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EXHIBIT 2
AGREEMENT AND PLAN OF CONSOLIDATION
This Agreement and Plan of Consolidation ("Agreement") is dated as of
February 15, 2000 by and between STURGIS BANK & TRUST COMPANY, a Michigan
savings bank ("Sturgis") and SOUTHERN MICHIGAN BANCORP, INC., a Michigan
corporation ("Bancorp").
RECITALS
WHEREAS, neither of the Board of Directors of Sturgis nor Bancorp seeks
to sell their respective entities at this time, but the Boards desire to enter
into a transaction structured as a strict consolidation of equals.
WHEREAS, Sturgis, with principal offices in Sturgis, Michigan, as of
the date hereof has Four Million (4,000,000) authorized shares of common stock,
par value $1.00 per share ("Sturgis Common Stock"), of which 3,094,866 shares
are outstanding.
WHEREAS, Bancorp, with its principal offices in Coldwater, Michigan
owns, among other things, one hundred percent (100%) of the issued and
outstanding capital stock of SOUTHERN MICHIGAN BANK & TRUST, a Michigan banking
corporation ("Southern"). As of the date hereof, Bancorp has 4,000,000
authorized shares of common stock, par value $2.50 per share ("Bancorp Common
Stock"), of which 1,963,818 shares are outstanding.
WHEREAS, promptly after execution of this Agreement, Bancorp will
organize Newbank, a Michigan savings bank ("Newbank"), which will be a wholly
owned subsidiary of Bancorp.
WHEREAS, the parties desire to consolidate Newbank in a reorganization
qualifying as a tax free reorganization under Section 368 of the Internal
Revenue Code with and into Sturgis (the "Consolidation"). As a result of the
Consolidation, Bancorp will own one hundred percent (100%) of the capital stock
of Sturgis and Southern with Sturgis and Southern each retaining their separate
identities as chartered financial institutions.
WHEREAS, Sturgis and Bancorp will select a new corporate name for
Bancorp.
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Consolidation and also to prescribe
certain conditions to the Consolidation.
WHEREAS, the Boards of Directors of Sturgis and Bancorp (at meetings
duly called and held) have determined that this Agreement and the transactions
contemplated hereby are in the best interests of Sturgis and Bancorp,
respectively, and their respective shareholders and have approved this
Agreement.
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements hereinafter set forth, the parties hereby
agree as follows:
ARTICLE ONE
THE CONSOLIDATION AND RELATED MATTERS
1.1 FORMATION OF NEWBANK. Promptly after execution of this Agreement,
Bancorp shall organize Newbank as a savings bank organized under the laws of the
State of Michigan with its principal office at 000 X. Xxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxx.
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1.2 MICHIGAN BANK CONSOLIDATION. At the Effective Time (as defined
below), Newbank shall be consolidated with and into Sturgis which shall be the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation") in accordance with the Michigan Savings Bank Act, as amended (the
"MSBA").
1.3 EFFECTIVE TIME. As soon as practicable after each of the conditions
set forth in ARTICLE FOUR hereof has been satisfied or waived, Sturgis and
Newbank will file, or cause to be filed, a Consolidation Agreement with the
Commissioner of the Financial Institutions Bureau (the "Commissioner") and any
other applicable filings or notices required by any State or federal
governmental authority for the Consolidation. The Consolidation Agreement shall
be in the form required by and executed in accordance with the provisions of the
MSBA. The Consolidation shall become effective at the time the Consolidation
Agreement is filed with the Commissioner ("Effective Time") which shall be
immediately following the Closing as defined in SECTION 1.15 hereof and on the
same day as the Closing if practicable or at such other date and time as may be
agreed to by the parties and specified in the Consolidation Agreement in
accordance with applicable law.
1.4 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Consolidation and without any action on the part of Sturgis or Newbank or the
holder of shares of Sturgis or Newbank common stock:
(a) Each share outstanding of Sturgis Common Stock issued and
outstanding at the Effective Time, subject to clause (b) of this SECTION 1.4 and
SECTION 1.7 hereof and other than shares held by the Dissenting Shareholders (as
defined below), shall cease to be outstanding, shall cease to exist and shall be
converted into and represent solely .398 shares of Bancorp Common Stock (the
"Conversion Number") and shall no longer be a share of Sturgis Common Stock.
(b) Any shares of Sturgis Common Sock which are owned or held by any
party hereto or any of their respective subsidiary(s) defined in SECTION 2.1
hereof (other than in a fiduciary capacity) at the Effective Time shall cease to
exist, the certificates for such shares shall as promptly as practicable be
cancelled, such shares shall not be converted into or represent any shares of
Bancorp Common Stock and no shares of Bancorp Common Stock shall be issued or
exchanged therefor.
(c) Each share of Newbank common stock which is issued and outstanding
immediately before the Effective Time shall be converted into and become one
share of the Surviving Corporation immediately after the Effective Time.
(d) The holders of certificates representing shares of Sturgis Common
Stock shall cease to have any rights as shareholders of Sturgis as of the
Effective Time, except such rights, if any, as they may have pursuant to
Michigan law.
(e) Any issued and outstanding shares of Sturgis Common Stock held by
Dissenting Shareholders shall not be converted as described in this SECTION 1.4,
but from and after the Effective Time shall represent only the right to receive
such value as may be determined to be due to such Dissenting Shareholders
pursuant to the MSBA. The "Dissenting Shareholders" shall mean any holder of
Sturgis Common Stock who votes against the Consolidation at the Sturgis
Shareholders Meeting or who gives notice in writing to Sturgis at or prior to
the Sturgis Shareholders Meeting that such holder dissents from the
Consolidation where such holder, within thirty (30) days after the Effective
Time, and in compliance with the MSBA, delivers a written request to Sturgis
demanding the fair value of the shares of Sturgis Common Stock held by such
holder accompanied by the surrender of such holder's stock certificates.
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1.5 SURVIVING CORPORATION IN THE CONSOLIDATION.
(a) The name of the Surviving Corporation in the Consolidation shall be
"STURGIS BANK & TRUST COMPANY." At the Effective Time, the headquarters and
principal executive offices of Sturgis immediately prior to the Effective Time
shall become the headquarters and principal executive offices of the Surviving
Corporation.
(b) At the Effective Time, the Articles of Incorporation of Sturgis
immediately prior to the Effective Time shall become the Articles of
Incorporation of the Surviving Corporation until amended as provided therein.
(c) At the Effective Time, the Bylaws of Sturgis immediately prior to
the Effective Time shall become the Bylaws of the Surviving Corporation until
amended as provided therein and in the Articles of Incorporation of the
Surviving Corporation.
(d) At the Effective Time, the directors and executive officers of
Sturgis immediately prior to the Effective Time shall become the directors and
executive officers of Sturgis, as the Surviving Corporation, except as provided
in SECTION 5.2 below until such directors or officers are replaced or additional
directors or officers are elected or appointed in accordance with the provisions
of the Articles of Incorporation and Bylaws of Sturgis, as the Surviving
Corporation.
(e) From and after the Effective Time, the Consolidation shall have
the effect set forth in this Agreement and under the MSBA, including without
limitation all the following:
(i) The Surviving Corporation shall possess all of the rights,
interests, privileges, powers and franchises and is subject to all the
restrictions, disabilities, liabilities and duties of each of Sturgis
and Newbank. The title to all property, real, personal and mixed is
transferred to the Surviving Corporation and shall not revert or be in
any way impaired by reason of the Consolidation.
(ii) The Surviving Corporation shall hold and enjoy the same
and all rights of property, franchises and interests including
appointments, designations and nominations and all other rights and
interests in any fiduciary capacity, in the same manner and to the same
extent as those rights and interests were held or enjoyed by each of
Sturgis and Newbank at the time of the Consolidation.
1.6 AUTHORIZATION FOR ISSUANCE OF COMMON STOCK; EXCHANGE OF
CERTIFICATES.
(a) Prior to the Closing, Bancorp shall reserve for issuance a
sufficient number of shares of Bancorp Common Stock for the purpose of issuing
such shares to Sturgis' shareholders in accordance with this ARTICLE ONE. At or
prior to the Effective Time, Bancorp shall supply, or shall cause to be
supplied, to Registrar and Transfer Company (the "Exchange Agent") in trust for
the benefit of the holders of the Sturgis Common Stock, for exchange in
accordance with this SECTION 1.6 through the Exchange Agent: (i) certificates
evidencing the Bancorp Common Stock issuable pursuant to SECTION 1.4(A) in
exchange for outstanding Sturgis Common Stock and (ii) cash in an aggregate
amount sufficient to pay for fractional shares pursuant to SECTION 1.7 (the
shares and cash so deposited, together with any dividends or distributions with
respect to Bancorp Common Stock held by the Exchange Agent payable after the
Effective Time which shall also be deposited with the Exchange Agent, being
hereinafter referred to collectively as the "Exchange Fund"). Any interest,
dividends or other income earned on the investment of cash (not including the
Bancorp Common Stock) held in the Exchange Fund shall be for the account of and
payable to Bancorp.
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(b) After the Effective Time, holders of certificates theretofore
representing outstanding shares of Sturgis Common Stock (other than as provided
in SECTION 1.4(B) above and SECTION 1.4(E) above), upon surrender of such
certificates (together with the signed and completed transmittal form referred
to below and such other customary documents as may be required pursuant to such
instructions) to the Exchange Agent, shall be entitled to receive certificates
for the number of whole shares of Bancorp Common Stock into which shares of
Sturgis Common Stock theretofore evidenced by the certificate so surrendered
shall have been converted as provided in SECTION 1.4 hereof and cash payments in
lieu of fractional shares, if any, as provided in SECTION 1.7 hereof. As soon as
practicable after the Effective Time, the Exchange Agent will send a notice and
transmittal form to each Sturgis shareholder of record at the Effective Time
advising such shareholder: (i) of the effectiveness of the Consolidation and the
procedure for surrendering to the Exchange Agent outstanding certificates
formerly representing Sturgis Common Stock in exchange for new certificates of
Bancorp Common Stock; and (ii) if applicable, of such shareholder's right under
the MSBA to dissent within thirty (30) days of the Effective Time. Upon
surrender, each certificate representing Sturgis Common Stock shall be
cancelled.
(c) Until surrendered as provided in this SECTION 1.6, all outstanding
certificates of a holder which, before the Effective Time, represented Sturgis
Common Stock (other than those representing shares cancelled at the Effective
Time pursuant to SECTION 1.4(B) hereof) will be deemed for all corporate
purposes (except certificates of the Dissenting Shareholders) to represent the
number of whole shares of Bancorp Common Stock in which the shares of Sturgis
Common Stock formerly represented thereby were converted and the right to
receive cash in lieu of a fractional share interest. However, until such
outstanding certificates formerly representing Sturgis Common Stock are so
surrendered, no dividend or distribution payable to holders of record of Bancorp
Common Stock shall be paid to any holder of such outstanding certificates, but
upon surrender of such outstanding certificates by such holder there shall be
paid to such holder the amount of any dividends or distributions, without
interest, theretofore paid with respect to any such whole shares of Bancorp
Common Stock, but not paid to such holder, and which dividends or distributions
had a record date occurring on or after the Effective Time and the amount of any
cash, without interest, payable to such holder in lieu of a fractional share
interest pursuant to SECTION 1.7 hereof. After the Effective Time, there shall
be no further registration of transfers on the records of Sturgis of outstanding
certificates formerly representing shares of Sturgis Common Stock and, if a
certificate formerly representing such share is presented to Bancorp or Sturgis,
it shall be forwarded to the Exchange Agent for cancellation and exchange as
herein provided. Six months after the Effective Time, the Exchange Agent shall
return to Bancorp any certificates for Sturgis Common Stock and cash remaining
in the possession of the Exchange Agent (together with any dividends and
distributions in respect thereof) and thereafter shareholders of Sturgis shall
look exclusively to Bancorp for shares of Bancorp Common Stock and cash to which
they are entitled hereunder. Notwithstanding the foregoing, none of Sturgis,
Bancorp, the Exchange Agent or any other person shall be liable to any former
holder of shares of Sturgis Common Stock for any amount delivered in good faith
to a public official pursuant to applicable abandoned property, escheat or
similar law.
(d) All shares of Bancorp Common Stock issued or paid upon the
conversion of Sturgis Common Stock in accordance with the above terms and
conditions shall be deemed to have been issued or paid in full satisfaction of
all rights pertaining to such Sturgis Common Stock.
