AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SVB FINANCIAL SERVICES, INC.
AND
XXXXXX FINANCIAL CORPORATION
JANUARY 11, 2005
TABLE OF CONTENTS
ARTICLE I - THE MERGER..............................................................................2
Section 1.1 Merger.............................................................................2
Section 1.2 Name...............................................................................2
Section 1.3 Articles of Incorporation..........................................................2
Section 1.4 Bylaws.............................................................................2
Section 1.5 Directors and Officers.............................................................2
ARTICLE II - CONVERSION OF SHARES AND EXCHANGE OF STOCK CERTIFICATES................................2
Section 2.1 Conversion of Shares...............................................................2
Section 2.2 Exchange of Stock Certificates.....................................................4
Section 2.3 Treatment of Outstanding Somerset Options.........................................11
Section 2.4 Reservation of Shares.............................................................13
Section 2.5 Taking Necessary Action...........................................................13
Section 2.6 Press Releases, Etc...............................................................13
Section 2.7 Xxxxxx Common Stock...............................................................13
Section 2.8 Dissenters' Rights................................................................13
Section 2.9 Certain Actions...................................................................14
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SOMERSET...........................................14
Section 3.1 Authority.........................................................................14
Section 3.2 Organization and Standing.........................................................14
Section 3.3 Subsidiaries......................................................................15
Section 3.4 Capitalization....................................................................15
Section 3.5 Charter, Bylaws and Minute Books..................................................15
Section 3.6 Financial Statements..............................................................16
Section 3.7 Absence of Undisclosed Liabilities................................................19
Section 3.8 Absence of Changes................................................................19
Section 3.9 Dividends, Distributions and Stock Purchases......................................19
Section 3.10 Taxes............................................................................19
Section 3.11 Title to and Condition of Assets.................................................20
Section 3.12 Contracts........................................................................20
Section 3.13 Litigation and Governmental Directives...........................................22
Section 3.14 Compliance with Laws; Governmental Authorizations................................22
Section 3.15 Insurance........................................................................23
Section 3.16 Financial Institutions Bonds.....................................................23
Section 3.17 Labor Relations and Employment Agreements........................................23
Section 3.18 Employee Benefit Plans...........................................................24
Section 3.19 Related Party Transactions.......................................................24
Section 3.20 No Finder........................................................................25
Section 3.21 Complete and Accurate Disclosure.................................................25
Section 3.22 Environmental Matters............................................................25
Section 3.23 Proxy Statement/Prospectus.......................................................25
Section 3.24 SEC Filings......................................................................26
Section 3.25 Reports..........................................................................26
Section 3.26 Loan Portfolio of Somerset Bank..................................................26
Section 3.27 Investment Portfolio.............................................................27
Section 3.28 Regulatory Examinations..........................................................27
Section 3.29 Regulatory Agreements and Matters................................................27
Section 3.30 Beneficial Ownership of Xxxxxx Common Stock......................................28
Section 3.31 Fairness Opinion.................................................................28
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF FULTON..............................................28
Section 4.1 Authority.........................................................................28
Section 4.2 Organization and Standing.........................................................29
Section 4.3 Capitalization....................................................................29
Section 4.4 Articles of Incorporation and Bylaws..............................................29
Section 4.5 Subsidiaries......................................................................29
Section 4.6 Financial Statements..............................................................30
