this
Agreement, the Merger and the transactions contemplated hereby.
(t) Material Interests of Certain Persons. Except as noted in Annex
3.1(t), none of its respective officers or directors, or any "associate" (as
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934
(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 its business.
18
(u) Insurance. It is presently insured, and has been insured, in the
amounts, with the companies and since the periods set forth in Annex 3.1(u).
All of the insurance policies and bonds maintained by it are in full force and
effect, it is not in default thereunder and all material claims thereunder have
been filed in due and timely fashion. In the judgment of its management, such
insurance coverage is adequate.
(v) Dividends. The only dividends or other distributions which it has
made on its capital stock since January 1, 1994 are set forth in Annex 3.1(v).
(w) Books and Records. Its books and records have been, and are
being, maintained in accordance with applicable legal and accounting
requirements and reflect in all material respects the substance of events and
transactions that should be included therein.
(x) Board Action. Its board of directors (at a meeting duly called
and held) has been duly convened and by the requisite vote of all directors (a)
determined that the Merger is advisable and in the best interests of it and its
shareholders, (b) approved this Agreement and the transactions contemplated
hereby and thereby and (c) directed that the Agreement be submitted for
consideration by its shareholders at the Bank Meeting (as hereafter defined).
(y) Fairness Opinions. Its board of directors has received a written
opinion, a copy of which has been furnished to SBI, to the effect that the
consideration to be received by its shareholders pursuant to this Agreement, as
of the date of this Agreement, is fair to such holders from a financial point of
view.
(z) INTENTIONALLY OMITTED.
(aa) Fidelity Bonds. Since at least January 1, 1994, Bank has
continuously maintained fidelity bonds insuring it against acts of dishonesty by
its employees in such amounts as is customary for a bank of its size. Since
January 1, 1994, the aggregate amount of all potential claims under such bonds
has not exceeded $10,000 and Bank is not aware of any facts which would
reasonably form the basis of a claim under such bonds. It has no reason to
believe that its fidelity coverage will not be renewed by its carrier on
substantially the same terms as its existing coverage.
(bb) Condition of Tangible Assets. Except as set forth in Annex
3.1(bb), in all material respects: (i) all buildings, structures and
improvements on the real property owned or leased by it are in good condition,
ordinary wear and tear excepted, and are free from structural defects, and (ii)
the equipment, including heating, air conditioning and ventilation equipment
owned by it, is in good operating condition, ordinary wear and tear excepted.
The operation and use of the property in the business conform in all material
respects to all applicable laws, ordinances, regulations, permits, licenses and
certificates.
(cc) Loans by Bank. Since January 1, 1993, and except as shown on
Annex 3.1(cc), in the aggregate, the loans by Bank have been lawfully made,
constitute valid debts of the
19
obligors, have been incurred in the ordinary course of business, are subject to
the terms of payment as shall have been agreed upon between Bank and each
customer and Bank does not know of any applicable setoff or counterclaim which
in the aggregate would have a Material Adverse Effect on it. A list of all loans
thirty (30) days past due, as of March 25, 1998, together with a list of all
loans thirty (30) days past due on the last day of each of the preceding eleven
(11) months is attached hereto at Annex 3.1(cc). No part of the amount
collectible under any loan is contingent upon performance by Bank of any
obligation and no agreement for participation, in which Bank has relinquished or
agreed to share control with a participation in management of the facility, or
agreement providing for deductions or discounts have been made with respect to
any part of such debts, except as expressly disclosed in Annex 3.1(cc). Except
as disclosed in Annex 3.1(cc), Bank does not know of any pending, threatened or
expected actions in connection with any material loans or commitments presently
or previously made by Bank relating to claims based on theories of "lenders'
liability" or any other basis.
(dd) Regulatory Compliance - Banking Department. Bank is in
compliance in all material respects with the applicable rules and regulations of
the Banking Department, except as noted in Annex 3.1(dd) and except where the
failure to comply would not have a Material Adverse Effect on Bank.
(ee) Regulatory Compliance - FDIC and Board. Except as noted on Annex
3.1(ee) hereto and except where the failure to comply would not have a Material
Adverse Effect on it, it is in compliance in all material respects with the
rules and regulations of the FDIC and Board to the extent such rules and
regulations are deemed applicable by regulatory determination.
(ff) Capital Compliance. As of December 31, 1997, Bank was in
compliance with the minimum capital requirements applicable to a Pennsylvania
chartered commercial bank, including as to leverage ratio requirements, tangible
capital requirements and risk based capital requirements.
(gg) Year 2000 Compliance. Except as provided in Annex 3.1(gg)
hereof, Bank has undertaken an assessment of its software and hardware in order
to reveal those portions thereof which will require modification or replacement
to utilize properly dates beyond December 31, 1999, and has contracted with
appropriate third parties to modify or replace existing software and hardware to
mitigate against any Material Adverse Effect upon its computer programs and
systems caused by the change in the Year 2000. Bank has contacted its vendors
and borrowers in order to assess their efforts to mitigate any adverse effects
to their computer programs and systems beyond December 31, 1999. Furthermore,
Bank has taken all actions required to be taken to be in compliance with
announced or promulgated directives by or from the Bank Regulatory Agencies and
the Federal Financial Institutions Examination Council relating to Year 2000
compliance including, but not limited to, the adoption of a formal Year 2000
plan which includes a contingency plan in the event internal or external
computer programs and systems, as the case may be, will not be in compliance
beyond December 31, 1999. The most recent regulatory examination of Bank
relating to Year 2000
20
compliance was conducted on December 4, 1997. The findings of this examination
have been separately disclosed to SBI.
(hh) Assessments Fully Paid. All payments, fees and charges assessed
by appropriate state and federal agencies against Bank, and due on or prior to
the date of this Agreement, have been paid in full. Bank's assessment category
with the Board and Banking Department is well-capitalized.
(ii) Annual Reports and Financial Statements. Bank has delivered to
SBI (i) Bank's audited report for Bank's fiscal year ended December 31, 1997,
containing balance sheets of Bank at December 31, 1997 and December 31, 1996 and
statements of earnings, changes in shareholders' equity and cash flows of Bank
for the three years ended December 31, 1997, 1996, and 1995 and such financial
statements have been certified by independent public accountants, and (ii)
Bank's Quarterly Reports for the quarters ended March 31, 1997, June 30, 1997
and September 30, 1997 containing unaudited balance sheets of Bank as at such
dates and unaudited statements of earnings and cash flows of Bank for the three,
six and nine-month periods reflected therein. Bank has also delivered to SBI
true and correct copies of its Annual Reports for the years ended December 31,
1996, 1995 and 1994, together with all Annual Reports to Shareholders for the
same periods. All such reports (collectively, the "Bank Reports") (i) comply in
all material respects with the requirements of the rules and regulations of the
Board, (ii) do not contain any untrue statement of a material fact and (iii) do
not 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. No documents to be filed by Bank with the Board
or any regulatory agency in connection with this Agreement, or the transactions
contemplated hereby will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading. All documents which Bank is responsible for filing with the
Board or any regulatory agency in connection with the Merger will comply as to
form in all material respects with the requirements of applicable law.
(jj) Proxy Statement/Prospectus, Etc. Except for information relating
to SBI and its subsidiaries and pro forma financial information reflecting the
combined operations of SBI and Bank, neither (i) the Proxy Statement/Prospectus
(as defined hereinafter at Section 4.2) or any amendment or supplement thereto,
at the time it is filed with the SEC, at the time the Registration Statement (as
defined hereinafter at Section 4.2) is declared effective, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of Bank or at the date of the
Bank Shareholders' Meeting to consider this Agreement nor (ii) any other
documents to be filed by Bank with the FDIC or any regulatory agency in
connection with this Agreement, or the transactions contemplated hereby will
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
21
SECTION 3.2 Representations and Warranties of SBI and its Material
------------------------------------------------------
Subsidiaries. SBI represents and warrants to Bank (and the word "it" in this
------------
Article III refers to SBI and each of its Material Subsidiaries, as that term is
defined at Section 3.2(d) hereof), that, except as specifically disclosed in the
Annex of disclosure schedules included herewith, to the best of its knowledge:
(a) Corporate Organization and Qualification. SBI is a corporation
duly incorporated, validly existing and duly subsisting under the laws of the
Commonwealth of Pennsylvania and is in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by SBI requires such qualification, except for such failure
to qualify or be in such good standing which, when taken together with all other
such failures, would not have a Material Adverse Effect on SBI. It has the
requisite corporate and other power and authority (including all federal, state,
local and foreign governmental authorizations) to carry on its business as now
conducted and to own its properties and assets. SBI owns, or will own at
Closing, directly or indirectly, all of the outstanding shares of capital stock
of Interim Bank. SBI has made available to Bank complete and correct copies of
the articles of incorporation and bylaws of SBI and will make available to Bank
complete and correct copies of the articles of incorporation and bylaws of
Interim Bank; such articles and bylaws of SBI are in full force and effect as of
the date hereof.