(e) If any new certificate for Bancorp Common Stock is to be issued in
a name other than that in which the certificate surrendered and exchanged
thereof is registered, it shall be a condition of the issuance therefore that
the certificate surrendered in exchange shall be properly endorsed and otherwise
in proper form for transfer and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes required by reason of the
issuance of a new certificate representing shares of Bancorp Common Stock in any
name other than that of the registered holder of the certificate surrendered, or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
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(f) In the event any certificate representing Sturgis Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed certificate, upon the making of an
affidavit of that fact by the holder thereof, such shares of Bancorp Common
Stock as may be required pursuant hereto; provided, however, that Bancorp or the
Exchange Agent may, in its discretion and as a condition precedent to the
issuance or payment thereof, require the owner of such lost, stolen, or
destroyed certificate to deliver a bond in the sum as it may direct as indemnity
against any claim that may be made against Sturgis, Bancorp, the Exchange Agent
or any other person with respect to the certificate alleged to have been lost,
stolen or destroyed.
(g) Bancorp or the Exchange Agent shall be entitled to deduct and
withhold from the consideration paid in exchange for Sturgis Common Stock such
amounts as Bancorp or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Bancorp or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid.
1.7 NO FRACTIONAL SHARES. Notwithstanding any term or provision hereof,
no fractional shares of Bancorp Common Stock, or any other evidence of ownership
thereof, will be issued upon the conversion of or in exchange for any shares of
Sturgis Common Stock; no dividend or distribution with respect to Bancorp shall
be payable on or with respect to any fractional share interest; and no such
fractional share interest shall entitle the owner thereof to vote or to any
other rights of a shareholder of Bancorp. In lieu of such fractional share
interest, any holder of Sturgis Common Stock who would otherwise be entitled to
a fractional share of Bancorp will, upon surrender of this certificate or
certificates representing Sturgis Common Stock outstanding immediately before
the Effective Time, be paid the applicable cash value of such fractional share
interest, which shall be equal to the product of the fraction of the share to
which such holder would otherwise be entitled and the closing price of Bancorp
Common Stock on the trading day immediately prior to the date of the Effective
Time. For purposes of determining such fractional share interest, such shares of
Sturgis Common Stock owned by a Sturgis shareholder shall be combined so as to
calculate the maximum number of whole shares of Bancorp issuable to such Sturgis
shareholder.
1.8 DISSENTER'S RIGHTS. Bancorp and Sturgis agree to comply in all
respects with the provisions of the MSBA whereby shareholders of Sturgis have
the right to dissent from the Consolidation and demand payment in cash for
shares of Sturgis Common Stock. As provided in SECTION 1.4(E) above, shares held
by a Dissenting Shareholder shall not be converted into Bancorp Common Stock and
cash in lieu of fractional shares.
1.9 ANTI-DILUTION. The consideration received with respect to each
share of Sturgis Common Stock shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Bancorp Common Stock or Sturgis
Common Stock), reorganization, recapitalization or other like change with
respect to Bancorp Common Shares or Sturgis Common Stock, as appropriate,
occurring after the date hereof and prior to the Effective Time. Notwithstanding
the foregoing, no adjustment shall be made pursuant to this provision for any
stock option plan adopted by Bancorp and approved by its shareholders at an
annual or special meeting.
1.10 SHAREHOLDERS' MEETING. Sturgis shall, at the earliest practicable
date, hold a meeting of shareholders (the "Sturgis Shareholders Meeting") to
submit this Agreement for adoption by its shareholders. The affirmative vote of
two-thirds of the issued and outstanding shares of Sturgis Common Stock entitled
to vote shall be required for such adoption. With respect to the Sturgis
Shareholders Meeting, Sturgis shall comply with all notice and other
requirements of the MSBA.
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1.11 STURGIS STOCK OPTIONS.
(a) Section 1.11 of Sturgis' Disclosure Schedule sets forth a list of
each stock option outstanding on the date of this Agreement (collectively, the
"Sturgis Stock Options") to purchase Sturgis Common Stock heretofore granted
pursuant to the Sturgis Stock Option Plan dated April 28, 1989 and the Sturgis
Director's Option Plan dated April 28, 1989 (collectively the "Sturgis Option
Plans"). Section 1.11 of Sturgis' Disclosure Schedule sets forth with respect to
each Sturgis Option Plan the option exercise price, the number of shares subject
to the option, the dates of grant, vesting, exercisability and expiration of the
option and that the option is either a qualified or a non-qualified stock
option. Without the prior written consent of Bancorp, no additional stock
options shall, after the date of this Agreement, be granted under the Sturgis
Option Plans.
(b) At the Effective Time, each Sturgis Stock Option which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Sturgis Common Stock and shall be converted
automatically into an option to purchase the shares of Bancorp Common Stock in
amount and at an exercise price (and subject to the terms of the Bancorp Option
Plan) determined as provided below: (i) the number of shares of Bancorp Common
Stock to be subject to the new options shall be equal to the product of the
number of shares of Sturgis Common Stock subject to the original Sturgis Stock
Option and the Conversion Number, provided that any fractional shares of Bancorp
Common Stock resulting from such multiplication shall be rounded down to the
nearest whole share, and (ii) the exercise price per share of Bancorp Common
Stock under the new option shall be equal to the exercise price per share of
Sturgis Common Stock under the original Sturgis Option Plan divided by the
Conversion Number, provided that such exercised price shall be rounded down to
the nearest whole cent.
(c) At the 2000 annual meeting of shareholders of Bancorp, the holders
of Bancorp Common Stock shall vote on approval of a Stock Option Plan whereby
qualified and non-qualified stock options may be issued in amounts sufficient to
convert the options on Section 1.11 of Sturgis' Disclosure Schedule pursuant to
this SECTION 1.11.
1.12 REGISTRATION STATEMENT; PROSPECTUS.
(a) For the purposes (i) of registering with the Securities and
Exchange Commission ("SEC") and with applicable state securities authorities the
Bancorp Common Stock to be issued to holders of Sturgis Common Stock in
connection with the Consolidation, and (ii) of holding the Sturgis Shareholders
Meeting, the parties shall cooperate in the preparation of an appropriate
registration statement (such registration statement together with all and any
amendments and supplements hereinafter referred to as the "Registration
Statement"), including the prospectus and proxy statement satisfying all
applicable requirements of applicable state laws, and of the Securities Act of
1933 (the "Securities Act"), the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations thereunder.
(b) Sturgis shall furnish such information concerning Sturgis and its
subsidiaries as is necessary in order to cause the prospectus and proxy
statement, insofar as it relates to such entities, to comply with SECTION
1.12(A) hereof. Sturgis agrees promptly to advise Bancorp if at any time before
the Sturgis Shareholders Meeting any information provided by Sturgis in the
prospectus and proxy statement (through incorporation by reference or otherwise)
becomes incorrect or incomplete in any material respect and to provide Bancorp
with the information needed to correct such inaccuracy or omission. Sturgis
shall furnish Bancorp with such supplemental information as necessary in order
to cause such prospectus and such proxy statement, insofar as it relates to
Sturgis and its subsidiaries, to comply with SECTION 1.12(A).
(c) Bancorp shall furnish Sturgis with such information concerning
Bancorp and its subsidiaries as is necessary in order to cause the prospectus
and proxy statement, insofar as it relates to such entities, to comply with
SECTION 1.12(A) hereof. Bancorp agrees promptly to advise Sturgis if at any time
before the Sturgis Shareholders Meeting (through incorporation by reference or
otherwise) becomes incorrect or incomplete in any
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material respect to provide Sturgis with the information needed to correct such
inaccuracy or omission. Bancorp shall furnish Sturgis with such supplemental
information as may be necessary in order to cause the prospectus and proxy
statement, insofar as it relates to Bancorp and its subsidiaries, to comply with
SECTION 1.12(A).
(d) Bancorp shall promptly file the Registration Statement with the SEC
and applicable state securities agencies. Sturgis and Bancorp shall use all
reasonable efforts to cause the Registration Statement to become effective under
the Securities Act and applicable state security laws at the earliest
practicable date. Sturgis authorizes Bancorp to utilize in the Registration
Statement the information concerning Sturgis and its subsidiaries incorporated
by reference in, and provided to Bancorp for the purpose of inclusion in, the
prospectus and proxy statement. Bancorp shall advise Sturgis promptly when the
Registration Statement has become effective and of any supplements or amendments
thereto and Bancorp shall furnish Sturgis with copies of all such documents.
Before the Effective Time or the termination of this Agreement, each party shall
consult with the other with respect to any material that might constitute a
"Prospectus" relating to the Consolidation within the meaning in the Securities
Act.
(e) The parties intend that the Consolidation shall qualify for
"pooling of interest" accounting treatment under Accounting Principles Board
Opinion No. 16 and SEC Accounting Series Releases 130 and 135, as amended, and
each of the parties shall use its best efforts and take all actions reasonably
necessary to cause the Consolidation to qualify for such accounting treatment;
provided, however, if the parties mutually determine that the "pooling of
interest" accounting treatment desired by the parties is not available or is not
practicable (for any reason, including but not limited to, the exercise of
dissenters rights by holders of Sturgis Common Stock), the following provisions
shall become effective and supercede any other provision or provisions in this
Agreement to the contrary:
(i) The parties shall cause the Consolidation to be treated as a
"purchase" for accounting purposes and not as a "pooling of interest",
and each of the parties shall use its best efforts and take all actions
reasonably requested to obtain approval of and close the Consolidation
under "purchase" accounting treatment.
(ii) The parties shall, in compliance with the terms of SECTIONS
1.12(A)-(D) above, revise and resubmit the Registration Statement to
the SEC as soon as practicable with the Consolidation treated as a
"purchase" for accounting purposes and not as a "pooling of interest".
(iii) The condition to closing set forth in SECTION 4.1(G) shall
be deemed waived without any further action on behalf of either party
and all other provisions in this Agreement requiring the Consolidation
to be treated as a "pooling of interest" for accounting purposes shall
be revised to require the Consolidation to be treated as a "purchase"
for accounting purposes.
(iv) If Sturgis has held a Sturgis Shareholders Meeting whereat
the shareholders voted on the Consolidation with the understanding that
the Consolidation would qualify for "pooling of interest" treatment,
Sturgis shall hold a second Sturgis Shareholders Meeting in compliance
with SECTION 1.10 above whereat the shareholders will vote on the
Consolidation with the understanding that the Consolidation would be
treated as a "purchase" for accounting purposes.
(v) The condition to closing set forth in SECTION 4.1(K) shall
be amended to read in entirety as follows: "Dissenter Rights. The
holders of not more than 770,000 shares of Sturgis Common Stock shall
have taken one or both of the following actions: (i) given notice in
writing to Sturgis at or prior to the Sturgis Shareholders Meeting that
such holder dissents from the Consolidation, or (ii) voted against the
Consolidation at the Sturgis Shareholders Meeting."
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1.13 COOPERATION AND REGULATORY APPROVALS. The parties, and their
respective affiliates and subsidiaries, shall cooperate in the preparation and
submission by them, as promptly as reasonably practical, of such applications,
petitions, and other filings as they may reasonably deem necessary or desirable
to any bank regulatory authority, the Department of Justice, SEC, Secretary of
State of Michigan, other regulatory or governmental authorities, holders of the
voting shares of common stock of Sturgis and any other persons for the purpose
of obtaining any approvals or consents necessary to consummate the transactions
contemplated hereby. Each party shall have the right to review and comment on
such applications, petitions and filings in advance and shall furnish to the
other copies thereof promptly prior to submission thereof. Any such materials
must be acceptable to both Sturgis and Bancorp prior to submission to any
regulatory or governmental entity or authority or transmission to shareholders
or other third parties, except to the extent that Sturgis or Bancorp is legally
required to proceed prior to obtaining the acceptance of the other party hereto.
Each party agrees to consult with the other with respect to obtaining all
necessary consents and approvals, and each will keep the other apprised of the
status of matters relating to such approvals and consents and the consummation
of the transactions contemplated hereby. At the date hereof, no party is aware
of any reason that any regulatory approval required to be obtained by it would
not be obtained or would be obtained subject to conditions that would have a
result in a material adverse effect on this Agreement or the transactions
contemplated herein.
1.14 BANCORP NAME. Prior to the Closing and pursuant to the Michigan
Business Corporation Act, as amended, , Bancorp shall adopt an assumed name
which is reasonably agreeable to Bancorp and Sturgis. It is the intent of the
parties that at the 2001 annual meeting of the shareholders of Bancorp, the
shareholders of Bancorp shall be entitled to vote to amend the Articles of
Incorporation of Bancorp to change Bancorp's legal corporate name to such
assumed name.
1.15 CLOSING. If (i) this Agreement has been duly approved by the
shareholders of Sturgis, (ii) an assumed name for Bancorp has been adopted
pursuant to SECTION 1.14, and (iii) all conditions of this Agreement have been
satisfied in all material respects or waived, a closing (the "Closing") shall
take place as promptly as practicable thereafter at the offices of Dresser,
Xxxxxxx, Xxxxxxx & Xxxx, P.C., Sturgis, Michigan, or at such other place as the
parties agree, at which time the parties will exchange certificates, letters and
other documents as required hereby and will make the filings described in
SECTION 1.3 hereof. Such Closing will take place within thirty (30) days after
the satisfaction or waiver of all conditions and/or obligations precedent to
Closing contained in ARTICLE FOUR of this Agreement or at such other time as the
parties agree. The parties shall use their best efforts to cause this Closing to
occur on or before December 31, 2000.