Section 4.7 Absence of Undisclosed Liabilities................................................33
Section 4.8 Absence of Changes; Dividends, Etc................................................33
Section 4.9 Litigation and Governmental Directives............................................33
Section 4.10 Compliance with Laws; Governmental Authorizations................................33
Section 4.11 Complete and Accurate Disclosure.................................................34
Section 4.12 Labor Relations..................................................................34
Section 4.13 Employee Benefits Plans..........................................................34
Section 4.14 Environmental Matters............................................................35
Section 4.15 SEC Filings......................................................................35
Section 4.16 Proxy Statement/Prospectus.......................................................35
Section 4.17 Regulatory Approvals.............................................................36
Section 4.18 No Finder........................................................................36
Section 4.19 Taxes............................................................................36
Section 4.20 Title to and Condition of Assets.................................................36
Section 4.21 Contracts........................................................................36
Section 4.22 Insurance........................................................................37
Section 4.23 Reports..........................................................................37
Section 4.24 Regulatory Agreements and Matters................................................37
ARTICLE V - COVENANTS OF SOMERSET..................................................................38
Section 5.1 Conduct of Business...............................................................38
Section 5.2 Best Efforts......................................................................41
Section 5.3 Access to Properties and Records..................................................41
Section 5.4 Subsequent Financial Statements...................................................41
Section 5.5 Update Schedules..................................................................42
Section 5.6 Notice............................................................................42
Section 5.7 No Solicitation...................................................................42
Section 5.8 Affiliate Letters.................................................................44
Section 5.9 No Purchases or Sales of Xxxxxx Common Stock During Price Determination Period....45
Section 5.10 Dividends........................................................................45
Section 5.11 Internal Controls................................................................45
Section 5.12 Certain Matters, Certain Revaluations, Changes and Adjustments...................45
-ii-
Section 5.13 Other Policies...................................................................46
Section 5.14 Other Transactions...............................................................46
Section 5.15 Transaction Expenses of the Company..............................................46
ARTICLE VI - COVENANTS OF FULTON...................................................................47
Section 6.1 Best Efforts......................................................................47
Section 6.2 Access to Properties and Records..................................................48
Section 6.3 Subsequent Financial Statements...................................................48
Section 6.4 Update Schedules..................................................................48
Section 6.5 Notice............................................................................48
Section 6.6 No Purchase or Sales of Xxxxxx Common Stock During Price Determination Period.....48
Section 6.7 Assumption of Somerset Debentures.................................................49
Section 6.8 Employment Arrangements...........................................................49
Section 6.9 Insurance; Indemnification........................................................50
Section 6.10 Appointment of Fulton Director...................................................51
ARTICLE VII - CONDITIONS PRECEDENT.................................................................51
Section 7.1 Common Conditions.................................................................51
Section 7.2 Conditions Precedent to Obligations of Fulton.....................................53
Section 7.3 Conditions Precedent to the Obligations of Somerset...............................57
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER...................................................59
Section 8.1 Termination.......................................................................59
Section 8.2 Effect of Termination.............................................................60
Section 8.3 Amendment.........................................................................61
Section 8.4 Waiver............................................................................61
ARTICLE IX - CLOSING AND EFFECTIVE TIME............................................................61
Section 9.1 Closing...........................................................................61