(b) Corporate Authority. Subject only to the regulatory approvals
specified in Section 5.1(b) hereof, SBI has the requisite corporate power and
authority, and legal right, and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
applicable to SBI contemplated hereby. This Agreement has been duly and validly
executed and delivered by SBI and constitutes the valid and binding obligations
of SBI enforceable against SBI, in accordance with its terms, except to the
extent enforcement is limited by bankruptcy, insolvency and other similar laws
affecting creditors' rights or the application by a court of equitable
principles.
(c) Capitalization. As of Xxxxxxxx 00, 0000, XXX Common Stock was
held of record by more than 6,000 shareholders and the authorized capital stock
of SBI consisted of 32,000,000 shares of SBI Common Stock, of which
approximately 22,554,962 shares are issued and outstanding (an additional 30,454
shares are held as treasury stock) and 5,000,000 shares of Preferred Stock, no
par value per share, of which none are outstanding. Sufficient shares of
authorized, but unissued, shares of SBI Common Stock to effect the transactions
herein contemplated will be reserved by SBI for such purpose.
(d) Bank Subsidiaries. SBI owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of Farmers First Bank, a bank and
trust company organized under the laws of the Commonwealth of Pennsylvania;
Farmers & Merchants Bank and Trust, a bank organized under the laws of the State
of Maryland; Citizens National Bank of Southern Pennsylvania, a national banking
association with headquarters in Greencastle, Pennsylvania; First National Trust
Bank, a national banking association with headquarters in Sunbury, Pennsylvania;
Williamsport National Bank, a national banking association with headquarters in
Williamsport,
22
Pennsylvania; Equity National Bank, a national banking association with
headquarters in Marlton, New Jersey; Farmers National Bank, a national banking
association with headquarters in Mullica Hill, New Jersey; and Founders' Bank, a
bank organized under the laws of the Commonwealth of Pennsylvania (collectively
the "Bank Subsidiaries"). All of the issued and outstanding capital stock of the
Bank Subsidiaries is duly and validly authorized and issued, fully paid and
nonassessable (other than as provided at 12 U.S.C.A. (S) 55 with respect to
national banks) and is owned by SBI free and clear of any liens, security
interests, encumbrances, restrictions on transfer or other rights of any third
person with respect thereto. SBI owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of Susquehanna Bank, a federal savings
bank operating in Maryland (the "Savings Bank Subsidiary"). All of the issued
and outstanding capital stock of the Savings Bank Subsidiary is duly and validly
authorized and issued, free and clear of any liens, security interests,
encumbrances, restrictions on transfer or other rights of any third person with
respect thereto other than rights of account holders to liquidation accounts
maintained by the Savings Bank Subsidiary in accordance with the rules of the
Office of Thrift Supervision ("OTS"). The Bank Subsidiaries and the Savings Bank
Subsidiary are the "Material Subsidiaries." There are no options, calls,
warrants, conversion privileges or other agreements obligating any Material
Subsidiary at present or upon the occurrence of any event to issue or sell any
shares of its capital stock. Each of Farmers First Bank, Founders' Bank and
Farmers & Merchants Bank and Trust is a bank and trust company duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania or the State of Maryland and is duly authorized to engage in the
banking and trust business as an insured bank under the Federal Deposit
Insurance Act, as amended. Each of Citizens National Bank of Southern
Pennsylvania, First National Trust Bank, Williamsport National Bank, Equity
National Bank and Farmers National Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States and is duly authorized to engage in the banking and trust business as an
insured bank under the Federal Deposit Insurance Act, as amended. Susquehanna
Bank is a federal savings and loan association, duly organized, validly existing
and in good standing under the laws of the United States and is duly authorized
to engage in the savings and loan business under the Federal Deposit Insurance
Act, as amended. Each Material Subsidiary has corporate power and legal
authority and governmental authorizations which are material to its respective
operations and to transact the respective businesses in which it is presently
engaged.
(e) No Violations. The execution, delivery and performance of this
Agreement by SBI and Interim Bank does not, and the consummation of the
transactions contemplated hereby by SBI and Interim Bank will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument to which SBI or Interim Bank (or any of SBI's respective
properties or assets) is subject, which breach, violation or default would have
a Material Adverse Effect on SBI on a consolidated basis, or enable any person
to enjoin the Merger, (ii) a breach or violation of, or a default under, SBI's
or Interim Bank's articles of incorporation or bylaws or (iii) a breach or
violation of, or a default under (or an event which with due notice or lapse of
time or both would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any
23
of SBI's properties or assets under, any of the terms, conditions or provisions
of any note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which it is a party, or to which any of SBI's
properties or assets may be bound or affected, except for any of the foregoing
that, individually or in the aggregate, would not have a Material Adverse Effect
on SBI, on a consolidated basis; and the consummation of the transactions
contemplated hereby will not require any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument, other than (i) the required approvals,
consents and waivers of governmental authorities referred to in Section 5.1(b),
(ii) any such approval, consent or waiver that already has been obtained and
(iii) any other approvals, consents or waivers the absence of which,
individually or in the aggregate, would not result in a Material Adverse Effect
on SBI, on a consolidated basis, or enable any person to enjoin the Merger.
(f) Required Consents. SBI has no reason to believe that it will be
unable to obtain consents and approvals, including without limitation all such
consents and approvals of Regulatory Agencies (as hereinafter defined),
necessary to consummate the transactions contemplated by this Agreement by
September 30, 1998 or that any such consents or approvals would contain any
condition or requirement that would result in a Material Adverse Effect on SBI.
(g) Board Action. SBI's board of directors (at a meeting duly called
and held) has been duly convened and by the requisite vote of all directors (a)
determined that the Merger is advisable and in the best interests of it and its
shareholders, and (b) approved this Agreement and the transactions contemplated
hereby.
(h) Interim Bank.
i. Interim Bank is a Pennsylvania state chartered bank duly
organized, validly existing and duly subsisting under the laws of the
Commonwealth of Pennsylvania. All of the outstanding shares of capital stock of
Interim Bank have been validly issued, are fully paid and nonassessable and are
owned directly by SBI free and clear of any lien, charge or other encumbrance.
Interim Bank possesses no assets nor is subject to any liabilities and will not
acquire assets or incur liabilities prior to the Effective Time. Since the date
of its incorporation, Interim Bank has not engaged in any activities other than
in connection with the consummation of the Merger or as expressly contemplated
by this Agreement.
ii. Interim Bank has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Interim Bank and the consummation
of the transactions described herein have been duly and validly authorized by
all necessary corporate actions (including without limitation shareholder
action) in respect thereof on the part of Interim Bank. This Agreement is a
valid and binding obligation of Interim Bank, enforceable against Interim Bank
in accordance with its terms.
24
iii. All of the authorized capital stock of Interim Bank, which
consists solely of 100 shares of common stock, $.01 par value per share, is
presently issued and outstanding.
iv. SBI will, as the sole shareholder of Interim Bank, vote to
approve this Agreement and the Merger.
(i) SBI Reports. SBI has furnished to Bank true and complete copies
of (i) all of its annual reports on Form 10-K filed with the SEC since January
1, 1994 and its annual reports to shareholders for each of the three years ended
December 31, 1994, 1995 and 1996, respectively; (ii) all of its quarterly
reports on Form 10-Q and current reports, if any, on Form 8-K filed with the SEC
since January 1, 1996; (iii) each final registration statement, prospectus or
offering circular which SBI has used in connection with the sale of securities
since January 1, 1996; and (iv) each definitive proxy statement distributed by
SBI to its shareholders since January 1, 1996.