1.16 TAX CONSEQUENCES; ACCOUNTING TREATMENT. It is intended that (i)
the Consolidation shall constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code, (ii) this Agreement constitutes a
"plan of reorganization" for purposes of Section 368 of the Internal Revenue
Code, and (iii) as provided in SECTION 1.12(E) above, if available, the
Consolidation shall qualify for "pooling of interest" accounting treatment under
Accounting Principles Board Opinion No. 16 and SEC Accounting Series Releases
130 and 135, as amended.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
Sturgis (with respect to itself and with respect to each of its
Subsidiaries individually) represents and warrants to Bancorp, and Bancorp (with
respect to itself and with respect to each of its Subsidiaries individually)
represents and warrants to Sturgis, except as disclosed in the Disclosure
Schedule delivered by each party to the other pursuant to SECTION 2.29 hereof
(which Disclosure Schedule shall be prepared separately by each party and
include exceptions for such party and its Subsidiaries), as follows:
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2.1 ORGANIZATION. It is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization as set forth in Section 2.1 of its Disclosure Schedule. Section 2.1
of its Disclosure Schedule lists each "subsidiary" (the term "subsidiary" when
used with respect to any party means any entity (including without limitation
any corporation, partnership, joint venture or other organization, whether
incorporated or unincorporated) which is consolidated with such party for
financial reporting purposes) (individually a "Subsidiary" and collectively the
"Subsidiaries"). It has all requisite power and authority and, to the extent
required by applicable law, is licensed to own, lease and operate its properties
and conduct its businesses as now being conducted. It has delivered or made
available to the other party true, complete and correct copies of its Articles
of Incorporation, Bylaws and other organizational documents, as in effect on the
date of this Agreement. To the extent it is a depositary institution, all
eligible accounts thereof are insured by the Federal Deposit Insurance
Corporation ("FDIC"). It has full power and authority (including all licenses,
franchises, permits and governmental authorizations which are legally required)
to engage in all material respects in the business and activities now conducted
by it.
2.2 CAPITALIZATION. Its authorized capital stock and the number of
issued and outstanding shares of its capital stock as of the date hereof are
accurately set forth in the Recitals of this Agreement. All outstanding shares
of its common stock are duly authorized, validly issued, fully paid,
nonassessible and free of preemptive rights. Except (i) as set forth in Section
2.2 of its Disclosure Schedule or (ii) with respect to the Sturgis Option Plans
as set forth in Section 1.11 of its Disclosure Schedule, as of the date of this
Agreement, there are no options, convertible securities or warrants or other
rights to purchase or acquire any of its capital stock from it and no oral or
written agreement, contract, arrangement, understanding, plan or instrument of
any kind to which it is subject with respect to the issuance, voting or sale of
issued or unissued shares of its capital stock. A true and complete copy of each
plan and agreement pursuant to which such options, convertible securities,
warrants or other rights have been granted or issued, as in effect as of the
date of this Agreement, is included in Section 2.2 of its Disclosure Schedule.
2.3 OWNERSHIP OF SUBSIDIARIES. All outstanding shares or ownership
interests of its Subsidiaries are validly issued, fully paid, nonassessible and
owned beneficially and of record by it or one of its Subsidiaries free and clear
of any lien, claim, charge, restriction, rights of third parties, or encumbrance
(collectively "Encumbrance"), except as set forth in Section 2.3 of its
Disclosure Schedule. There are no options, convertible securities, warrants or
other rights (preemptive or otherwise) to purchase or acquire any capital stock
or ownership interests of any of its Subsidiaries and no contracts to which it
or any of its Subsidiaries is subject with respect to the issuance, voting or
sale of issued or unissued shares of the capital stock or ownership interests of
any of its Subsidiaries. It does not own more than 2% of the capital stock or
other equity securities (including securities convertible or exchangeable into
such securities) of or more than 2% of the aggregate profit participations in
any entity other than a Subsidiary or as otherwise set forth in Section 2.3 of
its Disclosure Schedule.
2.4 FINANCIAL STATEMENTS AND REPORTS. No registration statement,
offering circular, proxy statement, schedule or report filed by it or any of its
Subsidiaries under various securities and financial institution laws and
regulations ("Regulatory Reports"), on the date of its effectiveness in the case
of registration statements, or on the date of filing in the case of reports or
schedules, or on the date of mailing in the case of proxy statements, contain
any untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading. For the past three
years, it has timely filed all Regulatory Reports required to be filed by it
under various securities and financial institution laws and regulations except
to the extent that any failure to do so, in the aggregate, would not have a
material effect; and all such documents, as finally amended, complied in all
material respects with applicable requirements of law and, as of the respective
date or the date as amended, did not contain any untrue statements of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent stated therein, all financial
statements and schedules included in the
10
Regulatory Reports (or to be included in Regulatory Reports) to be filed after
the date hereof (i) were or will be (with respect to financial statements in
respect of periods ending after December 31, 1999), prepared in accordance with
its books and records, and (ii) present (and in the case of financial statements
and respective periods ending after December 31, 1999, will present) fairly the
consolidated financial position and the consolidated results of operations or
income, changes in shareholders' equity and cash flows of it as of the dates and
for the periods indicated in accordance with generally accepted accounting
principles applied on a consistent basis with prior periods. Its audited
financial statements after December 31, 1998 and for all periods thereafter up
to the Closing reflect or will reflect, as the case may be, all liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and regardless of when asserted) as of such date required to be
reflected in such financial statements in accordance with generally accepted
accounting principles and contain or will contain, as the case may be, adequate
reserves for losses on loans and properties acquired in settlement of loans,
taxes and all other material accrued liabilities and for all reasonably
anticipated material losses, if any, as of such date in accordance with
generally accepted accounting principles. Except as disclosed in its financial
statements at December 31, 1999, there exists no set of circumstances that could
reasonably be expected to result in any liability or obligation, taken as a
whole, material to it and its Subsidiaries except for transactions effected or
actions occurring or taken after December 31, 1999 (i) in the ordinary course of
business, (ii) as permitted by this Agreement, or (iii) as disclosed in its
Regulatory Reports filed after December 31, 1999 and before the date of this
Agreement. A true and complete copy of such December 31, 1999 financial
statements have been delivered by it. The books and records of it have been, and
are being, maintained in all material respects in accordance with generally
accepted accounting principles and any other applicable legal and accounting
requirements.
2.5 ABSENCE OF CHANGES.
(a) Since December 31, 1999, there has been no material adverse change
affecting it and there is no occurrence, event or development of any nature
existing or, to its best knowledge, threatened which may reasonably be expected
to have a material adverse effect upon it.
(b) Except as set forth in Section 2.5 of its Disclosure Schedule or in
its Regulatory Reports filed after December 31, 1999 and before the date of this
Agreement, since December 31, 1999, it has owned and operated its assets,
properties and businesses in the ordinary course and consistent with past
practice.
2.6 PROSPECTUS AND PROXY STATEMENT. At the time the prospectus and
proxy statements are mailed to its shareholders for the solicitation of proxies
for the approvals referred to in SECTION 1.10 hereof and at all times after such
mailing up to and including the time that such approvals, such prospectus and
proxy statement (including any supplements thereto), with respect to all
information set forth therein relating to it and its shareholders, its common
stock, this Agreement, the Consolidation and other transactions contemplated
hereby, will:
(a) Comply in all material respects with applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations under such Acts;
and
(b) Not contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements contained therein, in light of the circumstances under which it
is made, not misleading.
2.7 BROKER'S OR FINDER'S FEES. It has not incurred or will not incur
any liability for brokerage, finders', agents' or investment bankers' fees or
commissions in connection with this Agreement or the transactions contemplated
hereby, except for fees payable to Xxxxxxx Xxxxx Financial, Inc. by Sturgis
pursuant to an engagement agreement which has been fully disclosed to Bancorp
and fees payable to Austin Associates, Inc. by Bancorp pursuant to an engagement
letter which has been fully disclosed to Sturgis.
11
2.8 LITIGATION AND OTHER PROCEEDINGS. Except as set forth in Section
2.8 of its Disclosure Schedule, there is no litigation, action, suit,
investigation or proceeding pending or, to the best of its knowledge, overtly
threatened, against or affecting it or involving any of its properties or
assets, at law or in equity before any federal, state, municipal, local or other
governmental authority which individually or in the aggregate involve: (i) a
claim for damages or other monetary relief being one percent (1%) or more of its
combined capital stock, surplus and undivided profits, including reserves, or
(ii) matters which, if resolved adversely to the interest of it, would
presently, or in the future, materially and adversely effect the operations of
it or its ability to perform under this Agreement, and to the best of its
knowledge, no one has asserted and no one has reasonable or valid grounds on
which it reasonably can be expected that anyone will assert any such claims,
litigation, suits, actions and/or proceedings against it based upon the wrongful
action or inaction of it or its officers, directors or employees.
2.9 COMPLIANCE WITH LAW. Except as set forth in Section 2.9 of its
Disclosure Schedule:
(a) It is in compliance in all material respects with all laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to its
operation or business, including without limitation the Equal Credit Opportunity
Act, The Fair Housing Act, The Community Reinvestment Act, The Homeowners'
Disclosure Act, and all other applicable fair lending laws or other laws
relating to discrimination. It has received no notice from any federal, state,
local government or governmental or regulatory agency or body of any material
violation of, and does not know of any material violations of this SECTION
2.9(A).
(b) It has all permits, licenses, certificates of authority,
franchises, orders and approvals of, and have made all filings, applications and
registrations with, all federal, state, local government or governmental or
regulatory agency or body that are required in order to permit it to carry on
its business as it is presently being conducted.
(c) It has not received since January 1, 1997 notification or
communication from any government or governmental or regulatory agency or body
or the staff thereof: (i) asserting that it is not in compliance with any of the
statutes, regulations or ordinances that any such government or governmental or
regulatory agency or body administers or enforces, (ii) threatening to revoke
any license, franchise, permit or application, or (iii) threatening or
contemplating any enforcement action by or supervisory or any other written
agreement with a state or federal banking regulator or any revocation or
limitation of, or action which would have the effect of revoking or limiting,
FDIC deposit insurance.
2.10 CORPORATE ACTIONS. Its Board of Directors (at a meeting duly
called and held) has by the requisite vote (i) determined that the Consolidation
is advisable and in the best interests of it and its shareholders, (ii) duly
approve the Consolidation and this Agreement and authorized its officers to
execute and deliver this Agreement and to take all action necessary to
consummate the Consolidation and the other transactions contemplated hereby, and
(iii) in the case of Sturgis, authorized and directed the submission for
shareholders' approval of adoption of this Agreement. In the case of Bancorp, it
is not required to submit this Agreement to its shareholders for approval.
2.11 AUTHORITY. Except as set forth in Section 2.11 of its Disclosure
Schedule, neither the execution and delivery of and performance of its
obligations under this Agreement by it nor the consummation of the Consolidation
will violate any of the provisions of, or constitute a breach of default, under
or give any person the right to terminate or accelerate payment or performance
under (i) its Articles of Incorporation or Bylaws, (ii) any regulatory restraint
on the acquisition of it or control thereof, (iii) any law, rule, ordinance or
regulation or judgment, order, decree, award or governmental permit or license
to which it is subject, or (iv) any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation or instrument ("Contract") to which
it is a party or is subject or by which its properties or assets is bound and
which provides for payment by, on behalf of, or to it in excess of $50,000.00 in
the aggregate over the term of such Contract. It acknowledges that
12
the consummation of the Consolidation and the other transactions contemplated
hereby is subject to shareholder approval in the case of Sturgis and to various
governmental or regulatory approvals. It has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and thereunder, subject, to the approval or adoption of this Agreement by its
shareholders where required under applicable law. Other than the receipt of
Governmental Approvals (as defined in SECTION 4.1(C) hereof), the approval or
adoption of this Agreement by its shareholders if required by applicable law,
and except as set forth in Section 2.11 of its Disclosure Schedule with respect
to any Contract, no consents or approvals are required on its behalf in
connection with the consummation of the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered on behalf of it
and assuming due authorization, execution and delivery by every other party to
this Agreement, constitutes the valid and binding obligation of it, enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable laws relating to bankruptcy, insolvency, or creditors' rights
generally and general principles of equity.