Section 9.2 Effective Time....................................................................62
ARTICLE X - NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................62
Section 10.1 No Survival......................................................................62
ARTICLE XI - GENERAL PROVISIONS....................................................................62
Section 11.1 Expenses.........................................................................62
Section 11.2 Other Mergers and Acquisitions...................................................62
Section 11.3 Notices..........................................................................62
Section 11.4 Counterparts.....................................................................63
Section 11.5 Governing Law....................................................................63
Section 11.6 Parties in Interest..............................................................63
Section 11.7 Disclosure Schedules.............................................................64
Section 11.8 Entire Agreement.................................................................64
Section 11.9 Definitions......................................................................64
-iii-
INDEX OF SCHEDULES
Schedule 2.3. Somerset Options
Schedule 3.3. Other Somerset Subsidiaries
Schedule 3.6. Financial Statements
Schedule 3.7. Undisclosed Liabilities
Schedule 3.8. Changes
Schedule 3.9. Dividends, Distributions and Stock Purchases
Schedule 3.10 Taxes
Schedule 3.11 Title to and Condition of Assets
Schedule 3.12 Contracts
Schedule 3.13 Litigation and Governmental Directives
Schedule 3.14 Compliance with Laws; Governmental Authorizations
Schedule 3.15 Insurance
Schedule 3.16 Financial Institutions Bonds
Schedule 3.17 Labor Relations and Employment Agreements
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Related Party Transactions
Schedule 3.20 Finders
Schedule 3.22 Environmental Matters
Schedule 3.26 Loan Portfolio
Schedule 3.27 Investment Portfolio
Schedule 3.29 Regulatory Agreements
Schedule 4.5 Subsidiaries
Schedule 4.6 Financial Statements
Schedule 4.7 Undisclosed Liabilities
Schedule 4.8 Dividends, Distributions and Stock Purchases
Schedule 4.9 Litigation and Governmental Directives
Schedule 4.10 Compliance with Laws; Governmental Authorizations
Schedule 4.14 Environmental Matters
Schedule 4.19 Taxes
Schedule 5.1 Conduct of Business
Schedule 5.1(xxi) Pending and Contemplated Applications
-iv-
INDEX OF EXHIBITS
Exhibit A Form of Warrant Agreement
Exhibit B Form of Warrant
Exhibit C Form of Voting Agreement
Exhibit D Form of Employment Agreements
Exhibit E Form of Opinion of Somerset's Counsel
Exhibit F Form of Opinion of Xxxxxx'x Counsel
-v-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of the 11th day of January, 2005, by
and between XXXXXX FINANCIAL CORPORATION, a Pennsylvania business corporation
having its administrative headquarters at Xxx Xxxx Xxxxxx, X.X. Xxx 0000,
Xxxxxxxxx, Xxxxxxxxxxxx 00000 ("Fulton"), and SVB FINANCIAL SERVICES, INC., a
New Jersey corporation having its administrative headquarters at 00 Xxxx Xxxx
Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Somerset").
BACKGROUND:
Fulton is a financial holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Somerset is a bank holding
company registered under the BHC Act and is the parent of Somerset Valley Bank,
a New Jersey banking corporation ("Somerset Bank"). In addition to Somerset
Bank, Somerset has two directly owned 100% subsidiaries: SVB Bald Eagle
Statutory Trust I and SVB Bald Eagle Statutory Trust II in connection with its
issuance of subordinated debentures. Somerset Bank has one directly owned 100%
subsidiary: Somerset Valley Investment Company, Inc., which owns 100% of the
stock of West End One Corp., which is incorporated in the State of Delaware and
manages an investment portfolio. Somerset Bank and all other wholly-owned
subsidiaries of Somerset and Somerset Bank are collectively referred to herein
as the "Somerset Subsidiaries". Fulton and Somerset wish to merge with each
other, resulting in Somerset Bank becoming a subsidiary of Fulton. Subject to
the terms and conditions of this Agreement, the foregoing transaction will be
accomplished by means of a merger (the "Merger") in which (i) Somerset will be
merged with and into Fulton, (ii) Fulton will survive the Merger, and (iii) all
of the outstanding shares of the common stock of Somerset, $2.09 par value per
share ("Somerset Common Stock"), will be converted into cash and shares of the
common stock of Fulton, par value $2.50 per share, and the associated Fulton
Rights (as such term is defined in Section 2.1 herein) ("Xxxxxx Common Stock").
In connection with the execution of this Agreement, the parties are to
enter into a Warrant Agreement in substantially the form of Exhibit A attached
hereto (the "Warrant Agreement"), which provides for the delivery by Somerset of
a warrant in substantially the form of Exhibit B attached hereto (the "Warrant")
entitling Fulton to purchase shares of the Somerset Common Stock in certain
circumstances. In addition, Somerset has obtained voting agreements in the form
of Exhibit C attached hereto, from the directors and executive officers listed
on Exhibit C, who have agreed to vote shares of voting capital stock
beneficially owned by them in Somerset in favor of this Agreement, the Merger
and, to the extent required, all transactions incident thereto (collectively,
the "Voting Agreements").