All such reports (i) comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, (ii) do not contain any untrue statement of a material fact and
(iii) do not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j) SBI Benefit Plans. SBI has furnished to Bank true, correct and
complete copies of all of SBI's bonus, deferred compensation, pension, profit-
sharing, retirement, medical, group life, disability income, stock purchase,
stock option, other "employee benefit plans" (as that term is used within the
meaning of Section 3(3) of ERISA) or any other fringe benefit plan, agreement,
arrangement or practice, all amendments thereto and all summary plan
descriptions thereof, or, in the alternative, SBI has provided materials
generally descriptive of the foregoing, and in such case, SBI will provide such
specific additional information as may reasonably be requested. The foregoing
are collectively referred to as the "SBI Benefit Plans."
(k) Financial Reports. SBI has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since January 1, 1994 with
(A) the Board, (B) the FDIC, (C) the OCC, (D) the SEC, (E) the OTS, (F) the
Pennsylvania Department of Banking and (G) the Maryland Banking Commission (the
regulatory agencies listed at (A) through (G) are, collectively, the "SBI
Regulatory Agencies"), and (H) any other regulatory authority, and all other
material reports and statements required to be filed by it since January 1,
1994, including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States or any
regulatory agency and has paid all fees and assessments due and payable in
connection therewith, and no such report, registration or statement contains any
material misstatement or omission or is otherwise in material noncompliance with
any law, regulation or requirement.
(l) SBI's Balance Sheets. SBI's balance sheets as of December 31,
1997 previously provided to Bank and each balance sheet provided after the date
hereof to Bank
25
(including in each case any related notes and schedules) fairly presents or will
fairly present SBI's financial position as of its date and each of the
statements of income and shareholders' equity and of cash flows provided
therewith (including in each case any related notes and schedules), fairly
presents or will fairly present the results of operations, shareholders' equity
and cash flows, as the case may be, of it for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved.
(m) Absence of Certain Changes or Events. Since December 31, 1997,
SBI has not incurred any material liability, except in the ordinary course of
its business consistent with past practice, nor has there been any change in the
financial condition, properties, assets, business, results of operation or
prospects of it which, individually or in the aggregate, has had, or might
reasonably be expected to result in, a Material Adverse Effect on it.
(n) Fees. Neither SBI nor any of its officers, directors, employees
or agents, 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 it in connection with the
Agreement or the transactions contemplated hereby.
(o) Registration Statement, Etc. Except for information relating to
Bank, neither (i) the Registration Statement, the Proxy Statement/Prospectus or
any amendment or supplement thereto, or any other registration statement filed
with the SEC during the term of this Agreement, at the time it is filed with the
SEC, at the time it is declared effective, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of Bank or at the date of the
Bank Shareholders' Meeting to consider the approval of this Agreement nor (ii)
any other documents to be filed by SBI with the SEC or any regulatory agency in
connection with this Agreement or the transactions contemplated thereby will
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. All
documents which SBI is responsible for filing with the SEC or any regulatory
agency in connection with the Merger will comply as to form in all material
respects with the requirements of applicable law.
(p) Compliance with Laws. It has the permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental
authorities, including regulatory agencies that are required in order to permit
it to carry on its business as it is presently conducted and the absence of
which would, individually or in the aggregate, have a Material Adverse Effect on
SBI, on a consolidated basis; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and no suspension
or cancellation of any of them is threatened.
(q) Absence of Regulatory Actions. It is not a party to any cease and
desist order, written agreement or memorandum of understanding with, or a party
to any commitment letter or
26
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of, federal or state governmental authorities,
including, without limitation, the SBI Regulatory Agencies, charged with the
supervision or regulation of banks or bank holding companies or savings and loan
holding companies or engaged in the insurance of bank and/or savings and loan
deposits nor has it been advised by any SBI Regulatory Agency that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written agreement, memorandum
of understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(r) Litigation and Liabilities. Except as set forth in Annex 3.2(r),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise, including, without limitation, those relating to environmental and
occupational safety and health matters, or any other facts or circumstances of
which its management is aware that could reasonably be expected to result in any
claims against or obligations or liabilities of it, that, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect on SBI, on a
consolidated basis, or to hinder or delay, in any material respect, consummation
of the transactions contemplated by this Agreement.
(s) Environmental Matters. SBI is unaware of any activity or
conditions on or in any property owned, occupied, leased, or held as security by
SBI or a Material Subsidiary which would subject SBI or any Material Subsidiary
to damages, penalties, injunctive relief or cleanup costs under any
Environmental Law that individually or in the aggregate would have a Material
Adverse Effect on SBI, on a consolidated basis.
(t) Taxes. SBI's federal income tax returns have been examined and
closed or otherwise closed by operation of law through December 31, 1993. All
federal, state, local and foreign tax returns required to be filed by it or on
its behalf have been timely filed or requests for extensions have been timely
filed and any such extensions shall have been granted and not have expired, and,
to the knowledge of management, all such filed returns are complete and accurate
in all material respects. All taxes shown on such returns, and all taxes
required to be shown on returns for which extensions have been granted, have
been paid in full or adequate provision has been made for any such taxes on its
balance sheet (in accordance with generally accepted accounting principles)
other than those taxes which are being contested in appropriate forums in
proceedings which are being diligently pursued. Adequate provision has been
made on its balance sheet (in accordance with generally accepted accounting
principles consistently applied) for all federal, state, local and foreign tax
liabilities for periods subsequent to those for which returns have been filed.
There is no audit examination, deficiency, or refund litigation pending or, to
its knowledge, threatened with respect to any taxes that could result in a
determination that would have a Material Adverse Effect on SBI and its
subsidiaries, taken as a whole. All taxes, interest, additions and penalties
due with respect to completed and settled examinations or concluded litigation
relating to it have been paid
27
in full or adequate provision has been made for any such taxes on its balance
sheet (in accordance with generally accepted accounting principles). It has not
executed an extension or waiver of any statute of limitations or the assessment
or collection of any tax due that is currently in effect, except as disclosed on
Annex 3.2(t).
(u) Agreements. It is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement to which it is a party or by which it is bound or to
which any of its respective properties or assets is subject, other than such
defaults or violations as could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on SBI.
(v) Regulatory Compliance--State and Federal Regulators. SBI and its
state-chartered bank subsidiaries are in compliance in all material respects
with the applicable rules and regulations of the Banking Department, in the case
of Farmers First Bank and Founders' Bank, and the Maryland Banking Commission,
in the case of Farmers & Merchants Bank and Trust, the Material Subsidiaries
which are national banks are in compliance in all material respects with
applicable rules and regulations of the Office of the Comptroller of the
Currency and the Material Subsidiaries which are federally chartered thrifts are
in compliance in all material respects with applicable rules and regulations of
the OTS, except where the failure to comply would not have a Material Adverse
Effect on SBI and its subsidiaries, taken as a whole.
(w) Capital Compliance. As of Xxxxxxxx 00, 0000, XXX and its Material
Subsidiaries were in compliance with the minimum capital requirements applicable
to them under state and federal laws, including as to leverage ratio
requirements, tangible capital requirements and risk-based capital requirements.
(x) Assessments Fully Paid. All payments, fees and charges assessed
by appropriate state and federal agencies against SBI and its Material
Subsidiaries, and due on or prior to the date of this Agreement, have been paid
in full.
(y) Regulatory Compliance--FDIC and Board. Except where the failure
to comply would not have a Material Adverse Effect on SBI and its subsidiaries,
taken as a whole, and except as discussed herein SBI and its Material
Subsidiaries are in compliance in all material respects with the rules and
regulations of the FDIC and Board to the extent such rules and regulations are
deemed applicable by regulatory determination.
(z) Year 2000 Compliance. Except as provided in Annex 3.2(z) hereof,
SBI and its Material Subsidiaries are in material compliance with all
requirements announced or promulgated by the Bank Regulatory Agencies and the
Federal Financial Institutions Examination Council relating to Year 2000
compliance.
28
ARTICLE IV
COVENANTS
SECTION 4.1 Acquisition Proposals. Bank agrees that it and its
---------------------
officers and directors shall not, and that it shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to a merger, consolidation or similar
transaction involving, or any purchase, sale or other disposition of all or any
significant portion of the assets or any equity securities of, Bank (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or, except to the extent legally required for the discharge by its board of
directors of its fiduciary duties as determined upon consultation with counsel,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. Bank agrees that it will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. Bank agrees
that it will take the necessary steps to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations undertaken
by each of them in this Section 4.1. Bank agrees that it will notify SBI
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations, or discussions are
sought to be initiated or continued with, it.