2.12 EMPLOYMENT ARRANGEMENTS.
(a) Except as set forth in Section 2.12 of its Disclosure Schedule:
(i) All employees of it are employees-at-will, may be terminated
at any time for any lawful reason or for no reason and have no
entitlement to employment by virtue of any oral or written contract,
employer policy or otherwise;
(ii) There are no agreements, plans or other arrangements with
respect to employment, severance or other benefits with any current or
former directors, officers or employees of it which may not be
terminated without penalty or expense on thirty (30) days' or less
notice to any such person;
(iii) No Payments and benefits to current or former directors,
officers and employees of it resulting from the transactions
contemplated hereby or the termination of such persons' service or
employment within two years after completion of the Consolidation will
cause the imposition of excise taxes under Section 4999 of the Internal
Revenue Code or the disallowance of a deduction to it pursuant to
Section 162, 280G or any other Section of the Internal Revenue Code;
and
(iv) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby will (A)
constitute a stated "Triggering Event" under any "Employee Plans" (as
defined in SECTION 2.13(A) hereof) or "Benefit Arrangements" (as
defined in SECTION 2.13(A) hereof) of it that will result in any
material payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due
to any director, officer, stockholder or employee of it, (B) materially
increase any benefits otherwise payable under any Employee Plans or
Benefit Arrangements of it, or (C) result in any acceleration of the
time of payment or vesting of any such benefits to any material extent.
(b) It is not a party to any collective bargaining agreement or labor
union contract. To the best of its knowledge, (i) no grievance procedure,
arbitration proceeding or other labor controversy is pending against it under
any collective bargaining agreement that would result in a material liability,
(ii) it has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, provisions thereof relating
to wages, hours, equal employment, safety, collective bargaining and the payment
of social security and similar taxes and it is not liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing,
except, in each case, any of the foregoing which, individually or in the
aggregate would not have a material adverse effect on it, and (iii) there is no
unfair labor practice or similar complaint against it pending before the
National Labor Relations Board or similar authority or strike, dispute, slow
down, work stoppage or lockout pending or threatened against it or any complaint
pending before the Equal Employment Opportunity Commission or any comparable
federal, state or local fair employment
13
practices agency and none has existed during the past three years that was not
dismissed without liability on the part of it.
2.13 EMPLOYEE BENEFITS. It maintains only the employee benefit plans
("Employee Plans") set forth in Section 2.13 of its Disclosure Schedule (true
and correct copies of which have been delivered to the other party). None of the
Employee Plans of it is and it has not participated in, or contributed to, a
"Multi-Employee Plan" as defined in Section 3(37) of the Employment Retirement
Income Security Act of 1974 ("ERISA") or a "Multiple Employer Plan" as covered
in Section 413(c) of the Internal Revenue Code or any plan which is subject to
Title IV of ERISA or Section 412 of the Internal Revenue Code. It has not
incurred nor does it reasonably expect to incur any liability to the Pension
Benefit Guaranty Corporation except for required premium payments which, to the
extent due and payable, have been paid. The Employee Plans intended to be
qualified under Section 401(a) and 401k of the Internal Revenue Code are
qualified, and it is not aware of any fact which would adversely effect the
qualified status of such plans. The Internal Revenue Service has issued a
current favorable determination letter with respect to the qualified status of
the Employee Plans and has not taken any action to revoke such letter. Except as
set forth in Section 2.13 of the Disclosure Schedule: (a) it does not provide
health, medical, death or survivor benefits to any former employee, retiree or
beneficiary thereof or (b) it does not maintain any form of current (exclusive
of base salary and base wages) or deferred compensation, bonus, stock option,
stock appreciation right, benefit, severance pay, retirement, employee stock
ownership, incentive, group or individual health insurance, welfare or similar
plan or arrangement for the benefit of any single, or class of Directors,
officers or employees (whether active or retired) (collectively "Benefit
Arrangements"). There are no restrictions on the rights of it to amend or
terminate any Employee Plans or Benefit Arrangements without incurring any
liability thereunder.
Except as disclosed in Section 2.13 of its Disclosure Schedule: (a) all
Employee Plans and Benefit Plans which are in effect were in effect for
substantially all of calendar year 1999 and there has been no material amendment
thereof, (other than amendments required to comply with applicable law) or
increase of the cost thereof or benefits payable thereunder on or after January
1, 2000, (b) to its best knowledge, with respect to all Employee Plans and
Benefit Arrangements, it is in substantial compliance with the requirements
prescribed by any and all statutes, governmental or court orders or rules or
regulations currently in effect, including but not limited to ERISA and the
Internal Revenue Code, applicable to such Employee Plans or Benefit
Arrangements, (c) it has performed all obligations required to be performed by
it under the Employee Plans (including, but not limited to, the making of all
contributions) and is not in default under and has no knowledge of any default
by any other party to the Employee Plans, (d) to its best knowledge, neither it
nor any party in interest, within the meaning of Section 4975 of the Internal
Revenue Code or Section 3(14) of ERISA, has engaged in any prohibited
transaction, as this term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, that could subject the Employee Plans to any tax
or penalty, (e) there are no actions or claims pending (other than routine
claims for benefits) or, to its best knowledge, threatened against the Employee
Plans, (f) no proceeding has been initiated to terminate the Employee Plans, and
(g) to its best knowledge, no condition exists that could constitute grounds for
the termination of any Employee Plan under ERISA; no "Prohibitive Transaction"
as defined in ERISA and the Internal Revenue Code, has occurred with respect to
any Employee Plan.
2.14 INFORMATION FURNISHED. No statement contained in any schedule,
certificate or other document furnished (whether before, on or after the date of
this Agreement) or to be furnished in writing by or on behalf pursuant to this
Agreement contains or will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statement contained therein, in light of the circumstances
under which it is made, not misleading.
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2.15 PROPERTY AND ASSETS. It is the sole and absolute owner of the
assets (real and personal, tangible and intangible) reflected in the financial
statements at December 31, 1999 referred to in SECTION 2.4 hereof or acquired
subsequent thereto (other than assets which are under Leases in accordance with
generally accepted accounting principles and assets which have been disposed of
since the date of such financial statements in the ordinary course of business).
It has good and marketable title to all such assets free and clear of any and
all Encumbrances, except for (a) the Encumbrances, if any, listed in Section
2.15 of its Disclosure Schedule, (b) in each case for any assets the failure to
have good and marketable title or the existence of such Encumbrance which,
individually or in the aggregate, would not have a material adverse effect on
it, and (c) in the case of real property: (i) such items are shown in such
financial statements or the notes thereto, (ii) liens for current real estate
taxes not yet delinquent, (iii) easements, restrictions of record and title
exceptions that are not material to the value or use of such property, (iv)
property sold or otherwise transferred in the ordinary course of business since
the date of such financial statements, and (v) as otherwise specifically
indicated in its Regulatory Reports filed after December 31, 1999 and before the
date of this Agreement. No one has any written or oral agreement, option,
understanding, or commitment, or any right or privilege capable of becoming an
agreement for the purchase from it of any of the material assets owned or leased
by it. It enjoys peaceful and undisturbed possession under all material leases
for the use of real property or personal property under which they are lessee;
all of such leases are valid and binding and in full force and effect, and it is
not in default in material respect under any such lease. No default will arise
under any material real property, material personal property lease or material
intellectual property license by reason of the consummation of the Consolidation
without the lessor's or licensor's consent except as set forth in Section 2.15
of its Disclosure Schedule. Except as set forth in Section 2.15 of its
Disclosure Schedule: (a) there has been no material physical loss, damage or
destruction, whether or not covered by insurance, affecting any of the real
properties or material personal property of it since December 31, 1999, and (b)
all fixed assets material to its business and currently used by it are, in all
material respects, in good operating condition and repair.
2.16 AGREEMENTS AND INSTRUMENTS. Except as set forth in its Regulatory
Reports filed after December 31, 1999 and before the date of this Agreement or
in Section 2.16 of its Disclosure Schedule, it is not a party to (a) any
material agreement or commitment not made in the ordinary course of business,
(b) any agreement, indenture or other instrument relating to the borrowing of
money by it, (c) any agreements to make any loans or for the provision, purchase
or sale of goods, services or property between it and any Director or officer of
it, (d) any agreements with or concerning any labor or employee organization to
which it is a party, (e) any agreements between it and any five percent (5%) or
more stockholder of it, and (f) any agreements, directives, orders or similar
arrangements between or involving it, any state or regulatory authority.
2.17 MATERIAL CONTRACT DEFAULTS. It is not in default under any respect
under any contract, agreement, commitment, arrangement, lease, insurance policy
other instrument to which it is a party or by which its assets, business or
operation may be bound or affected or under which its assets, business or
operations receive benefits, which default is reasonably expected to have,
either individually or in the aggregate, a material adverse effect on it, and
there has not occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default.
2.18 TAX MATTERS.
(a) It has duly and properly filed all federal, state and other tax
returns and reports required to be filed and has timely made payments on all
taxes showing thereon to be due and payable, whether disputed or not; the
current status of audits of such returns and reports by the Internal Revenue
Service and other applicable tax authorities is as set forth in Section 2.18 of
its Disclosure Schedule; and, except as set forth in Section 2.18 of the
Disclosure Schedule, there is no agreement by it for the extension of time for
the assessment or payment of any taxes payable. Except as set forth in Section
2.18 of the Disclosure Schedule, neither the Internal Revenue Service nor any
other taxing authority is now asserting or, to its best knowledge, is
threatening to assert any deficiency or claim for additional taxes (or interest
thereon or penalties in connection therewith) nor
15
is it aware of any basis for any such assertion or claim. It has complied in all
material respects with applicable Internal Revenue Service backup withholding
requirements. It has complied with all applicable state law tax collection and
reporting requirements.
(b) Adequate provision for any unpaid federal, state or local taxes
due or to become due for all periods through and including December 31, 1999 has
been made and is reflected in its December 31, 1999 financial statements
referred to in SECTION 2.4 hereof and has been or will be made with respect to
periods ending after December 31, 1999.
2.19 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 2.19 of its Disclosure Schedule and
to its knowledge, it does not own, lease or otherwise control any property
affected by toxic waste, radon gas or other hazardous conditions or constructed
in part with the use of asbestos which requires removal or encapsulation. It has
no knowledge of, and has not received written notice from any governmental or
regulatory body of, any past, present or future conditions, activities,
practices or incidents which may interfere with or prevent compliance or
continued compliance with hazardous substance or other environmental laws or
regulations, orders, decrees, judgments or injunctions, issued, entered,
promulgated or approved thereunder or which may give rise to any common law or
legal liability or otherwise form the basis of any claim, action, suit,
proceeding, hearing, investigation or remediation activity based on or related
to the manufacture, processing, distribution, treatment, storage, disposal,
transport or handling, discharge, release, generation or threatened release into
the environment, of any pollutant, contaminant, chemical or industrial, toxic or
hazardous substance or waste. There is no civil, criminal or administrative
claim, action, suit, proceeding, hearing or investigation pending or, to its
knowledge, threatened against it relating in any way to such hazardous substance
laws or any regulation, order, decree, judgment or injunction issued, entered,
promulgated or approved thereunder. To its knowledge, there is no reasonable
basis for any such claim, action, suit, proceeding, hearing, investigation or
remediation activity that would impose any material liability or that could
reasonably be expected to have a material adverse effect on it.
(b) None of its "Loan Portfolio Properties, Trust Properties and Other
Properties" as defined in this SECTION 2.19(B) is in violation of or has any
liability absolute or contingent under any environmental laws or regulations,
except any such violations or liabilities which, individually or in the
aggregate would not have a material adverse effect on it. There are no actions,
suits, demands, notices, claims, investigations or proceedings threatened or
relating to any of its Loan Portfolio Properties, Trust Properties and Other
Properties including, without limitation, any notices, demand letters or
requests for information (from any federal or state environmental agency
relating to any such liability under or violation of any environmental laws or
regulation), which would impose liability upon it pursuant to any environmental
law or regulation, except such as would not, individually or in the aggregate
have a material adverse effect on it. "Loan Portfolio Properties, Trust
Properties and Other Properties" means, any real property, interest in real
property, improvements, appurtenances, rights and personal property attendant
thereto, which is owned, leased as a landlord or tenant, licensed as a licensor
or licensee, managed or operated or upon which is held a mortgage, deed to
secure debt or other security interest by it whether directly, as an agent, as a
trustee or other fiduciary or otherwise.
2.20 LOAN PORTFOLIO AND PORTFOLIO MANAGEMENT.
(a) All evidences of indebtedness reflected as assets on its financial
statement at December 31, 1999 referred to in SECTION 2.4 hereof, or originated
or acquired since such date, are (except with respect to those assets which are
no longer assets of it) binding obligations except as enforcement may be limited
by bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except as to the availability of equitable
remedies, including specific performance, which are subject to the discretion of
the court before which a proceeding is brought, and the payment of no material
amount thereof (individually or in the aggregate with other evidences of
indebtedness) is subject to any defenses or offsets which have been
16
threatened or asserted against it. All such indebtedness which is secured by an
interest in real property is secured by a valid and perfected mortgage lien
having the priorities specified in the loan documents. All such indebtedness
which is secured by an interest in personal property is secured by a valid and
perfected security interest having the priorities specified in the loan
agreement, except in each case in which individually or in the aggregate, the
failure to have such a security interest would not have a material adverse
effect on it. All loans originated, directly or indirectly or purchased by it at
the time entered into and at times owned by it in compliance with all material
respects with all applicable laws and regulations (including, without
limitation, all consumer protection laws and regulations). It administers loans
and investment portfolios in accordance with all applicable laws and regulations
and the terms of all applicable instruments. The records of it regarding all
loans outstanding on its books are accurate in all material respects.