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties hereby agree as follows:
ARTICLE I - THE MERGER
Subject to the terms and conditions of this Agreement, Somerset shall merge
with and into Fulton in accordance with the following:
Section 1.1 Merger. At the Effective Time (as defined in Section 9.2
herein) (i) Somerset shall merge with and into Fulton pursuant to the provisions
of the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"),
and the New Jersey Business Corporation Act (the "BCA"), whereupon the separate
existence of Somerset shall cease, and Fulton shall be the surviving corporation
(hereinafter sometimes referred to as the "Surviving Corporation"), and (ii) the
Somerset Common Stock will be converted into Xxxxxx Common Stock and cash
pursuant to the provisions of Article II hereof.
Section 1.2 Name. The name of the Surviving Corporation shall be "Xxxxxx
Financial Corporation". The address of the principal office of the Surviving
Corporation will be Xxx Xxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxx, Xxxxxxxxxxxx
00000.
Section 1.3 Articles of Incorporation. The Articles of Incorporation of the
Surviving Corporation shall be the Articles of Incorporation of Fulton as in
effect at the Effective Time.
Section 1.4 Bylaws. The Bylaws of the Surviving Corporation shall be the
Bylaws of Fulton as in effect at the Effective Time.
Section 1.5 Directors and Officers. The directors and officers of the
Surviving Corporation shall be the directors and officers of Fulton in office at
the Effective Time. Each of such directors and officers shall serve until such
time as his successor is duly elected and has qualified.
ARTICLE II - CONVERSION OF SHARES AND EXCHANGE OF STOCK CERTIFICATES
Section 2.1 Conversion of Shares. At the Effective Time (as defined in
Section 9.2 herein) the shares of Somerset Common Stock then outstanding shall
be converted into shares of Xxxxxx Common Stock and cash, as follows:
(a) Conversion of Somerset Shares. Except as set forth in subsection
------------------------------
(d) below, each share of Somerset Common Stock (a "Somerset Share") issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holders thereof, cease
to be outstanding and be cancelled and extinguished and converted into the
right to receive, upon the surrender of the share certificates evidencing
the Somerset Shares, the Xxxxxx Stock Consideration or the Cash
Consideration, or a combination of Fulton Stock Consideration and the Cash
Consideration, without any interest thereon, as specified in this Article
II hereof (the "Merger Consideration") in accordance with Section 2.2
herein.
(b) Definitions. For purposes hereof, the following terms have the
-----------
following respective meanings:
2
"Cash Consideration" means a per Company Share amount in cash
equal to $21.00
"Conversion Ratio" means .9519
"Outstanding Shares" means the aggregate number of Somerset
Shares outstanding immediately prior to the Effective Time, but
excluding Somerset Shares to be cancelled pursuant to Section
2.1(d), which number will not be greater than the number of
shares outstanding on the date of this Agreement (except as
permitted in Section 5.1 herein)
"Fulton Rights" means rights to purchase common stock of Fulton
distributed to holders of Xxxxxx Common Stock pursuant to a
Rights Agreement dated June 20, 1989, as amended and restated as
of April 27, 1999 (the "Xxxxxx Rights Agreement").
"Fulton Stock Consideration" means that number of shares of
Xxxxxx Common Stock equal to one share multiplied by the
Conversion Ratio. In the event that between the date of this
Agreement and the Effective Time, the issued and outstanding
shares of Xxxxxx Common Stock shall have been effected or changed
into a different number of shares or a different class of shares
as a result of a stock split, reverse stock split, stock
dividend, spin-off, extraordinary dividend, recapitalization,
reclassification, subdivision, combination of shares or other
similar transaction, or there shall have been a record date
declared for any such matter, the Xxxxxx Stock Consideration
shall be proportionately adjusted.
(c) No Fractional Shares. No fractional shares of Xxxxxx Common
---------------------
Stock shall be issued in connection with the Merger. In lieu of the
issuance of any fractional share to which he would otherwise be
entitled, each former shareholder of Somerset shall receive in cash an
amount equal to the fair market value of his fractional interest,
which fair market value shall be determined by multiplying such
fraction by the Closing Market Price.