SECTION 4.2 Securities Registration and Disclosure. Bank shall
--------------------------------------
cooperate with SBI in the preparation, in accordance with the requirements of
the proxy rules under the Exchange Act and the rules and regulations of the
Board, of the Proxy Statement/Prospectus and the filing thereof as part of the
Registration Statement. Following the date hereof, SBI will prepare and file
with the SEC under the Securities Act a registration statement for the
registration of the shares of SBI Common Stock to be issued pursuant hereto (the
"Registration Statement"). Each party shall be responsible for providing all
information concerning itself and its subsidiaries required to be included
therein. SBI shall take any action required to be taken under any applicable
state securities or "blue sky" laws in connection with the issuance of shares of
SBI Common Stock pursuant to this Agreement and Bank shall furnish SBI all
information concerning Bank and its shareholders as SBI may reasonably request
in connection with any such action.
SBI shall use reasonable efforts to provide ten (10) business days
prior to its filing with the SEC, a copy of the Registration Statement to Bank
and its counsel for review. Each party will promptly provide the other with
copies of all correspondence, comment letters, notices or other communications
to or from the SEC or the Board relating to the Registration Statement, the
Proxy Statement/Prospectus or any amendment or supplement thereto, and SBI will
advise Bank promptly after it receives notice thereof, of the effectiveness of
the Registration Statement, of the issuance of any stop order with respect to
the effectiveness thereof, of the suspension of the qualification of the
29
SBI Common Stock issuable in connection herewith for offering or sale in any
jurisdiction, or the initiation or threat of any proceeding for any such
purpose.
Bank will take appropriate action to call the Bank Shareholders'
Meeting, to be held not more than forty-five (45) days following the effective
date of the Registration Statement, to consider approval of this Agreement and,
except to the extent it would result in a reasonable likelihood that the Bank's
board of directors would breach its fiduciary duties under the PBCL and Banking
Code and subject to receipt of an updated fairness opinion from its financial
advisor dated on or immediately prior to the date of the Proxy Statement, will
use its best efforts to secure such approval. In connection with the Bank
Shareholders' Meeting, Bank will duly solicit, in compliance with the proxy
rules of the Board, the vote of its shareholders by mailing or delivering to
each such shareholder, as soon as practicable after the effectiveness of the
Registration Statement, the Proxy Statement/Prospectus, and as soon as
practicable thereafter, any amendments or supplements thereto as may be
necessary to assure that at the date of the Bank Shareholders' Meeting the Proxy
Statement/Prospectus shall conform to the requirements of Sections 3.1(oo) and
3.2(o) hereof.
Bank will furnish to SBI a list of all persons known to Bank who at
the date of the Bank Shareholders' Meeting may be deemed to be "affiliates" of
Bank within the meaning of Rule 145 under the Securities Act. Bank will use its
best efforts to cause each such person identified in its list to deliver at or
prior to the Closing a written agreement providing that such person will not
sell, pledge, transfer or otherwise dispose of the shares of SBI Common Stock to
be received by such person hereunder except (i) in compliance with the
applicable provisions of the Securities Act and the rules and regulations
thereunder and (ii) after such time as financial results covering at least
thirty (30) days of post-merger combined operations have been published within
the meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies.
SECTION 4.3 Employees.
---------
(a) SBI and any of its affiliates shall have the right (but not the
obligation) to employ, as officers and employees of SBI, the Surviving Bank,
Bank or other affiliates of SBI immediately following the Effective Time, any
persons who are officers and employees of Bank immediately before the Effective
Time. It shall be a condition to employment by SBI or any of its affiliates
that any former officer or employee of Bank agrees to cancel any existing
employment contract, agreement or understanding between him or herself and Bank,
including without limitation all benefits related to severance arrangements upon
a change of control or otherwise, prior to accepting such new employment and
without accepting any of the severance benefits or other benefits or payments
associated with such contract, agreement or understanding.
Notwithstanding the foregoing, SBI shall assume the Executive
Employment Agreement of Xxxxxxx X. Xxxx dated November 6, 1997; the Executive
Employment Agreement of Xxxx X. Xxxxxxx, Xx., dated June 18, 1997, and amended
as of the date of this Agreement; the Executive Employment Agreement of Xxxxxx
X. Xxxxxxx dated April 28, 1993, as amended June 18, 1997 and amended as of the
date of this Agreement; the Executive Employment Agreement of
30
Xxxxxx X. Xxxxx dated November 6, 1997, and amended as of the date of this
Agreement; the Severance Agreements of Xxxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxx,
Xxxx X. Xxxxx, Xxxxx X. Xxxxxxxxx, and Xxxxxxxx Xxxx; and the stock appreciation
rights awarded pursuant to the Bank's Stock Appreciation Rights Plan as
previously discussed with and disclosed to SBI. A copy of each of the referenced
Employment Agreements, with all amendments, the Severance Agreements and the
Stock Appreciation Rights Plan (including a schedule of Stock Appreciation
Rights through 1997) are attached hereto as Annex 4.3(a). After the date of this
Agreement, there shall be no further amendment, modification or alteration to
any of the afore described agreements or grants made under the plan without the
express written consent of SBI.
(b) Each person employed by Bank prior to the Effective Time who
remains an employee of the Surviving Bank, Bank or other SBI subsidiary
following the Effective Time (each a "Continued Employee") shall be entitled, as
an employee of SBI or an SBI subsidiary, to participate in whatever employee
benefit plans, as defined in Section 3(3) of ERISA, or whatever stock option,
bonus or incentive plans or other fringe benefit programs that may be in effect
generally for employees of SBI or SBI's subsidiaries from time to time ("SBI's
Plans"), if such Continued Employee shall be eligible or selected for
participation therein and otherwise shall not be participating in a similar plan
which continues to be maintained by the Surviving Bank or Bank for such
employee. All such participation shall be subject to such terms of such plans
as may be in effect from time to time provided, further that Continued Employees
will be eligible to participate in SBI's plans on the same basis as similarly
situated employees of SBI or SBI's subsidiaries. Such Continued Employees will
receive credit for past service with Bank for purposes of eligibility and
vesting, but not benefit accrual, under SBI's Plans.
(c) Bank shall take all timely and necessary action to cease
participation or accrual of benefits, effective as of the Effective Time, by
each person employed by Bank prior to the Effective Time in each Employee Plan
(as defined in Section 3.1(m)), including timely notice to all participants
under Section 204(h) of ERISA, if applicable, and to terminate each Employee
Plan, other than an Employee Plan containing a cash or deferred arrangement
qualified under Section 401(k) of the Code ("Employee 401(k) Plan") and other
than those specified in Annex 4.3(c), effective as of the Effective Time;
provided that SBI may, in its sole discretion, give notice to Bank not less than
twenty (20) days (sixty-one (61) days in the case of any employment contract or
other employee plan which by its terms requires thirty (30) or more days'
advance notice of termination) prior to the Effective Time, that any Employee
Plan shall not be terminated and/or participation or accrual of benefits
thereunder shall not cease pursuant to this Section 4.3(c). At the sole
discretion of SBI, any Employee 401(k) Plan shall be merged with any similar
such plan maintained and designated by SBI, effective at or after the Effective
Time, as elected by SBI, and Bank shall take any and all timely and necessary
action to effect such merger.
31
SECTION 4.4 Access and Information.
----------------------
(a) Upon reasonable notice, and subject to applicable laws relating
to the exchange of information, Bank shall afford to SBI and its representatives
(including, without limitation, directors, officers and employees of SBI and its
affiliates, and counsel, accountants and other professionals retained) such
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and work
papers of independent auditors), properties, personnel and such other
information as SBI may reasonably request (other than reports or documentation
which are not permitted to be disclosed under applicable law); provided,
however, that no investigation pursuant to this Section 4.4 shall affect or be
deemed to modify any representation or warranty made herein. SBI will not, and
will cause its representatives not to, use any information obtained pursuant to
this Section 4.4 or Section 3.1 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement and in no event will SBI
directly or indirectly use such information for any competitive or commercial
purpose. Subject to the requirements of law, SBI will keep confidential, and
will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.4 and Section 3.1 unless such
information (i) was already known to SBI or an affiliate of SBI, (ii) becomes
available to SBI or an affiliate of SBI from other sources not known by such
person to be bound by a confidentiality agreement, (iii) is disclosed with the
prior written approval of Bank (iv) is or becomes readily ascertainable from
published information or trade sources or (v) was already publicly available.