(b) Section 2.20 of its Disclosure Schedule sets forth a list, of
aggregate amount of loans, extensions of credit and other assets of it that have
been adversely designated, criticized or classified by it as of January 31,
2000, separated by category or classifications or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated, classified or criticized as of the date
hereof by any representative of any representative of any governmental or
regulatory authority as "Special Mention" "Substandard," "Doubtful," "Loss", or
words of similar import are excluded from amounts disclosed in the Asset
Classification other than amounts of loans, extensions of credit or other assets
that were charged off by it or before the date hereof.
2.21 REAL ESTATE LOANS; INVESTMENTS.
(a) Except for properties acquired in settlement of loans, there are
no facts, circumstances or contingencies known to it which exist and would
require a material reduction under generally accepted accounting principles of
the present carrying value of any of the real estate investments, joint
ventures, construction loans or other investments or other loans of it.
(b) It has good and marketable title to all securities held by it free
and clear of any Encumbrance, except to the extent such securities are pledged
in the ordinary course of business consistent with prudent banking practices to
secure obligations of it. Such securities are valued on its books in accordance
with generally accepted accounting principles. No material investment is subject
to any restrictions, contractual, statutory or other that would materially
impair the ability of it to dispose freely of any such investment at any time,
except restrictions on the public distribution or transfer of any such
investments under the Securities Act and the regulations thereunder or state
securities laws and pledges for security interest given to secure public funds
on deposit.
2.22 DERIVATIVE CONTRACTS. It is not a party to, nor has it agreed to
enter into, an exchange-traded or over-the-counter-swap, forward, future,
option, cap, floor or collar financial contract or other contract not included
in its financial statement as of December 31, 1999 which is a derivative
contract (including various combination thereof) (each, a "Derivative
Contract"), except for those Derivative Contracts set forth in Section 2.22 of
its Disclosure Schedule including a list, as applicable, of any of its assets
pledged as security for a Derivative Contract.
2.23 INTELLECTUAL PROPERTY.
(a) It owns or has the right to use pursuant to license, sub-license,
agreement or permission, all intellectual property necessary for the operation
of its businesses presently conducted and as presently proposed to be conducted.
The term "Intellectual Property" means all trademarks, service marks, logos,
trade names and corporate names and registrations and applications for
registration thereof, copyrights and registrations and applications for
registration thereof, computer software, data and documentation, trade secrets
and confidential
17
business information (including financial, marketing and business data, pricing
and cost information, business and marketing plans, and customer and supplier
lists and information), other proprietary rights, and copies of tangible
embodiments thereof (in whatever form or medium).
(b) To the best of its knowledge, it has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
intellectual property rights of third parties and it has not received any
charge, compliant, claim or notice alleging any such infringement, interference,
misappropriation or violation. To its knowledge, no third party has interfered
with, infringed upon, misappropriated or otherwise come into conflict with
intellectual property rights of it.
(c) Each item of intellectual property that any third party owns and
that it uses pursuant to license, sublicense, agreement or permission (i) the
license, sublicense, agreement or permission covering the item is legal, valid,
binding, enforceable and in full force and effect, (ii) the license, sublicense,
agreement or permission will continue to be legal, valid, binding and
enforceable and in full force and effect on identical terms on or after the
Closing, (iii) no party to the license, sublicense, agreement or permission is
in breach or default and no event of default has occurred which with notice or
lapse of time, or both, would constitute a breach or default or permit
termination, modification or acceleration thereunder, (iv) no party to the
license, sublicense, agreement or permission has repudiated any provision
thereof, and (v) it has not granted any sublicense or similar right with respect
to the license, sublicense, agreement or permission.
2.24 NO INVESTMENT COMPANY. It is not an "Investment Company" or a
company "controlled by" an "Investment Company" within the meaning of the
Investment Company Act of 1940, as amended.
2.25 TAX TREATMENT; POOLING OF INTEREST. It knows of no reason why the
Consolidation will fail to qualify as a reorganization under Section 368 of the
Internal Revenue Code. Except as set forth in Section 2.25 of its Disclosure
Schedule, all share repurchase programs previously authorized by its Board of
Directors, except to the extent that it is advised by the SEC that such
purchases would not adversely affect the ability of the parties to account for
the Consolidation as a "pooling of interest" for accounting purposes, have been
revoked by resolution duly adopted on or prior to the date hereof.
2.26 YEAR 2000 WARRANTY. Except as set forth in Section 2.26 of its
Disclosure Schedule, the computer systems and software programs of it (including
equipment and devices which are computer controlled or include imbedded
microprocessors) are Year 2000 Compliant (as defined below); provided, however,
that it makes no representations or warranties as to whether the computer
systems or software programs of any supplier, vender, customer or other third
party are Year 2000 Compliant and this SECTION 2.26 shall not apply if a
computer system or software program of any supplier, vender, customer or other
third party directly or indirectly causes its computer systems or software
programs to be non-year 2000 Compliant. The term "Year 2000 Compliant", with
respect to a computer system or software program, means that such computer
system or program, as applicable: (i) is capable of recognizing, processing,
managing, representing, interpreting, and manipulating correctly date related
data for dates earlier and later than January 1, 2000, (ii) has the ability to
provide date recognition for any data element without limitation, (iii) has the
ability to recognize all "leap years" including February 29, 2000.
2.27 XXXXXXX XXXXXXX. It has reviewed its stock transfer records since
July 26, 1999 and has questioned its directors and executive officers concerning
known stock transfers since that date. Based upon that investigation, it has
not, and to its knowledge (a) no director or officer of it, (b) no person
related to any such director or officer by blood or marriage and residing in the
same household, and (c) no person knowingly provided material nonpublic
information by any one or more of these persons; has purchased or sold, or
caused to be purchased or sold, any shares of it during any period when it was
in possession of material nonpublic information or in violation of any
applicable provisions of the Exchange Act.
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2.28 INSURANCE. It maintains insurance in full force and effect on
its assets, properties, premises, operations, and personnel in such amounts and
against such risks and losses as are customary and adequate for comparable
entities engaged in the same business and industry. There is no unsatisfied
claim of $25,000.00 or more under such insurance as to which the insurance
carrier has denied liability. During the last five years, no insurance company
has cancelled or refused to renew a policy of insurance covering its assets,
properties, premises, operations, or personnel. It has given adequate and timely
notice to each carrier, and has complied with all policy provisions, with
respect to any known claim for which a defense and/or indemnification may be
available to it.
2.29 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.
(a) Within fourteen (14) days of the date hereof, Bancorp shall
deliver to Sturgis and Sturgis shall deliver to Bancorp each party's respective
Disclosure Schedule setting forth exceptions to its and its Subsidiaries'
representations and warranties in this ARTICLE TWO, provided that each exception
set forth in a Disclosure Schedule shall be deemed disclosed for purposes of all
representations and warranties if such exception is contained in a section of
the Disclosure Schedule corresponding to a Section in ARTICLE TWO and provided
further that no such exception is required to be set forth in a Disclosure
Schedule if its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard established by
SECTION 2.29(B).
(b) If the Disclosure Schedule of either party reveals the
existence of any fact, circumstance or event, individually or taken together
with all other facts, circumstances or events, which would constitute a material
adverse effect or material adverse change (as defined in SECTION 2.29(C)), then
either party, in writing, may terminate this Agreement within five (5) business
days after receipt of such Disclosure Schedule and (i) this Agreement shall
become void and have no effect except the provisions of SECTIONS 2.7, 3.6, 8.2
AND 8.12 shall survive; and (ii) each party shall bear and pay all costs and
expenses incurred by it in connection with this Agreement and the transactions
contemplated herein.
(c) None of the representations or warranties of Bancorp or
Sturgis contained in ARTICLE TWO shall be deemed untrue or incorrect, and no
party shall be deemed to have breached its representations or warranties
contained herein, as a consequence of the existence of any fact, circumstance or
event if such fact, circumstance or event, individually or taken together with
all other facts, circumstances or events, would not have a material adverse
effect or material adverse change on such party. As used in this Agreement, the
term "material adverse effect" or "material adverse change" means an effect or
change which (i) is materially adverse to the financial condition of a party and
its respective Subsidiaries taken as a whole, (ii) significantly and adversely
affects the ability of Bancorp or Sturgis to consummate the transactions
contemplated hereby or to perform its material obligations hereunder or (iii)
enables any person to prevent the consummation of the transactions contemplated
hereby, provided however that any effect or change resulting from (A) actions or
omissions of Bancorp or Sturgis contemplated by this Agreement or taken with the
prior consent of the other party in contemplation of the transactions provided
for herein, or (B) circumstances affecting the financial institutions industry
generally (including changes in laws or regulations, accounting principles or
general levels of interest rates) which do not adversely affect a party and its
Subsidiaries, taken as a whole, in a manner significantly different than the
other party hereto, shall be deemed not to be or have a material adverse effect
or result in a material adverse change.
ARTICLE THREE
COVENANTS
3.1 INVESTIGATION; ACCESS AND COPIES. Between the date of this
Agreement and the Effective Time, each party agrees to give the other party and
its respective representatives and agents full access (to the extent lawful) to
all of the premises, books, records and employees of it and its Subsidiaries at
all reasonable times and to furnish and cause its Subsidiaries to furnish to the
other party and its respective agents or representatives
19
access to and true and complete copies of such financial and operating data, all
documents with respect to matters to which reference is made in ARTICLE TWO of
this Agreement or any list, schedule or certificate delivered or to be delivered
in connection herewith and such other documents, records or information with
respect to the businesses and properties of it as the other party or its
respective agents or representatives shall from time to time reasonably request;
provided however, that any such inspection: (a) shall be conducted in such
manner as not to interfere unreasonably with the operation of the business of
the entity inspected, and (b) shall not affect any of the representations and
warranties hereunder. Each party will give prompt written notice to the other
party of any event or development which (i) had it existed or been known on the
date of this Agreement, would have been required to be disclosed under this
Agreement, (ii) would cause any of its representations and warranties contained
herein to be inaccurate or otherwise materially misleading, or (iii) materially
relates to the satisfaction of the conditions set forth in ARTICLE FOUR of this
Agreement. Notwithstanding anything to the contrary herein, no party hereto
shall be required to provide access to or to disclose information where such
access or disclosure would have jeopardized the attorney-client privilege of the
entity in possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or, in the event of any litigation or
threatened litigation between the parties or the terms of this Agreement, where
access to information may be adverse to the interest of such party. To the
extent reasonably practical, the parties hereto will make appropriate substitute
disclosure arrangements where the restrictions of the preceding sentence apply.
3.2 CONDUCT OF BUSINESS. Between the date of this Agreement and
the Effective Time or the termination of this Agreement, each party agrees, on
behalf of itself and its respective Subsidiaries, except insofar as the
President of Sturgis or the President of Bancorp shall otherwise consent in
writing (which consent shall not be unreasonably withheld):
(a) That it and its Subsidiaries shall (i) except as contemplated
in this Agreement conduct their businesses only in the ordinary course
consistent with past practices, (ii) maintain their books and records in
accordance with past practices, and (iii) use all reasonable efforts to preserve
intact their business organization and assets, to maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates and take no action that would (A) adversely affect the
ability of any of them to obtain any Governmental Approvals (as defined in
SECTION 4.1(C) hereof) or which would reasonably be expected to hinder or delay
receipt of Governmental Approvals or (B) adversely affect its ability to perform
its obligations under this Agreement;
(b) That, except as expressly permitted in this SECTION 3.2(B),
it and its Subsidiaries shall not: (i) declare, set aside or pay any dividend or
make any other distribution with respect to its capital stock, except for
dividends in accordance with past practice, (ii) reacquire or buy any of its
outstanding shares, (iii) issue or sell any shares of capital stock of it except
shares of it issued pursuant to exercise of stock options previously issued and
identified in SCHEDULE 1.11, (iv) effect any stock split, stock dividend,
reverse stock split or other reclassification or recapitalization of its common
stocks, or (v) issue any options or other rights to purchase its capital stock.
Notwithstanding the foregoing, Bancorp may adopt a stock option plan after the
date of this Agreement and prior to the Effective Date as contemplated by
SECTION 1.11(C) above.