(d) Cancelled Somerset Shares. Notwithstanding the provisions of
-------------------------
Section 2.1(a) herein, the following shares of Somerset Common Stock
shall not be converted into Xxxxxx Common Stock, and shall be
cancelled, at the Effective Time: (i) shares of Somerset Common Stock
then owned by Fulton or any direct or indirect subsidiary of Fulton
(except for trust account shares or shares acquired in connection with
debts previously contracted); and (ii) shares of Somerset Shares owned
by Somerset or any direct or indirect subsidiary of Somerset (except
for trust account shares or shares acquired in connection with debts
previously contracted).
(e) Closing Market Price. For purposes of this Agreement, the
---------------------
"Closing Market Price" shall be the average of the per share closing
bid and asked prices for Xxxxxx Common Stock, calculated to two
decimal places, for the ten (10) consecutive trading days immediately
preceding the date which is two (2) business days before the Effective
Date (as such term is defined in Section 9.2 herein), as reported on
the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the
3
foregoing period of ten (10) trading days being hereinafter sometimes
referred to as the "Price Determination Period" (For example, if June
30, 2005 were to be the Effective Date, then the Price Determination
Period would be June 14-17, June 20-24 and June 27, 2005). In the
event that NASDAQ shall fail to report closing bid and asked prices
for Xxxxxx Common Stock for any trading day during the Price
Determination Period, the closing bid and asked prices for that day
shall be equal to the average of the closing bid and asked prices as
quoted: (i) by X. X. Xxxxxxxxx & Company, Inc. and by Xxxx, Xxxx &
Co.; or (ii) in the event that both of these firms are not then making
a market in Xxxxxx Common Stock, by two brokerage firms then making a
market in Xxxxxx Common Stock to be selected by Fulton and approved by
Somerset.
Section 2.2 Exchange of Stock Certificates. Somerset Common Stock
certificates shall be exchanged for certificates evidencing the Xxxxxx Stock
Consideration and the Cash Consideration in accordance with the following
procedures:
(a) Election Procedure. Each holder of Somerset Shares (other than
-------------------
holders of Somerset Shares to be cancelled as set forth in Section 2.1(d))
shall have the right to submit a request specifying either that such
holder's Somerset Shares shall be converted into the Xxxxxx Stock
Consideration, Cash Consideration or a combination of Cash Consideration
and Fulton Stock Consideration, without interest, in the Merger in
accordance with the following procedures:
(i) Each holder of Somerset Stock may specify in a request made
in accordance with the provisions of this Section 2.2 (herein called
an "Election") to either: (i) convert each Somerset Share owned by
such holder into the right to receive the Xxxxxx Stock Consideration
in the Merger (a "Stock Election"); (ii) convert each Somerset Share
owned by such holder into the right to receive the Cash Consideration
in the Merger (a "Cash Election"); or (iii) convert a portion of the
Somerset Shares owned by such holder into the right to receive the
Cash Consideration in the Merger, and a portion of the Somerset Shares
owned by each such holder into the right to receive the Xxxxxx Stock
Consideration in the Merger, in the ratio of Fulton Stock
Consideration to Cash Consideration of either 80%/20% or 60%/40% (a
"Cash/Stock Election"). A Form of Election (as defined below) shall be
included with each copy of the Proxy Statement/Prospectus (as defined
in Section 6.1(b)) mailed to shareholders of Somerset in connection
with the meeting of shareholders called to consider the approval of
this Agreement. Fulton and Somerset shall each use its reasonable best
efforts to mail or otherwise make available the Form of Election to
all persons who become holders of Somerset Shares during the period
between the record date for such shareholder meeting and the Election
Deadline (as defined in Section 2.2(a)(iv)).
(ii) Fulton shall prepare a form (the "Form of Election"), which
shall be in form and substance acceptable to Somerset, pursuant to
which each holder of Somerset Shares, no later than at the close of
business on the Election Deadline, may make an Election and which
shall be mailed to the Somerset shareholders in
4
accordance with Section 2.2(a)(i) so as to permit Somerset's
shareholders to exercise their right to make an Election on or prior
to the Election Deadline.
(iii) Holders of record of Somerset Shares who hold such shares
as nominees, trustees, or in other representative capacities may
submit multiple Forms of Election, provided that such representative
certifies that each Form of Election covers all Somerset Shares held
by such representative for a particular beneficial owner.