Without in any way limiting the foregoing, Bank shall provide to SBI within
forty-five (45) days of the end of each calendar quarter consolidated financial
statements (including a balance sheet and income statement) as of the end of,
and for, such period that are in conformance with generally accepted accounting
principles and the representation set forth in Section 3.1(f). In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise not be consummated, each party shall, if so requested, promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto (or an affiliate of any party hereto) to be
returned to the party which furnished the same. This Section 4.4 supersedes and
terminates any agreement between the parties relating to the confidentiality of
information which may have been exchanged (the "Confidentiality Agreement").
(b) During the period from the date of this Agreement to the Effective
Date, SBI shall provide to Bank the following documents and information:
i. As soon as reasonably available, but in no event more than
forty-five (45) days after the end of each fiscal quarter of SBI ending after
the date of this Agreement, SBI will deliver to Bank its quarterly report on
Form 10-Q as filed with the SEC.
ii. As soon as reasonably available, but in no event more than
ninety (90) days after the end of each fiscal year of SBI ending after the date
of this Agreement, SBI will deliver to Bank its annual report on Form 10-K as
filed with the SEC.
32
iii. SBI will deliver to Bank, contemporaneously with its being
filed with the SEC, a copy of each current report on Form 8-K filed by SBI after
the date of this Agreement.
iv. At least five (5) business days prior to submission, SBI
will furnish to Bank the portions which describe the transactions (including any
financial information or pro forma financial information of, or including, Bank)
contemplated herein of (A) registration statements, prospectuses or offering
circulars used by SBI in connection with the sale of securities after the date
of this Agreement, (B) proxy statements distributed by SBI to its shareholders
after the date of this Agreement, and (C) all other publicly-available reports,
statements or other documents which are either distributed to shareholders or
filed by SBI or any of its subsidiaries with the SEC. Any comments timely
received by SBI from Bank in connection with the foregoing will be reviewed and
considered in good faith, but SBI shall not be bound to comply with the
recommendations set forth in such comments. SBI also shall furnish Bank with
copies of the foregoing in the form filed with the SEC or otherwise distributed
to shareholders.
v. SBI will promptly notify Bank of any material changes to the
SBI Benefit Plans.
SECTION 4.5 Certain Filings, Consents and Arrangements. SBI shall
------------------------------------------
use all reasonable efforts to obtain all necessary approvals required to carry
out the transactions contemplated by this Agreement and to consummate the
Merger. Bank shall cooperate with SBI in connection therewith, including
without limitation furnishing all information concerning Bank as may be
reasonably requested by SBI in connection with any such action. SBI shall use
all reasonable efforts to provide, five (5) days prior to submission, Bank with
copies of all material applications, notices, petitions or other filings or
submissions prepared by SBI in connection with consummation of the Merger. Any
comments timely received by SBI from Bank in connection with the foregoing will
be reviewed and considered in good faith, but SBI shall not be bound to comply
with the recommendations set forth in such comments. SBI will consult with Bank
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and governmental authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and SBI
will keep Bank apprised of the status of matters relating to completion of the
transactions contemplated hereby. SBI shall promptly furnish Bank with copies
of applications to any governmental authority in respect of the transactions
contemplated hereby.
SECTION 4.6 Takeover Statutes. No "fair price," "moratorium," or
-----------------
other form of anti-takeover statute or regulation or any similar provision of
Bank's articles of incorporation are applicable to the transactions contemplated
by this Agreement and, if any such statute, regulation or provisions shall
become applicable to the transactions contemplated by this Agreement, Bank and
the members of its board of directors shall grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to eliminate or minimize the effects of
such statute or regulation or provision on the transactions contemplated hereby
and thereby.
33
SECTION 4.7 Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including using efforts to obtain all necessary actions or non-
actions, extensions, waivers, consents and approvals from all applicable
governmental authorities, or other entities, effecting all necessary
registrations, applications and filings and obtaining any required contractual
consents and regulatory approvals.
SECTION 4.8 Publicity. Except as required by law, Bank shall not,
---------
without the prior consent of SBI (which consent shall not be unreasonably
withheld), issue any press releases or otherwise make public filings under
securities laws, with respect to this Agreement or the transactions described
herein. Prior to issuing any press release or making any public filings under
securities laws which makes any reference to Bank, SBI shall provide a copy to
Bank for comment and in all such instances the parties shall cooperate.
SECTION 4.9 INTENTIONALLY OMITTED.
SECTION 4.10 Notification of Certain Matters. Each party shall give
-------------------------------
prompt notice to the others of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses, results of
operations or prospects of it to which it is a party or is subject; and (b) any
material adverse change in its financial condition, properties, business, or
results of operations taken as a whole or the occurrence of any event which, so
far as reasonably can be foreseen at the time of its occurrence, is reasonably
likely to result in any such change. Each party shall give prompt notice to the
other parties of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement.
SECTION 4.11 Insurance. Bank shall use its best efforts to retain no
---------
less than the level of insurance coverage presently held by it as of the date
hereof.
SECTION 4.12 Dividends. Bank shall not declare, pay or set aside any
---------
dividend or other distribution in respect of its capital stock except that it
shall have the right, after January 1, 1999, to declare and pay a dividend
corresponding in amount and timing with past practice.
SECTION 4.13 Indemnification; Insurance.
--------------------------
(a) From and after the Effective Time, SBI agrees to indemnify and
hold harmless each present and former director and officer of Bank and each
officer or employee of Bank that is serving as a director or trustee of another
entity expressly at Bank's request or direction (each, an "Indemnified Party"),
against any costs or expenses (including reasonable attorneys' fees),
34
judgments, fines, losses, claims, damages or liabilities (collectively, the
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, and
whether or not the Indemnified Party is a party thereto, arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted under the
Articles of Incorporation or the Bylaws of Bank in effect on the date hereof.
(b) SBI shall maintain the Bank's existing directors' and officers'
liability insurance policy (or a policy providing comparable coverage amounts on
terms generally no less favorable, including SBI's existing policy if it meets
the foregoing standard) covering persons who are currently covered by such
insurance for a period of two years after the Effective Time; provided, however,
that in no event shall SBI be obligated to expend, in order to maintain or
provide insurance coverage pursuant to this Section 4.13(b), any amount per
annum in excess of 150% of the amount of the annual premiums paid as of the date
hereof by the Bank for such insurance (the "Maximum Amount"). If the amount of
the annual premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, SBI shall use all reasonable efforts to maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Amount. In the event that SBI acts as
its own insurer for all of its directors and officers with respect to matters
typically covered by a directors' and officers' liability insurance policy,
SBI's obligations under this Section 4.13(b) may be satisfied by such self
insurance, so long as its senior ratings by Standard & Poor's Corporation and
Xxxxx'x Investors Services, Inc. are not lower than such ratings as of the date
hereof.
(c) In the event that SBI or any of its respective successors or
assigns (i) consolidate with or merge into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, the successors and assigns of such entity
shall assume the obligations set forth in this Section 4.13.
ARTICLE V
CONDITIONS TO CONSUMMATION
SECTION 5.1 Conditions to Closing. The respective obligations of the
---------------------
parties to effect the Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of the following conditions:
(a) The Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the shareholders of Bank in accordance
with applicable law.
(b) All of the required approvals, consents or waivers of governmental
authorities with respect to this Agreement (including the Merger) and the
transactions contemplated hereby
35
including, without limitation, the approvals, notices to, consents or waivers of
(i) the Board, and (ii) the Banking Department (together with the Bank
Regulatory Agencies and the SBI Regulatory Agencies, the "Regulatory Agencies")
shall have been obtained and shall remain in full force and effect, and all
applicable statutory waiting periods (including without limitation all
applicable statutory waiting periods relating to the Merger) shall have expired;
and the parties shall have procured all other regulatory approvals, consents or
waivers of governmental authorities that are necessary or appropriate to the
consummation of the transactions contemplated by this Agreement except those
approvals, consents or waivers, if any, for which failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on SBI or Bank
(after giving effect to the transaction contemplated hereby); provided, however,
that no approval, consent or waiver referred to in this Section 5.1(b) shall be
deemed to have been received if it shall include any condition or requirement
that reasonably would result in a Material Adverse Effect on SBI.
(c) All other requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Agreement shall have
been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger, or any other transaction contemplated
by this Agreement, and no litigation or proceeding shall be pending against any
of the parties herein or any of their subsidiaries brought by any governmental
agency seeking to prevent consummation of the transactions contemplated hereby.
(e) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger, or any other transaction contemplated by this Agreement.