(c) That, except as expressly permitted in this SECTION 3.2(C),
it and its Subsidiaries shall not: (i) sell, dispose of or pledge any
significant assets of it other than in the ordinary course of business
consistent with past practices or to borrow funds consistent with the provisions
hereinafter contained, (ii) merge or consolidate it into another entity or
acquire any other entity or except in accordance with its written business plan
in effect on the date hereof, acquire any significant assets, (iii) sell or
pledge or agree to sell or pledge or permit any lien to exist on any stock of
any of its Subsidiaries owned by it, (iv) change the Articles of Incorporation
or, charter, Bylaws or other governing instruments of it, except as contemplated
by this Agreement, (v) engage in any lending activities other than in the
ordinary course of business consistent with past practices, (vi) form any new
Subsidiary (except as contemplated by this Agreement with respect to Newbank and
Sturgis and Southern each
20
creating their own limited liability company for single business tax purposes)
or cause or permit a material change in the activities presently conducted by
any Subsidiary or make any additional investment in Subsidiaries in excess of
$50,000.00, (vii) engage in any off balance sheet interest rate swap agreement,
except to hedge interest rate risk on certificates of deposit or mortgage
servicing rights, or to hedge interest rate risk and/or credit risk on
commitments to extend consumer credit secured by residential mortgage loans,
(viii) engage in any material activity not contemplated by its written business
plan in effect on the date hereof, (ix) purchase any equity securities other
than Federal Home Loan Bank Stock or incur or assume any indebtedness except in
the ordinary course of business, (x) authorize capital expenditures other than
in the ordinary course of business, (xi) implement or adopt any change in its
accounting principles, practices, or methods other than as may be required by
generally accepted accounting principles, or (xii) make any change to or take
any action to amend, modify or terminate its Contracts. The limitations
contained in this SECTION 3.2 shall also be deemed to constitute limitations as
to the making of any commitment with respect to any matters set forth in this
SECTION 3.2.
(d) That, except as expressly permitted in this SECTION 3.2(C),
it and its Subsidiaries shall not: (i) grant any general increase in
compensation or benefits to its employees or officers or pay any bonus to its
employees or officers except in accordance with policies in effect on the date
hereof, (ii) enter into, extend, renew, modify, amend or otherwise change any
employment or severance agreement with any of its directors, officers or
employees (except as provided in SECTION 4.1(I) below), (iii) grant any increase
in fees or other increases in compensation or benefits to any of its present or
former directors in such capacity, and (iv) establish or sponsor any new
Employee Plan or Benefit Arrangement or effect any material change in its
Employee Plans or Benefit Arrangements (unless such change is contemplated by
this Agreement or is required by applicable law or, in the opinion of its
counsel, is necessary to maintain continued qualification of tax-qualified plan
that provides for retirement benefits).
3.3 NO SOLICITATION. Each party agrees on behalf of itself and
each of its Subsidiaries that it will not authorize or permit any director,
officer, employee, investment banker, financial consultant, attorney, accountant
or other representative of it, directly or indirectly to initiate contact with
any person or entity in an effort to solicit, initiate or encourage any "Take
Over Proposal" (as defined in this SECTION 3.3). Except as the fiduciary duties
of its Board of Directors may otherwise require (as determined in good faith
after consultation with its legal counsel), each party agrees that it will not
authorize or permit any officer, director, employee, investment banker,
financial consultant, attorney, accountant or other representative of it,
directly or indirectly: (i) to cooperate with, or furnish or cause to be
furnished any non-public information concerning its business, properties or
assets, to any person or entity in connection with any Take Over Proposal, (ii)
to negotiate any Take Over Proposal with any person or entity, or (iii) to enter
into any agreement, letter of intent or agreement in principle as to any Take
Over Proposal. Each party agrees that it shall promptly give notice to the other
upon becoming aware of any Take Over Proposal, such notice to contain, at a
minimum, the identity of the person submitting the Take Over Proposal, a copy of
any written inquiry or other communication, the terms of any Take Over Proposal,
any information requested or discussion sought to be initiated and the status of
any request, negotiations or expression of interest. As used in this Agreement
"Take Over Proposal" shall mean any proposal other than as contemplated by this
Agreement for a consolidation or other business combination involving either
party or for the acquisition of a ten percent or a greater equity interest in
either party or any of their respective Subsidiaries or for the acquisition of a
substantial portion of the assets of either party or any of their respective
Subsidiaries.
3.4 SHAREHOLDER APPROVAL. Sturgis shall call the meeting(s) of
its shareholders for the purpose of voting upon this Agreement and related
matters, as referred to in SECTION 1.10 and, if necessary, SECTION 1.12(E)(IV)
hereof, as soon as practicable. In connection with the Sturgis Shareholders
Meeting, the Board of Directors shall recommend approval of this Agreement and
any other matters requiring shareholder action relating to the transactions
contemplated herein unless as a result of an unsolicited Take Over Proposal
received by a party after the date hereof, the Board of Directors of Sturgis
determines in good faith after consultation
21
with its legal counsel and investment banking firm that to do so would
constitute a breach of the fiduciary duties of such Board of Directors to the
shareholders of Sturgis. Sturgis shall use its best effort to solicit from its
shareholders proxies in favor of approval, and to take all other action
necessary or helpful to secure a vote of the holders of the outstanding shares
of its common stock in favor of this Agreement, except as the fiduciary duties
of the Board of Directors may otherwise require.
3.5 COMPLIANCE WITH ACCOUNTING AND SECURITIES RULES.
(a) After execution of this Agreement, (i) Sturgis shall use its
best efforts to cause to be delivered to Bancorp from each person who may be
deemed to be an "affiliate" of Sturgis within the meaning of Rule 145 of the
Securities Act, a written letter agreement as of a date prior to the date of the
Sturgis Shareholders Meeting in form reasonably satisfactory to Bancorp,
regarding restrictions on resale of shares of Bancorp Common Stock, to ensure
compliance with applicable restrictions imposed under the federal securities
laws and, prior to the Effective Time, Sturgis shall use its best efforts to
secure such written letter agreement from persons who become an affiliate of it
subsequent to the date hereof, and (ii) neither party shall take any action
which would prevent the Consolidation and the other transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the Internal Revenue Code, or, except as provided in SECTION 1.12(E) above,
which would disqualify the Consolidation as a "pooling of interests" for
accounting purposes.
(b) Because the Consolidation is intended to qualify for pooling
of interests accounting treatment, the shares of Bancorp Common Stock received
by Sturgis affiliates in the Consolidation shall not be transferable until such
time as financial results covering at least 30 days of post-Consolidation
operations have been published, and the certificates representing such shares
will bear an appropriate restrictive legend. Bancorp shall use its best efforts
to publish as promptly as reasonably practical but in no event later than
forty-five (45) days after the end of the first full month after the Effective
Time in which there are at least thirty (30) days of post-consolidation combined
operations (which month may be the month in which the Effective Time occurs),
combined net interest income and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135. In the event
the Consolidation is to be treated as a "purchase" pursuant to SECTION 1.12(E)
above, this SECTION 3.5(B) shall be null and void.
3.6 PUBLICITY. Between the date of this Agreement and the
Effective Time, neither party nor any of its Subsidiaries shall, without the
prior approval of the other party (which approval shall not be unreasonably
withheld) issue or make, or permit any of its directors, employees, officers or
agents to issue or make, any press release, disclosure or statement to the press
or third party with respect to the Consolidation or the other transactions
contemplated hereby, except as required by applicable law or applicable rules of
the National Association of Security Dealers, Inc. The parties shall cooperate
when issuing or making any press release, disclosure statement with respect to
the Consolidation or any other transactions contemplated hereby.
3.7 COOPERATION. Between the date of this Agreement and the
Effective Time, the parties and their respective Subsidiaries shall, in
conformance with provisions of this Agreement, use their best efforts, and take
all actions necessary or appropriate to consummate the Consolidation and the
other transactions contemplated hereby at the earliest practicable date.
3.8 ADDITIONAL FINANCIAL STATEMENTS AND REPORTS. As soon as
reasonably practical after they become publicly available, each party shall
furnish to the other its statements of financial condition, statements of
operation or statements of income, statements of cash flow and statements of
changes in shareholders' equity at all dates and for all periods before the
Closing. Such financial statements will be prepared in conformity with generally
accepted accounting principles applied on a consistent basis and fairly present
the financial condition, results of operation and cash flow of the respective
parties (subject, in the case of unaudited financial statements to (a) normal
year-end audit adjustments, (b) any other adjustments described therein, and (c)
the absence of notes which, if presented, would not differ materially from those
included in the most recent audited financial
22
statements), and all such financial statements will be prepared in conformity
with the requirements of Form 10-Q or 10-K under the Exchange Act. As soon as
reasonably practical after they are filed, each party shall, to the extent
permitted under applicable law, furnish to the other its Regulatory Reports.
3.9 STOCK EXCHANGE LISTING. After the Closing, Bancorp agrees to
use all commercially reasonable efforts to cause Bancorp Common Stock to be
listed in the NASDAQ National Market.
3.10 EMPLOYEE BENEFITS AND AGREEMENTS. The Employee Plans shall
not be terminated by reason of the Consolidation, but shall continue thereafter
as plans of Sturgis and Bancorp until such time as the Employee Plans are
integrated, subject to the terms and conditions specified in such plans and to
such changes therein as may be necessary to reflect the consummation of the
Consolidation.
3.11 SECTION 3.11 has been intentionally omitted.
3.12 FORBEARANCES. During the period from the date of this
Agreement to the Effective Time, except as set forth in its Disclosure Schedule
and, except as expressly contemplated or permitted by this Agreement neither
party shall, without the prior written consent of the other party: (a) take any
action that would prevent or impede the Consolidation from qualifying (i) for
"pooling of interest" accounting treatment or (ii) as a reorganization within
the meaning of Section 368 of the Internal Revenue Code.
3.13 LEGAL CONDITIONS TO CONSOLIDATION. Each party shall, and
shall cause its Subsidiaries to, use their best efforts (a) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party with respect to the
Consolidation and, subject to the conditions set forth in ARTICLE FOUR hereof,
to consummate the transactions contemplated by this Agreement and (b) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any governmental entity or authority
and any other third party which is required to be obtained by it or any of its
Subsidiaries in connection with the Consolidation and the other transactions
contemplated by this Agreement.
3.14 COMPLIANCE. Each party shall comply, and shall cause each of
its Subsidiaries to comply, in all material respects with all laws, regulations,
agreements, court orders, and administrative orders applicable to the conduct of
its business unless the application of such laws, regulations, or orders is
being contested in good faith and the other party has been notified of such
contest.
3.15 MAINTENANCE. Each party will use all reasonable efforts to
maintain its and its Subsidiaries' property and assets in their present state of
repair, order and condition, reasonable wear and tear and damage by fire or
other casualty excepted.
3.16 PRESERVATION OF GOODWILL. Each party will use all reasonable
efforts to preserve its and its Subsidiaries' business organizations intact, to
keep available the services of its and its Subsidiaries' present officers and
employees, and to preserve the goodwill of its and its Subsidiaries' customers
and others having business relations with it or its Subsidiaries.
3.17 INSURANCE POLICIES. Each party shall use all reasonable
efforts to maintain and keep in full force and effect insurance coverage, so
long as such insurance is reasonably available, on its and its Subsidiaries'
assets, properties, premises, operations, and personnel in such amounts against
such risk and loss as are presently in force.
3.18 CHARGE-OFFS. Each party shall maintain its and its
Subsidiaries' reserve for loan and lease losses in a manner in conformity with
its prior practice and applicable industry, regulatory and accounting standards.
23
3.19 DATA PROCESSING CONTRACTS. Each party shall maintain all
material data processing contracts of it and its Subsidiaries.
ARTICLE FOUR
CONDITIONS OF CONSOLIDATION
4.1 GENERAL CONDITIONS. The obligations of each party to effect
the Consolidation shall be subject to the satisfaction (or written waiver by
such party, to the extent such condition is waivable) of the following
conditions before the Effective Time:
(a) SHAREHOLDER APPROVAL. The holders of the outstanding shares
of Sturgis Common Stock shall have approved or adopted this Agreement as
specified in SECTION 1.10 and SECTION 1.12(E)(IV) hereof or as otherwise
required by applicable law.
(b) NO PROCEEDINGS. No order shall have been entered and remain
in force restraining or prohibiting the Consolidation and any legal,
administrative, arbitration, investigatory or other proceedings by any
governmental or judicial or other authority. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any governmental or regulatory authority which prohibits, materially
restricts or makes illegal the consummation of the Consolidation.
(c) GOVERNMENTAL APPROVALS. To the extent required by applicable
law or regulation, all approvals of or filings with any governmental or
regulatory authority (collectively "Governmental Approvals") shall have been
obtained or made, and any waiting period shall have expired in connection with
the consummation of the Consolidation; provided, however, that none of the
proceedings shall be deemed obtained or made if it shall be conditioned or
restricted in a manner that would have or result in a material adverse effect on
the parties hereto. All other statutory or regulatory requirements for the valid
consummation of the Consolidation shall have been satisfied.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective and shall not be subject to a stop order of the SEC (and
no proceedings for that purpose shall have been initiated or threatened by the
SEC) and, if the offer and sale is subject to the securities laws of any state,
shall not be subject to a stop order of any state's securities authority.