(iv) Not later than the filing of the Proxy Statement/Prospectus
with the Securities and Exchange Commission (the "SEC"), as
contemplated in Section 6.1(b) hereof, Fulton shall appoint Xxxxxx
Financial Advisors, National Association, as the person to receive
Forms of Election and to act as exchange agent under this Agreement
(the "Exchange Agent"). Any Somerset shareholder's Election shall have
been made properly only if the Exchange Agent shall have received, by
5:00 p.m. local time in the city in which the principal office of such
Exchange Agent is located, on the date of the Election Deadline, a
Form of Election properly completed and signed and accompanied by
certificates for the Somerset Shares to which such Form of Election
relates (or by an appropriate guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of
any registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States provided such certificates are in fact
delivered to the Exchange Agent by the time required in such guarantee
of delivery). Failure to deliver Somerset Shares covered by such a
guarantee of delivery within the time set forth on such guarantee
shall be deemed to invalidate any otherwise properly made Election. As
used herein, "Election Deadline" means the date announced by Fulton
(which date shall be agreed upon by Somerset), as the last day on
which Forms of Election will be accepted. In the event this Agreement
shall have been terminated prior to the Effective Time, the Exchange
Agent shall immediately return all Election Forms and Certificates for
Somerset Shares to the appropriate Somerset shareholders.
(v) Any Somerset shareholder may at any time prior to the
Election Deadline change his Election by written notice received by
the Exchange Agent prior to the Election Deadline accompanied by a
revised Form of Election properly completed and signed.
(vi) Any Somerset shareholder may, at any time prior to the
Election Deadline, revoke his Election by written notice received by
the Exchange Agent prior to the Election Deadline or by withdrawal
prior to the Election Deadline of his certificates for Somerset Common
Stock, or of the guarantee of delivery of such certificates,
previously deposited with the Exchange Agent. All Elections shall be
revoked automatically if the Exchange Agent is notified in writing by
Xxxxxx or Somerset that this Agreement has been terminated. Any
Somerset shareholder who shall have deposited certificates for
Somerset Shares with the
5
Exchange Agent shall have the right to withdraw such certificates by
written notice received by the Exchange Agent prior to the Election
Deadline and thereby revoke his Election as of the Election Deadline
if the Merger shall not have been consummated prior thereto.
(vii) Xxxxxx shall have the right to make rules, not inconsistent
with the terms of this Agreement, governing the validity of the Forms
of Election, the manner and extent to which Elections are to be taken
into account in making the determinations prescribed by Section 2.2,
the issuance and delivery of certificates for Xxxxxx Common Stock into
which Somerset Shares are converted in the Merger and the payment of
cash for Somerset Shares converted into the right to receive the Cash
Consideration in the Merger.
(b) Issuance of Xxxxxx Stock Consideration and Payment of Cash
-----------------------------------------------------------------
Consideration; Proration. The manner in which each Somerset Share (except
-------------------------
Somerset Shares to be cancelled as set forth in Section 2.1(d)) shall be
converted into the Xxxxxx Stock Consideration, the Cash Consideration or
the right to receive a combination of Xxxxxx Stock Consideration and Cash
Consideration at the Effective Time shall be as set forth in this Section
2.2(b).
(i) As is more fully set forth below, the number of Shares to be
converted into the right to receive the Cash Consideration in the
Merger pursuant to this Agreement shall not exceed forty percent (40%)
of all Outstanding Shares (the "Maximum Cash Percentage") and shall
not be less than twenty percent (20%) of all Outstanding Shares (the
"Minimum Cash Percentage"); provided, however, that (A) for federal
income tax purposes, it is intended that the Merger should qualify as
a reorganization under the provisions of Section 368(a) of the Code
and, notwithstanding anything to the contrary contained herein, in
order that the Merger will not fail to satisfy continuity of interest
requirements under applicable federal income tax principles relating
to reorganizations under Section 368(a) of the Code, as reasonably
determined by Barley, Snyder, Xxxxx & Xxxxx, LLC, Xxxxxx shall
increase the number of Outstanding Shares that will be converted into
the Xxxxxx Stock Consideration and reduce the number of Outstanding
Shares that will be converted into the right to receive the Cash
Consideration and (B) any shares issuable under Xxxxxx Stock Options
issued under Section 2.3 herein shall be considered as having been
issued in the Merger in calculating compliance with the Maximum Cash
Percentage and the Minimum Cash Percentage.