(f) The Merger shall as of the date of the Closing meet the
requirements for pooling-of-interests accounting treatment under generally
accepted accounting principles and under the accounting rules of the SEC, and
SBI shall have received a letter from Coopers & Xxxxxxx L.L.P. in form and
substance reasonably satisfactory to SBI as to the matters specified in this
Section 5.1(f).
(g) The Registration Statement shall have been filed (the date of
which is referred to herein as the "Filing Date") by SBI with the SEC under the
Securities Act, and shall have been declared effective prior to the time the
Proxy Statement/Prospectus is first mailed to the shareholders of Bank, and no
stop order with respect to the effectiveness of the Registration Statement shall
have been issued; the SBI Common Stock to be issued pursuant to this Agreement
shall be duly registered or qualified under the securities or "blue sky" laws of
all states in which such action is required for purposes of the initial issuance
of such shares and the distribution thereof to the shareholders of Bank entitled
to receive such shares.
36
(h) SBI and Bank shall have received a ruling from the IRS or an
opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to SBI and Interim Bank, to the
effect that:
i. The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and Bank and SBI will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Code;
ii. No gain or loss will be recognized by Bank or SBI by reason
of the Merger;
iii. Except for cash received in lieu of fractional shares, no
gain or loss will be recognized by the shareholders of Bank who receive solely
SBI Common Stock upon the exchange of their shares of Bank Common Stock for
shares of SBI Common Stock;
iv. The basis of the SBI Common Stock to be received by the Bank
shareholders will be, in each instance, the same as the basis of the Bank Common
Stock surrendered in exchange therefor;
v. The holding period of the SBI Common Stock received by a
Bank shareholder receiving SBI Common Stock will include the period during which
the Bank Common Stock surrendered in exchange therefor was held; and
vi. Cash received by a Bank shareholder in lieu of a fractional
share interest of SBI Common Stock will be treated as having been received as a
distribution in full payment in exchange for the fractional share interest of
SBI Common Stock which he would otherwise be entitled to receive and will
qualify as capital gain or loss.
In case a ruling from the IRS is sought, Bank and SBI shall
cooperate and each shall furnish to the other and to the IRS such information
and representations as shall, in the opinion of counsel for SBI and Bank, be
necessary or advisable to obtain such ruling.
(i) All litigation pending against Bank which, individually or in the
aggregate, would have a Material Adverse Effect on Bank's consolidated
operations, shall have been settled or otherwise resolved on terms satisfactory
to SBI and Bank.
(j) INTENTIONALLY OMITTED.
SECTION 5.2 Conditions to Obligations of SBI and Interim Bank. The
-------------------------------------------------
obligations of SBI and Interim Bank to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following additional
conditions:
(a) Each of the representations and warranties of Bank contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made on such
37
date (or on the date when made in the case of any representation or warranty
which specifically relates to an earlier date); Bank shall have performed each
of its covenants and agreements, which are material to its operations and
prospects, contained in this Agreement; and SBI and Interim Bank shall have
received certificates signed by the Chief Executive Officer and the Controller
of the Bank, dated the Closing Date, to the foregoing effect.
(b) KMPG Peat Marwick LLP, or such other accounting firm as is
acceptable to the parties, shall have furnished to SBI an "agreed upon
procedures" letter, dated the Closing Date, in form and substance satisfactory
to SBI to the effect that, based upon a procedure performed with respect to the
financial condition of Bank for the period from December 31, 1997 to a specified
date not more than five (5) days prior to the date of such letter, including but
not limited to (a) their inspection of the minute books of Bank, (b) inquiries
made by them of officers and other employees of Bank and affiliates responsible
for financial and accounting matters as to transactions and events during the
period, as to consistency of accounting procedures with prior periods and as to
the existence and disclosure of any material contingent liabilities, and (c) of
other specified procedures and inquiries performed by them, nothing has come to
their attention that would indicate that (A) during the period from December 31,
1997 to a specified date not more than five (5) days prior to the date of such
letter, there was any change in the capitalization of Bank on a consolidated
basis, or (B) any material adjustments would be required to the audited
financial statements for the period ended December 31, 1997 in order for them to
be in conformity with generally accepted accounting principles applied on a
consistent basis with that of prior periods.
(c) SBI shall have received an opinion or opinions dated as of the
Closing Date, from Saul, Ewing, Xxxxxx & Xxxx LLP, counsel to Bank,
substantially in the form attached hereto as Exhibit 5.2(c).
(d) There shall not have occurred any change in the financial
condition, properties, assets, liabilities (including contingent liabilities),
business or results of operation of Bank which, individually or in the
aggregate, has had or might reasonably be expected to result in a Material
Adverse Effect on Bank other than such changes resulting from (i) changes in
banking laws or regulations, or (ii) changes in generally accepted accounting
principles, or interpretations thereof, that affect the banking or thrift
industries.
(e) SBI shall have received from each of the persons identified by
Bank pursuant to Section 4.2 hereof an executed counterpart of an affiliate's
agreement in the form contemplated by such Section.
(f) Except as otherwise provided in this Agreement, prior to Closing
all issued and outstanding options, warrants or rights to acquire Bank Common
Stock or any capital stock of Bank shall have been exercised or cancelled. No
compensation or other rights will be payable or exchangeable in the Merger in
respect of any such rights which remain unexercised at the Effective Time.
38
(g) Concomitant with the signing of this Agreement, each of the
directors of Bank and National Penn shall have executed in favor of, and
delivered to, SBI a Voting Agreement, substantially in the form attached hereto
as Exhibit 5.2(g). Furthermore, concomitant with the signing of this Agreement,
the parties to the Warrant Substitution Agreement shall have executed such
agreement substantially in the form attached hereto as Exhibit 1.6
SECTION 5.3 Conditions to the Obligations of Bank. The obligations
-------------------------------------
of Bank to effect the Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of the following additional conditions:
(a) Each of the representations, warranties and covenants of SBI
contained in this Agreement shall be true and correct in all material respects
on the Closing Date as if made on such date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date); SBI shall have performed each of its covenants and agreements, which are
material to its operations and prospects, contained in this Agreement; and Bank
shall have received certificates signed by the President or Vice President and
Secretary of SBI, dated the Closing Date, to the foregoing effect.
(b) Bank shall have received an opinion dated as of the Closing Date,
from Xxxxxx, Xxxxx & Bockius LLP, Harrisburg, Pennsylvania, counsel to SBI and
Interim Bank, substantially in the form attached hereto as Exhibit 5.3(b).
(c) There shall not have occurred any change in the financial
condition, properties, assets, liabilities (including contingent liabilities),
business or results of operation of SBI which, individually or in the aggregate,
has had or might reasonably be expected to result in a Material Adverse Effect
on SBI other than such changes resulting from (i) change in banking laws or
regulations or (ii) changes in generally accepted accounting principles, or
interpretations thereof, that affect the banking or thrift industries.
(d) Bank shall have received an updated opinion from Xxxxxxxxx
Associates, Inc. of Rockville, Maryland, dated as of a date no later than the
date of the Proxy Statement/Prospectus mailed to the Bank shareholders in
connection with the Merger and not subsequently withdrawn, to the effect that
the Merger Consideration is fair to Bank's shareholders from a financial point
of view.
(e) The shares of SBI Common Stock to be issued in the Merger shall
have been authorized to be listed for quotation on the NASDAQ National Market
System.
(f) No transaction or event involving SBI or any subsidiary of SBI
shall have occurred or be pending which would result in a change in the nature
of the securities as the same are described in SBI Articles of Incorporation as
in effect on the date of this Agreement or in the issuer of the securities to be
issued in the Merger to holders of Bank Common Stock or which would result in
SBI's ceasing to own any Material Subsidiary.
39
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated, and the
-----------
Merger abandoned, prior to the Effective Date, either before or after its
approval by the shareholders of Bank:
(a) by the mutual, written consent of Bank and SBI if the board of
directors of each so determines by a vote of a majority of the members of the
entire board;
(b) by Bank if (i) by written notice to SBI that there has been a
material breach by SBI of any representation, warranty, covenant or agreement
contained herein and such breach is not cured or not curable within thirty (30)
days after written notice of such breach is given to SBI by Bank, (ii) by
written notice to SBI that any condition precedent to Bank's obligations as set
forth in Article V of this Agreement has not been met or waived by Bank at such
time as such condition can no longer be satisfied, (iii) the board of directors
of Bank fails to make, withdraws or modifies or changes the favorable
recommendation described at Section 4.2, or (iv) the board of directors of Bank
recommends to the stockholders of Bank that an Acquisition Proposal is likely to
be more favorable, from a financial point of view, to the stockholders of Bank
than the Merger;
(c) by SBI by written notice to the other parties, in the event (i)
of a material breach by Bank of any representation, warranty, covenant or
agreement contained herein and such breach is not cured or not curable within
thirty (30) days after written notice of such breach is given to Bank by SBI or
(ii) any condition precedent to SBI's obligations as set forth in Article V of
this Agreement has not been met or waived by SBI at such time as such condition
can no longer be satisfied.