(e) FEDERAL TAX OPINION. Each party shall have received an
opinion of its independent accountants, dated as of the Effective Time, to the
effect that for federal income tax purposes (i) the Consolidation will qualify
as a reorganization under Section 368 of the Internal Revenue Code, (ii) no gain
or loss will be recognized by Sturgis or Bancorp by reason of the Consolidation,
(iii) no gain or loss will be recognized by any shareholder of Sturgis upon the
exchange of Sturgis Common Stock solely for Bancorp Common Stock in the
Consolidation, (iv) the basis of the Bancorp Common Stock received by each
shareholder of Sturgis who exchanges Sturgis Common Stock for Bancorp Common
Stock in the Consolidation will be the same as the basis of Sturgis Common Stock
surrendered and exchanged therefor (subject to any adjustments required as a
result of receipt of cash in lieu of a fractional share), (v) the holding period
of the Bancorp Common Stock received by a shareholder of Sturgis in the
Consolidation will include the holding period of the Sturgis Common Stock
surrendered in exchange therefor, provided that such shares of Sturgis Common
Stock were held as a capital asset by such shareholders at the Effective Time,
and (vi) cash received by a Sturgis shareholder in lieu of a fractional share
interest of Bancorp Common Stock as part of the Consolidation will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest which such shareholder would otherwise be entitled to
receive and will qualify as capital gain or loss (assuming the Sturgis stock was
a capital asset in such shareholders' hands at the Effective Time).
24
(f) THIRD PARTY CONSENTS. All consents or approvals of all
persons (other than Governmental Approvals referred to in SECTION 4.1(C) hereof)
required for the execution, delivery and performance of this Agreement and the
consummation of the Consolidation shall have been obtained and shall be in full
force and effect unless the failure to obtain such consent or approval is not
reasonably likely to have, individually or in the aggregate a material adverse
effect on the parties or transaction hereto.
(g) POOLING OF INTEREST. Each party shall have received a letter,
effective as of the Effective Time, from its independent accountants addressed
to it to the effect that the Consolidation will qualify for "pooling of
interest" accounting treatment.
(h) FAIRNESS OPINION. Each party shall have received its written
fairness opinion from its financial consultant.
(i) EMPLOYMENT AGREEMENTS. Bancorp shall have entered into
Employment Agreements in form and substance reasonably acceptable to Bancorp and
Sturgis with: (i) Xxxxxxx X. Xxxxxx, (ii) Xxxxx X. Xxxxxxxxx and (iii) such
other individuals, if any, as shall be mutually agreed upon by Bancorp and
Sturgis.
(j) STOCK OPTION PLAN. The holders of the outstanding shares of
Bancorp Common Stock shall have approved a Stock Option Plan at the 2000 annual
meeting of Bancorp's shareholders whereby Bancorp shall be authorized to issue
qualified and non-qualified stock options in sufficient amounts to convert the
options for Sturgis Common Stock specified in SCHEDULE 1.11 to options for
Bancorp Common Stock as provided in SECTION 1.11 above.
(k) DISSENTER RIGHTS. The independent accounting firms regularly
retained by Bancorp and Sturgis shall have mutually determined that the
Consolidation would qualify as a "pooling of interest" for accounting purposes
if all the holders of Potentially Dissenting Shares (as defined below) perfect
their dissenters' rights under MSBA. As used herein, "Potentially Dissenting
Shares" shall mean all shares held by any holder of Sturgis Common Stock where
such holder shall have taken one or both of the following actions: (i) given
notice in writing to Sturgis at or prior to the Sturgis Shareholders Meeting
that such holder dissents from the Consolidation, or (ii) voted against the
Consolidation at the Sturgis Shareholders Meeting.
(1) BANCORP NAME. Bancorp shall have adopted an assumed name by
the procedure specified in SECTION 1.14 hereof.
4.2 CONDITIONS TO OBLIGATIONS OF STURGIS. The obligations of
Sturgis to effect the Consolidation and the other transactions contemplated
hereby shall be subject to the satisfaction or written waiver of Sturgis of the
following conditions before the Effective Time:
(a) NO MATERIAL ADVERSE EFFECT. Between the date of this
Agreement and the Closing, Bancorp shall not have been affected by any event or
change which has had or caused a material adverse effect or material adverse
change on it.
(b) REPRESENTATIONS, WARRANTIES AND CONDITIONS. The
representations and warranties of Bancorp (i) shall be true and correct as of
the date hereof and at the Effective Time with the same effect as though made at
the Effective Time (or on the date when made in the case of any representation
or warranty which specifically relates to an earlier date) except where the
failure to be true and correct would not have, or would not reasonably be
expected to have, a material adverse effect on Bancorp, (ii) Bancorp and its
Subsidiaries shall have performed all obligations and complied with each
covenant, in all material respects, and satisfied all conditions under this
Agreement on its part to be satisfied at or before the Effective Time, and (iii)
Bancorp shall have delivered to Sturgis a certificate, dated the Effective Time
and signed by its chief executive officer and chief financial officer,
certifying as to the satisfaction of clauses (i) and (ii) hereof.
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(c) NO LITIGATION. Neither Bancorp nor any Bancorp Subsidiary
shall be subject to any pending litigation which, if determined adversely to
Bancorp or to any Bancorp Subsidiary, would have a material adverse effect on
Bancorp.
(d) AUDITED FINANCIALS. Bancorp shall have delivered to Sturgis
audited consolidated financial statements at and for the year ended December 31,
1999, including an unqualified opinion of Bancorp's independent auditors related
thereto.
(e) OTHER CERTIFICATES. Bancorp shall have delivered to Sturgis
such other certificates and instruments as Sturgis and its counsel may
reasonably request. The form and substance of all certificates, instruments and
other documentation delivered to Sturgis under this Agreement shall be
reasonably satisfactory to Sturgis and its counsel.
(f) OPINION OF LEGAL COUNSEL. Bancorp shall have delivered to
Sturgis an opinion of Miller, Canfield, Paddock & Stone, P.L.C., counsel for
Bancorp, dated as of the date of the Closing and in form reasonably satisfactory
to counsel for Sturgis.
4.3 CONDITIONS TO OBLIGATIONS OF BANCORP. The obligations of
Bancorp to effect the Consolidation and the other transactions contemplated
hereby shall be subject to the satisfaction or written waiver by Bancorp of the
following additional conditions before the Effective Time:
(a) NO MATERIAL ADVERSE EFFECT. Between the date of this
Agreement and Closing, Sturgis shall have not been affected by any event or
change which has had or caused a material adverse effect or material adverse
change on Sturgis.
(b) REPRESENTATIONS, WARRANTIES AND CONDITIONS. The
representations and warranties of Sturgis shall (i) be true and correct as of
the date hereof and at the Effective Time with the same effect as though made at
the Effective Time (or on the date when made in the case of any representation
or warranty which specifically relates to an earlier date) except where the
failure to be true and correct would not have, or would not reasonably be
expected to have, a material adverse effect on Sturgis, (ii) Sturgis and its
Subsidiaries shall have performed all obligations and complied with each
covenant, in all material respects and satisfied all conditions under this
Agreement on its part to be satisfied at or before the Effective Time, and (iii)
Sturgis shall have delivered to Bancorp a certificate, dated the Effective Time
and signed by its President and chief financial officer, certifying as to the
satisfaction of clauses (i) and (ii) hereof.
(c) NO LITIGATION. Neither Sturgis nor any Sturgis Subsidiary
shall be subject to any pending litigation which, if determined adversely to
Sturgis or to any Sturgis Subsidiary, would have a material adverse effect on
Sturgis.
(d) AUDITED FINANCIALS. Sturgis shall have delivered to Bancorp
audited financial statements at and for the year ended December 31, 1999,
including an unqualified opinion of Sturgis' independent auditors related
thereto.
(e) OTHER CERTIFICATES. Sturgis shall have delivered to Bancorp
such other certificates and instruments as Bancorp and its counsel may
reasonably request. The form and substance of all certificates, instruments and
other documentation delivered to Bancorp under this Agreement shall be
reasonably satisfactory to Bancorp and its counsel.
(f) OPINION OF LEGAL COUNSEL. Sturgis shall have delivered to
Bancorp an opinion of Dresser, Xxxxxxx, Xxxxxxx & Xxxx, P.C., counsel for
Sturgis, dated as of the date of Closing and in form reasonably satisfactory to
counsel for Bancorp.
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ARTICLE FIVE
CORPORATE GOVERNANCE
5.1 STURGIS AND SOUTHERN OFFICERS AND EMPLOYEES. After the
Effective Time, Sturgis as the Surviving Corporation and Southern shall continue
to have the same officers and employees as immediately before the Effective Time
subject to the discretion of the continuing Board of Directors of Sturgis and
Southern.
5.2 STURGIS AND SOUTHERN BOARD OF DIRECTORS. The present Boards
of Directors of Sturgis and Southern shall continue to serve as the Board of
Directors of Sturgis and Southern after the Consolidation except that Sturgis
shall cause Xxxxx X. Xxxxxxxxx to be added to the Board of Directors of Sturgis
and Bancorp shall cause Xxxxxxx X. Xxxxxx to be added to the Board of Directors
of Southern. The Bylaws of Sturgis and Southern shall be amended as necessary to
accommodate such additions.
5.3 BANCORP BOARD OF DIRECTORS. Bancorp shall cause all of the
Directors of Bancorp except Xxxxx X. Xxxxxxxxx or another Director designated by
the Board of Directors of Bancorp (the "Designated Director") to resign as of
the Effective Time. Immediately after the Effective Time, the Designated
Director, as the sole remaining Director of Bancorp, shall elect the individuals
identified in Section 5.3 of each party's Disclosure Schedule to the Board of
Directors of Bancorp for the terms indicated: (i) two (2) individuals designated
by Bancorp and one (1) individual designated by Sturgis for a one (1) year term,
(ii) two (2) individuals designated by Bancorp and one (1) individual designated
by Sturgis for a two (2) year term, and (iii) two (2) individuals designated by
Sturgis and one (1) individual designated by Bancorp for a three (3) year term;
provided that the Designated Director shall continue to serve the balance of his
or her elected term and shall, for purposes of the foregoing, be deemed an
individual designated by Bancorp for that particular term.
5.4 BANCORP OFFICERS AND COMMITTEES. Bancorp shall cause all of
the officers of Bancorp to resign as of the Effective Time. It is the intention
of the parties that immediately after the Board of Directors of Bancorp is
formed under SECTION 5.3 above, the Board of Directors will take action to
elect: Xxxxxxx X. Xxxxxx as President and Chief Executive Officer ("CEO") of
Bancorp; Xxxxx X. Xxxxxxxxx as Vice-Chairman, Chief Operating Officer and Chief
Financial Officer of Bancorp; Xxxxx Xxxxxxxx as Chairman of Bancorp; Xxxxx
Xxxxxxxx as Vice Chairman of Bancorp; and all members of all committees of the
Bancorp Board of Directors with equal representation from both the Sturgis and
Bancorp designated board members. It is intended by the parties that at age
sixty-five (65) years, Xxxxxxx X. Xxxxxx will be succeeded by Xxxxx X. Xxxxxxxxx
as President and CEO of Bancorp and Xxxxxxx X. Xxxxxx will become Chairman of
the Board of Directors of Bancorp.
5.5 BYLAWS. At the Effective Time, the Bylaws of Bancorp shall be
amended and restated to provide as follows (the "Amended and Restated Bylaws"):
(a) The Board of Directors of Bancorp shall have nine (9) members
with staggered three (3) year terms and no Director may stand for election after
age seventy (70) years.
(b) Bancorp shall not take any of the following actions unless
such action is authorized by a vote of seventy five percent (75%) of the members
of the Board of Directors of Bancorp:
(i) amendments to Bancorp's Articles of Incorporation or
the Amended and Restated Bylaws;
(ii) approval of any merger, share exchange or dissolution
involving Bancorp or any of its subsidiaries;
(iii) sale or transfer of substantially all of the corporate
assets of Bancorp or any of its subsidiaries;
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(iv) issuance and/or sale of any stock of Bancorp including
the establishment of the consideration to be accepted by Bancorp for
the sale of any shares of its stock;
(v) acquisition by Bancorp of another business or
operation by way of merger, share exchange, purchase of stock, purchase
of assets or otherwise wherein the consideration paid or delivered
exceeds either 10% of the book value of assets of Bancorp and its
subsidiaries or 10% of the fair market value of outstanding capital
stock of Bancorp, as applicable;
(vi) any action taken by Bancorp as a shareholder of any
subsidiary including, without limitation, Sturgis and Southern; and
(vii) election of officers, nomination of directors and
appointment of Board of Directors committee members.