(ii) If the percentage of Outstanding Shares for which a Cash
Election is made (including the cash portion of any Cash/Stock
Elections) exceeds the Minimum Cash Percentage and is less than the
Maximum Cash Percentage, all Elections shall be honored as submitted
and all Non-Electing Shares shall be converted into Xxxxxx Stock
Consideration.
6
(iii) If the percentage of Outstanding Shares for which a Cash
Election is made (including the cash portion of any Cash/Stock
Elections) exceeds the Maximum Cash Percentage: (A) Each Somerset
Share for which the holder made a Stock Election, the portion of each
Cash/Stock Election electing Xxxxxx Stock Consideration (collectively,
the "Aggregate Stock Elections") and each Non-Electing Share shall be
converted in the Merger into the Xxxxxx Stock Consideration. Each
Somerset Share for which a Cash Election has been received and the
portion of a Cash/Stock Election electing Cash Consideration
(collectively, the "Aggregate Cash Elections") shall be converted into
the right to receive Cash Consideration and Xxxxxx Stock Consideration
in the following manner:
(A) Each Somerset Shareholder shall have the Pro-rated Cash
Percentage of the shares for which he or she elected Cash
Consideration (including the cash portion of any Cash/Stock
Election) converted into the Cash Consideration;
(B) Each Somerset Shareholder shall have the Remaining Stock
Percentage of the shares for which he or she elected Cash
Consideration (including the portion of any Cash/Stock Election
electing Cash Consideration) converted into the Xxxxxx Stock
Consideration; and
(C) For the purposes of the foregoing:
"Aggregate Cash Election Percentage" shall mean the
percentage of Outstanding Shares represented by the
Aggregate Cash Elections.
"Pro-rated Cash Percentage" shall mean the percentage
determined by the following formula:
1 - [(Aggregate Cash Election Percentage - 40%)/40%]
---------------------------------------------------
"Remaining Stock Percentage" shall mean the percentage
determined by subtracting the Pro-rated Cash Percentage from
100%.
(iv) If Cash Elections (including the cash portion of any
Cash/Stock Elections) are less than the Minimum Cash Percentage:
Each Somerset Share for which the Aggregate Cash Elections have
been made and each Non-Electing Share shall be converted in the
Merger into the Cash Consideration. Each Somerset Share for which
a Aggregate Stock Elections have been made shall be converted
into the right to receive the Cash Consideration and Xxxxxx Stock
Consideration in the following manner:
(A) Each Somerset Shareholder shall have the Pro-rated Stock
Percentage of the shares for which he or she elected Xxxxxx Stock
Election converted into the Xxxxxx Stock Consideration;
7
(B) Each Somerset Shareholder shall have the Remaining Cash
Percentage of the shares for which he or she elected Xxxxxx Stock
Consideration (including the portion of any Cash/Stock Election
electing Xxxxxx Stock Consideration) converted into the Cash
Consideration; and
(C) For the purposes of the foregoing:
"Aggregate Stock Election Percentage" shall mean the
percentage of Outstanding Shares represented by the
Aggregate Stock Elections.
"Pro-rated Stock Percentage" shall mean the percentage
determined by the following formula:
1-[(Aggregate Stock Election Percentage - 80%)/80]
"Remaining Cash Percentage" shall mean the percentage
determined by subtracting the Pro-rated Stock Percentage
from 100%.
(v) If Non-Electing Shares are not converted under Sections
(i)-(iv) above, the Exchange Agent shall convert each Non-Electing
Share into the Xxxxxx Stock Consideration.