(d) by SBI or Bank by written notice to the other, in the event that
the Merger is not consummated by March 31, 1999, unless the failure to so
consummate by such time is due to the breach of any representation, warranty or
covenant contained in this Agreement by the party seeking to terminate;
provided, however, that such date may be extended by the written agreement of
the parties hereto.
(e) by Bank, whether before or after approval of the Merger by Bank's
shareholders, by giving written notice of such election to Susquehanna within
one (1) business day following determination of the Average Closing Price per
share of SBI Common Stock before Closing if such Average Closing Price is
greater than $42.00 per share (subject to adjustment in accordance with Section
1.2 herein) at the time such calculation is required to be made pursuant to
Schedule 1.2 hereof.
(f) by Susquehanna, whether before or after approval of the Merger by
Bank's shareholders, by giving written notice of such election to Bank within
one (1) business day following determination of the Average Closing Price per
share of SBI Common Stock before Closing if such
40
Average Closing Price is less than $32.00 per share (subject to adjustment in
accordance with Section 1.2 herein) at the time such calculation is required to
be made pursuant to Schedule 1.2 hereof.
SECTION 6.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement, as provided above, this Agreement shall thereafter become
void and have no effect, except that the provisions of Sections 3.1(p) and
3.2(n) (Fees), 4.4 (relating to confidentiality and return of documents), 4.8
(Publicity) and 6.3 and 7.7 (Expenses) of this Agreement shall survive any such
termination and abandonment.
SECTION 6.3 Expenses. Any termination of this Agreement pursuant to
--------
Section 6.1(a), 6.1(d), 6.1(e) or 6.1(f) hereof shall be without cost, expense
or liability on the part of any party to the others. Any termination of this
Agreement pursuant to clause (iii) of Section 6.1(b) shall be without cost,
expense or liability on the part of Bank to any other party, if the board of
directors of Bank failed to make, withdrew, modified or changed its favorable
recommendation described in Section 4.2 as a result of a material adverse change
in SBI's financial condition, properties, assets, liabilities (including
contingent liabilities), business or results of operations, or failed to make
such favorable recommendation due to its financial advisor's failure to update
its fairness opinion as contemplated by Section 4.2. Any termination of this
Agreement pursuant to Section 6.1(b)(i) or (ii) or 6.1(c) hereof shall also be
without cost, liability or expense on the part of any party to the others,
unless the breach of a representation or warranty or covenant is caused by the
willful conduct or gross negligence of a party, in which event said party shall
be liable to the other parties for all out-of-pocket costs and expenses,
including without limitation, reasonable legal, accounting and investment
banking fees and expenses, incurred by such other party in connection with their
entering into this Agreement and their carrying out of any and all acts
contemplated hereunder ("Expenses").
If this Agreement is terminated by the Bank, because the board of
directors of the Bank: (a) failed to make, withdrew, modified or changed its
favorable recommendation to the Bank shareholders to approve this Agreement and
the transactions contemplated thereby or (b) recommends to the Bank shareholders
that an Acquisition Proposal is more favorable, from a financial point of view,
to the Bank Shareholders than the Merger, then the Bank shall promptly, but in
no event later than two (2) business days after such termination, pay SBI a fee
of $500,000 which amount shall be payable by wire transfer of same day funds.
If Bank fails to promptly pay the amount due pursuant to this Section 6.3, and,
in order to obtain such payment, SBI commences a suit which results in a
judgment against Bank for all or a substantial portion of the fee set forth in
this Section 6.3, Bank shall pay to SBI all costs and expenses (including
reasonable attorneys' fees) incurred by SBI in connection with such suit.
41
ARTICLE VII
OTHER MATTERS
SECTION 7.1 Certain Defined Terms. As used in the Agreement, the
---------------------
following terms shall have the meanings indicated:
"Acquisition Proposal" shall be defined as at Section 4.1.
"Articles of Merger" shall be defined as at Section 1.1(c).
"Average Closing Price" means the average closing price per share of
SBI Common Stock as determined in conformity with Schedule 1.2 and as defined
therein.
"Bank" or "Surviving Bank" is First Capitol Bank, a Pennsylvania state
chartered bank, and shall be defined as at Section 1.1(a).
"Bank Common Stock" shall be defined as at Section 1.2(a).
"Bank Warrants" and "Bank Warrants Plans" shall be defined as
identified on Annex 3.1(b) and Annex 3.1(m).
"Bank Regulatory Agencies" shall be defined as at Section 3.1(f)(ii).
"Bank Reports" shall be defined as at Section 3.1(nn).
"Bank Subsidiaries" shall be defined as at Section 3.2(d).
"Banking Code" is the Pennsylvania Banking Code of 1965, as amended
and defined as at Section 1.1(a).
"Banking Department" is the Pennsylvania Department of Banking and
defined as at Section 1.1(c).
"Board" is the Board of Governors of the Federal Reserve System and
shall be defined as at Section 3.1(f)(ii).
"COBRA" is the Consolidated Omnibus Budget Reconciliation Act of 1985
and shall be defined as at Section 3.1(m)(xiii).
"Closing" shall be defined as at Section 1.1(b).
"Code" is Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended.
42
"Continued Employee" shall be defined as at Section 4.3(b).
"corporate affiliate" shall mean, with respect to a person, any other
corporation controlling, controlled by, or under common control with, such
person.
"Department of State" is the Pennsylvania Department of State and
shall be defined as at Section 1.1(c).
"Dissenters' Rights" shall be defined as at Section 1.4.
"Dissenters' Shares" shall be defined as at Section 1.2(a).
"Dissenting Shareholder" shall be defined as at Section 1.2(a).
"ERISA" is the Employee Retirement Income Security Act and defined as
at Section 3.1(m)(i).
"ERISA Affiliate" shall be defined as at Section 3.1(m)(ii).
"Effective Date" is the day in which the Effective Time for the Merger
occurs and shall be defined as at Section 1.1(c).
"Effective Time" is at 12:01 a.m. on the business day of the Closing
and defined as at Section 1.1(c).
"Employee 401(k) Plan" shall be defined as at Section 4.3(c).
"Environmental Condition" shall be defined as at Section 3(q)(J).
"Environmental Laws" shall be defined as at Section 3.1(q)(M)(ii).
"Environmental Permits" shall be defined as at Section 3(q)(B) and
identified on Annex 3.1(q)B.
"Exchange Act" is the Securities Exchange Act of 1934 and defined as
at Section 3.1(t).
"Exchange Ratio" shall be described on Schedule 1.2 hereof.
"FDIC" is the Federal Deposit Insurance Corporation and shall be
defined as at Section 3.1(f)(ii).
"Filing Date" shall be defined as at Section 5.1(g).
43
"Hazardous Material" shall be defined as at Section 3(q)(M)(ii).
"IRS" is the Internal Revenue Service and shall be defined as at
Section 3.1(m)(vii).
"Interim Bank" shall be Susquehanna Interim Bank, a Pennsylvania state
chartered bank.
"Loan Properties" shall be defined as at Section 3.1(q)(ii) and
identified on Annex 3.1(q).
"material" means material to the party in question (as the case may
be) and its respective subsidiaries, taken as a whole.
"Material Adverse Effect," with respect to a person, means any
condition, event, change or occurrence that has or results in a material adverse
effect upon (A) the financial condition, properties, assets, liabilities
(including contingent liabilities), business or results of operations of such
person and its subsidiaries and corporate affiliates, taken as a whole, or (B)
the ability of such person to perform its obligations under, and to consummate
the transactions contemplated by, this Agreement. In the case of Bank, receipt
of a CAMELS rating in connection with a safety and soundness examination which
is lower than the rating given to Bank in connection with the safety and
soundness examination most recently reported prior to the date of this Agreement
shall be deemed to have a "Material Adverse Effect" on Bank.
"Material Subsidiaries" shall be defined as at Section 3.2(d).