ARTICLE SIX
TERMINATION OF OBLIGATIONS
6.1 TERMINATION OF AGREEMENT AND ABANDONMENT OF CONSOLIDATION.
This Agreement may be terminated at any time before the Effective Time, whether
before or after approval thereof by the shareholders of Sturgis or Bancorp, as
provided below:
(a) MUTUAL CONSENT. By mutual consent of the parties as
evidenced by their written agreement.
(b) CLOSING DELAY. At the election of either party, as evidenced
by written notice, if the Closing shall not have occurred on or before December
31, 2000, or such later date as shall have been agreed to in writing by the
parties, provided, however, that the right to terminate under this SECTION
6.1(B) shall not be available to any party whose failure to perform an
obligation hereunder has been the cause of, or has resulted in, the failure of
the Closing to occur on or before such date.
(c) CONDITIONS TO STURGIS' PERFORMANCE NOT MET. By Sturgis
(provided it has not breached this Agreement to any material extent) upon
delivery of written notice of termination to Bancorp if any event occurs
(through no fault of Sturgis) which renders impossible the satisfaction in any
material respect one or more of the conditions to the obligations of Sturgis to
effect the Consolidation set forth in SECTIONS 4.1 and 4.2 hereof and
non-compliance is not waived in writing by Sturgis.
(d) CONDITIONS TO BANCORP'S PERFORMANCE NOT MET. By Bancorp
(provided it has not breached this Agreement to any material extent) upon
delivery of written notice of termination to Sturgis if any event occurs
(through no fault of Bancorp) which renders impossible the satisfaction in any
material respect one or more of the conditions to the obligations of Bancorp to
effect the Consolidation set forth in SECTIONS 4.1 and 4.3 hereof and
non-compliance is not waived in writing by Bancorp.
(e) BREACH. By either Sturgis or Bancorp if there has been a
material breach of the other party's representations and warranties (as
contemplated in this Agreement), covenants or agreements set forth in this
Agreement of which written notice has been given to such breaching party and
which has not been fully cured or cannot be fully cured within the earlier of
(i) thirty (30) days after receipt of such notice or (ii) five (5) days prior to
the Closing and which breach would, in the reasonable opinion of the
non-breaching party, individually or in the aggregate, have, or be reasonably
likely to have, a material adverse effect on the non-breaching party.
(f) STURGIS ELECTION. By Sturgis if the Board of Directors of
Bancorp shall have authorized Bancorp to enter into any agreement, letter of
intent or agreement in principle with the intent to pursue or effect a Take Over
Proposal.
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(g) BANCORP ELECTION. By Bancorp if: (i) the Board of Directors
of Sturgis shall not have publicly recommended in the prospectus and proxy
statement that its shareholders approve and adopt this Agreement or shall have
withdrawn, modified or changed in any manner adverse to Bancorp its approval or
recommendation of this Agreement, or (ii) the Board of Directors of Sturgis
shall have authorized Sturgis to enter into any agreement, letter of intent or
agreement in principle with the intent to pursue or effect a Take Over Proposal.
6.2 TERMINATION; LACK OF SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. In the event of termination of this Agreement pursuant to SECTION
6.1 hereof:
(a) This Agreement shall become void and have no effect, except
(i) the provisions of SECTIONS 2.7, 3.6, 8.2 and 8.12 shall survive; (ii) a
termination pursuant to SECTION 6.1(E) hereof shall not relieve the breaching
party from any liability for any uncured intentional breach of a representation,
warranty, covenant or agreement giving rise to such termination and the party
whose representations and warranties were incorrect or who breached such
covenant or agreement shall be liable to the other party for all costs and
expenses of the other party in connection with the preparation, negotiation,
execution and performance of this Agreement (including reasonable legal and
accounting fees), in addition to all rights and remedies to which such
non-breaching party may otherwise be entitled; (iii) in the event of a
termination pursuant to SECTION 6.1(F) by Sturgis, Bancorp shall pay Sturgis
Five Hundred Thousand and 00/100 Dollars ($500,000.00) as a break-up fee plus
all costs, fees and expenses incurred by Sturgis in connection with the
preparation, negotiation, execution and performance of this Agreement (including
reasonable legal and accounting fees) which shall be the sole and exclusive
remedy of Sturgis in connection with such termination of this Agreement; and
(iv) in the event of a termination pursuant to SECTION 6.1(G) by Bancorp,
Sturgis shall pay Bancorp Five Hundred Thousand and 00/100 Dollars ($500,00.00)
as a break-up fee plus all costs, fees and expenses incurred by Bancorp in
connection with the preparation, negotiation, execution and performance of this
Agreement (including reasonable legal and accounting fees) which shall be the
sole and exclusive remedy of Bancorp in connection with such termination of this
Agreement.
(b) The representations, warranties and agreements 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, no
party shall have any liability to the other on account of any breach or failure
of any of those representations, warranties, covenants and agreements, provided,
however that the foregoing clause (i) shall not apply to agreements of the
parties which by their terms are intended to be performed after the Effective
Time and (ii) shall not relieve any party or person for liability for fraud or
intentional misrepresentation.
(c) At any time prior to the Effective Time, the parties hereto,
by action taken or authorized by their respective Board of Directors, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by Sturgis' shareholders, there may
not be, without further approval of such shareholders, any extension or waiver
or this Agreement or any portion hereof which reduces the amount or changes the
form of consideration to be delivered to the holders of Sturgis Common Stock.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or a estoppel with respect to, any subsequent waiver or
extension.
6.3 PAYMENT OF EXPENSES. Except as otherwise provided herein,
each party shall bear and pay all costs and expenses incurred by it in
connection with the transactions contemplated hereby; provided, however, that
the costs and expenses of printing and mailing the Proxy Statement/Prospectus,
and all filing and other fees paid to the SEC in connection with the
Consolidation, shall be borne equally by Sturgis and Bancorp.
29
ARTICLE SEVEN
OTHER AGREEMENTS
7.1 ADDITIONAL AGREEMENTS.
(a) If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all necessary action as may be reasonably requested by,
and at the sole expense of, Bancorp.
(b) Except as provided in SECTION 1.12(E) above, each party shall
use all commercially reasonable efforts to cause to be delivered to the other
the independent accountants letter, dated as of the Closing, stating that
accounting for the Consolidation is as a "pooling of interest" under opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations.
7.2 ADVICE OF CHANGES. Each party shall promptly advise the other
party of any change or event having a material adverse effect on it or which it
believes would or would reasonably be likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
ARTICLE EIGHT
GENERAL
8.1 AMENDMENTS. Subject to applicable law, this Agreement may be
amended, whether before or after any shareholder approval hereof, by an
agreement in writing executed in the same manner as this Agreement and
authorized or ratified by the Boards of Directors of the parties hereto,
provided that after the approval of this Agreement by the shareholders of
Sturgis, no such amendment may change the amount or form of the consideration to
be delivered hereunder without such shareholders' approval. This Agreement may
not be amended except by a written instrument executed on behalf of each of the
parties.
8.2 CONFIDENTIALITY. All information disclosed by any party to
any other party, whether prior or subsequent to the date of this Agreement,
including without limitation, any information obtained pursuant to SECTION 3.1
hereof, shall be kept confidential by such other party and shall not be used by
such other party otherwise than herein contemplated, all in accordance with the
terms of the Confidentiality Agreement between the parties dated September 9,
1999 (the "Confidentiality Agreement"). In the event of the termination of this
Agreement, each party shall upon request use all reasonable efforts to promptly
return to the other party all documents (and reproductions thereof) received
from such other party (and, in the case of reproductions, all such reproduction)
that include information subject to the confidentiality requirements set forth
above.
8.3 GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Michigan except to the extent certain matters may be governed by
federal law.
8.4 NOTICES. All notice and other communication required or
permitted hereunder shall be in writing and shall be deemed given if mailed by
registered or certified mail (postage prepaid and return receipt requested)
addressed as follows:
If to Sturgis: Sturgis Bank & Trust Company
X.X. Xxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
30
With a copy to: Dresser, Xxxxxxx, Xxxxxxx & Xxxx, P.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to Bancorp: Southern Michigan Bancorp, Inc.
00 Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
With a copy to: Miller, Canfield, Paddock & Stone, P.L.C.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx X. Xxxx, Esq.
Fax: (000) 000-0000
(or such other address as shall be furnished in writing by either party to the
other), and any such notice or communication shall be deemed to have been given
two business days after the date of such mailing (except that the notice of
change of address shall not be deemed to have been given until received by the
addressee). Notices may also be sent by facsimile transmission, hand delivery or
overnight courier and in such event shall be deemed to have been given as of the
date received by the addressee.
8.5 NO ASSIGNMENT. This Agreement may not be assigned by any
party hereto, by operation of law or otherwise, except as contemplated hereby.
8.6 HEADINGS. The description of the Articles and Sections of
this Agreement are inserted for convenience only and are not a part of this
Agreement.
8.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to each other party.
8.8 CONSTRUCTION AND INTERPRETATION. It is expressly acknowledged
and agreed that all parties have been represented by counsel and have
participated in the negotiation and drafting of this Agreement, and there shall
be no presumption against any party on the ground that such party was
responsible for preparing this Agreement or any part of it. Each of the Exhibits
and Schedules referred to in, and/or attached to this Agreement, are an integral
part of this Agreement and are incorporated in this Agreement by reference. In
the event of a conflict between the terms of this Agreement and any Exhibit,
Schedule or other attachment hereto, the terms of this Agreement shall control,
unless prohibited by applicable law. No provision of this Agreement shall be
construed to require either party or their Subsidiaries to take any action which
would violate any applicable law, rule or regulation. Except as the context
otherwise requires, all references herein to any state or federal regulatory
agency shall also be deemed to refer to any predecessor or successor agency, and
all references to state and federal statutes or regulations shall be deemed to
refer to any successor statute or regulation. Whenever this Agreement refers to
a number of days, such number shall refer to calendar days unless business days
are specified. Whenever in this Agreement "or" is used, it is used in the
inclusive sense of "and/or" unless otherwise specified.
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8.9 ENTIRE AGREEMENT. This Agreement, together with the
Schedules, lists, Exhibits and certificates referred to herein or required to be
delivered hereunder, and any amendment hereafter executed and delivered in
accordance with SECTION 8.1 hereof, constitutes the entire agreement of the
parties and supersedes any prior written or oral agreement or understanding
among any parties pertaining to the Consolidation, except that the
Confidentiality Agreement shall remain in full force and effect as contemplated
in SECTION 8.2 hereof.
8.10 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if such provision in this Agreement is held to be prohibited
by or invalid under applicable law, then such provision will be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
8.11 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any person (other than the parties hereto and their respective
successors and assigns) permitted hereby, to any claim, cause of action, remedy
or right of any kind.
8.12 NO EMPLOYMENT SOLICITATION. If this Agreement is terminated,
the parties hereto agree that for a period of twelve (12) months subsequent to
such termination (i) none of the parties shall, without first obtaining the
prior written consent of the other, directly or indirectly, solicit the
employment of any current Director, officer or employee of the other party or
any Subsidiary of such other party and (ii) none of the parties shall actively
solicit business relationships with clients of the other party or any Subsidiary
of such other party solely as the result of review of the information
contemplated in SECTION 8.2 hereof. This provision shall supercede in entirety
the second sentence of Section 6 of the Confidentiality Agreement.
8.13 CONSENT TO JURISDICTION. Each of the parties consent to the
exclusive personal jurisdiction and venue of the courts, state and federal, for
St. Xxxxxx County, State of Michigan, for the purposes of any suit, action or
other proceeding arising out of this Agreement or the transactions contemplated
hereby.
8.14 FURTHER ASSURANCES. At the request of any party to this
Agreement, the other party shall execute, acknowledge and deliver such other
documents and/or instruments as may be reasonably required by the requesting
party to carry out the purposes of this Agreement. In the event any party to
this Agreement shall be involved in litigation, threatened litigation or
government inquiries with respect to a matter covered by this Agreement, every
other party to this Agreement shall also make available to such party, at
reasonable times and subject to reasonable requirements of its own businesses,
such of its personnel as may have information relevant to such matters, provided
that such party shall reimburse the providing party for its reasonable costs for
employee time incurred in connection therewith if more than one business day is
required. Following the Closing, the parties will cooperate with each other in
connection with tax audits and in the defense of any legal proceedings.
8.15 REMEDIES. Unless expressly made the exclusive remedy by the
terms of this Agreement, all remedies provided for in this Agreement are
cumulative and shall be in addition to any and all other rights and remedies
provided by law and by any other agreement between the parties.
32
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
on its behalf by its duly authorized officers as of the date first set forth
above.
STURGIS BANK & TRUST COMPANY
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
By: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
SOUTHERN MICHIGAN BANCORP, INC.
/s/ Xxxxx X. Xxxxxxxxx
----------------------------------------------
By: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