"Merger" shall be the acquisition by Susquehanna Bancshares, Inc. of
First Capitol Bank by means of a merger of Susquehanna Interim Bank with and
into First Capitol Bank.
"Merger Consideration" shall be determined on the basis of the
Exchange Ratio set forth at Schedule 1.2 hereof, and shall be defined as at
Section 1.2(a).
"OCC" is the Office of the Comptroller of the Currency and defined as
at Section 3.2(k).
"OREO" is other real estate owned and shall be defined as at Section
3.1(q)(A).
"OTS" is the Office of Thrift Supervision and shall be defined as at
Section 3.2(d).
"Old Certificates" shall be defined as at Section 1.3(a).
"PBCL" is the Pennsylvania Business Corporation Law of 1988, as
amended.
44
"Participation Facilities" shall be defined as at Section 3.1(q)(ii)
and identified on Annex 3.1(q).
"Pension Plan" is an employee benefit plan subject to Title IV of
ERISA and shall be defined as at Section 3.1(m)(ii).
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"Plan" or "Agreement" shall be this Agreement and Plan of Affiliation
dated as of the 15th day of April, 1998 by and among Susquehanna Bancshares,
Inc., Susquehanna Interim Bank and First Capitol Bank.
"Properties" shall be defined as at Section 3.1(q)(i)(K).
"Qualified Plan" shall be defined as at Section 3.1(m)(vi).
"Registration Statement" shall be defined as at Section 4.2.
"Regulatory Agencies" shall be defined as at Section 5.1(b).
"SBI" shall be Susquehanna Bancshares, Inc., a Pennsylvania
corporation and a multi-state, multi-institutional bank holding company.
"SBI Benefit Plans" shall be defined as at Section 3.2(j).
"SBI Common Stock" shall be defined as at Section 1.2(a).
"SBI Plans" shall be defined as at Section 4.3(b).
"SBI Regulatory Agencies" shall be defined as at Section 3.2(k).
"SEC" is the Securities and Exchange Commission and shall be defined
as at Section 3.1(i)(A).
"Savings Bank Subsidiary" shall be defined as at Section 3.2(d).
"Securities Act" is the Securities Act of 1933, as amended, and shall
be defined as at Section 1.3(e).
"subsidiary" with respect to a person, means any other person
controlled by such person.
45
"Unclaimed Shares" shall be defined as at Section 1.3(e).
When a reference is made in this Agreement to Exhibits, Sections, Annexes or
Schedules, such reference shall be to a Section of, or Exhibit, Annex or
Schedule to, this Agreement unless otherwise indicated. The table of contents,
tie sheet and headings contained in this Agreement are for ease of reference
only and shall not affect the meaning or interpretation of this Agreement.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed followed by the words "without limitation." Any
singular term in this Agreement shall be deemed to include the plural and any
plural term the singular.
SECTION 7.2 Survival. The representations, warranties and agreements
--------
of the parties set forth in this Agreement shall not survive the Effective Time,
and shall be terminated and extinguished at the Effective Time, and from and
after the Effective Time none of the parties hereto shall have any liability to
the other on account of any breach or failure of any of those representations,
warranties and agreement; provided, however, that the foregoing clause shall not
(i) apply to agreements of the parties which by their terms are intended to be
performed either in whole or in part after the Effective Time, and (ii) shall
not relieve any person of liability for fraud, deception or intentional
misrepresentation.
SECTION 7.3 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and their respective
successors and assigns, and, other than the right to receive the consideration
payable in the Merger pursuant to Article I hereof, is not intended to and shall
not confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 7.4 Waiver and Amendment. Prior to the Effective Time, any
--------------------
provision of this Agreement may be: (i) waived by the party benefitted by the
provision; or (ii) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties hereto approved
by their respective boards of directors, except that no amendment or waiver may
be made that would change the form or the amount of the Merger Consideration or
otherwise have the effect of prejudicing the Bank shareholders' interest in the
Merger Consideration following the Bank Shareholders' Meeting.
SECTION 7.5 Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 7.6 Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania,
or, to the extent it may control, federal law, without reference to the choice
of law principles thereof.
SECTION 7.7 Expenses. Subject to the provisions of Section 6.3
--------
hereof, each party hereto will bear all expenses incurred by it in connection
with this Agreement and the transactions
46
contemplated hereby; provided, however, that all filing and other fees (other
than federal and state income taxes) required to be paid to any governmental
agency or authority in connection with the consummation of the transactions
contemplated hereby shall be paid by SBI.
SECTION 7.8 Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
If to Bank, to:
First Capitol Bank
0000 Xxxxxxxxx Xxxx
Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Xx., Chairman
With copies to:
Saul, Ewing, Xxxxxx & Xxxx LLP
Penn National Insurance Tower
0 Xxxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esquire
If to SBI, to:
Susquehanna Bancshares, Inc.
00 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, President and Chief Executive
Officer
With copies to:
Xxxxxx, Xxxxx & Bockius LLP
One Commerce Square
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. X'Xxxxx, Esquire
47
If to Interim Bank, to:
Susquehanna Interim Bank
c/o Susquehanna Bancshares, Inc.
00 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, President and Chief Executive
Officer
With copies to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
One Commerce Square
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. X'Xxxxx, Esquire
SECTION 7.9 Entire Agreement; Etc. This Agreement, together with
---------------------
such other agreements as are executed by the parties in connection herewith, on
the date hereof, represent the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and thereby and supersede any
and all other oral or written agreements heretofore made. All terms and
provisions of this Agreement, together with such other agreements as are
executed by the parties in connection herewith, on the date hereof, and thereof,
shall be binding upon and shall inure to the benefit of the parties hereto and
thereto and their respective successors and assigns. Nothing in this Agreement
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement except as expressly provided.
SECTION 7.10 Intentionally Omitted Sections. The term "Intentionally
------------------------------
Omitted" appearing after certain sections of this Agreement has been used for
convenience only, and does not in any way limit or alter the provisions hereof.
48
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
SUSQUEHANNA BANCSHARES, INC.
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Title: Xxxxxx X. Xxxxxxxx, President
SUSQUEHANNA INTERIM BANK
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Title: Xxxxxx X. Xxxxxxxx, President
FIRST CAPITOL BANK
By:/s/ Xxxx X. Xxxxxxx
----------------------------------------
Title: Xxxx X. Xxxxxxx, Xx., Chairman
49
SCHEDULE 1.2
Exchange Provisions
-------------------
So long as the Average Price Per Share of SBI Common Stock Before
Closing is at or between $32.00 and $42.00, then 1.352 shares of SBI Common
Stock shall be exchanged for each of the outstanding shares of Bank Common Stock
and the Exchange Ratio shall equal 1.352.
The Average Price Per Share of SBI Common Stock Before Closing shall
be determined by adding the price at which SBI Common Stock is reported to have
closed by NASDAQ's NMS (or if SBI Common Stock is not quoted on NASDAQ's NMS
then as reported by a recognized source as to the principal trading market on
which such shares are traded) over the period of ten business days ending on the
second business day preceding the date set for Closing, pursuant to Section 1.1
(b) hereof, and dividing such total by 10 (such Average Price Per Share Before
Closing is also referred to as the "Average Closing Price").
If the Average Closing Price is greater than $42.00, then 28,729,000
divided by the Average Closing Price shall be the total number of shares of SBI
Common Stock to be exchanged for all of the outstanding Bank Common Stock, and
the Exchange Ratio shall equal the total number of shares of SBI Common Stock to
be exchanged for all of the outstanding Bank Common Stock divided by the total
number of shares of Bank Common Stock outstanding on the Effective Date.
If the Average Closing Price is less than $32.00, then 21,889,000
divided by the Average Closing Price shall equal the total number of shares of
SBI Common Stock to be exchanged for all of the outstanding Bank Common Stock,
and the Exchange Ratio shall equal the total number of shares of SBI Common
Stock to be exchanged for all of the outstanding Bank Common Stock divided by
the total number of shares of Bank Common Stock outstanding on the Effective
Date.
Notwithstanding the foregoing, Bank shall have the right to terminate
this Agreement, in accordance with Section 6.1 (e), if the Average Closing Price
is greater than $42.00, and SBI shall have the right to terminate this
Agreement, in accordance with Section 6.1(f), if the Average Closing Price is
less than $32.00.
The Exchange Ratio in all instances set forth herein is subject to
adjustment in accordance with Section 1.2(c).