(vi) For the purposes of this Section 2.2, Outstanding Shares as
to which an Election is not in effect at the Election Deadline shall
be called "Non-Electing Shares." If Xxxxxx shall determine that any
Election is not properly made with respect to any Somerset Shares,
such Election shall be deemed to be not in effect, and the Somerset
Shares covered by such Election shall, for purposes hereof, be deemed
to be Non-Electing Shares. Xxxxxx and the Exchange Agent shall have no
obligation to notify any person of any defect in any Form of Election
submitted to the Exchange Agent.
(vii) The Exchange Agent shall make all computations contemplated
by this Section 2.2 and all such computations shall be conclusive and
binding on the holders of Somerset Shares absent manifest error.
(c) Issuance of Xxxxxx Stock Consideration.
--------------------------------------
(i) Immediately prior to the Effective Time, Xxxxxx shall deliver
to the Exchange Agent, in trust for the benefit of the holders of
Somerset Shares, certificates representing an aggregate number of
shares of Xxxxxx Common Stock as nearly as practicable equal to the
number of shares to be converted into Xxxxxx Common Stock as
determined in Section 2.2(b)
(ii) As soon as practicable on the day of the Closing (but after
the Effective Time), each holder of Somerset Shares converted into
Xxxxxx Stock
8
Consideration pursuant to Article II, upon proper surrender to the
Exchange Agent with a properly completed Letter of Transmittal (to the
extent not previously surrendered with a Form of Election ) of one or
more certificates for such Somerset Shares for cancellation, shall be
entitled to receive (and the Exchange Agent shall deliver)
certificates representing the number of shares of Xxxxxx Common Stock
into which such Somerset Shares shall have been converted in the
Merger.
(iii) No dividends or distributions that have been declared, if
any, will be paid to persons entitled to receive certificates for
shares of Xxxxxx Common Stock until such persons surrender their
certificates at which time all such dividends and distributions shall
be paid. In no event shall the persons entitled to receive such
dividends be entitled to receive interest on such dividends. If any
certificate for such Xxxxxx Common Stock is to be issued in a name
other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that
the person requesting such exchange shall pay to the Exchange Agent
any transfer taxes or other taxes required by reason of issuance in a
name other than the registered holder of the certificate surrendered,
or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a
holder of Somerset Shares for any Xxxxxx Common Stock or dividends
thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(d) Payment of Cash Consideration. Immediately prior to the Effective
-----------------------------
Time, Xxxxxx shall deposit with the Exchange Agent, in trust for the
benefit of the holders of Somerset shares, an amount in cash equal to the
Cash Consideration to be paid to holders of Somerset Shares to be converted
into the right to receive the Cash Consideration as determined in Section
2.2(b). As soon as practicable on the day of the Closing (but after the
Effective Time), the Exchange Agent shall distribute to holders of Somerset
Shares converted into the right to receive the Cash Consideration and
determined in accordance with Section 2.2(b), upon proper surrender to the
Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more Certificates for such Somerset Shares for
cancellation, a bank check for an amount equal to the Cash Consideration
times the number of Somerset Shares to converted. In no event shall the
holder of any such surrendered certificates be entitled to receive interest
on any of the Cash Consideration to be received in the Merger. If such
check is to be issued in the name of a person other than the person in
whose name the certificates surrendered for exchange therefor are
registered, it shall be a condition of the exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of issuance of such check to a person other
than the registered holder of the certificates surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Somerset
for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
9
(e) Letter of Transmittal. Xxxxxx will instruct the Exchange Agent to
---------------------
mail to each holder of record of Certificates who has not previously
surrendered such holder's certificates with a validly executed Form of
Election as soon as reasonably practical after the Effective Time, (i) a
Letter of Transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to such holder's certificates shall pass, only
upon proper delivery of the certificates to the Exchange Agent and shall be
in such form and have such other provisions as shall be agreed upon by
Somerset prior to the Effective Time) and (ii) instructions for use in
effecting the surrender of certificates in exchange for the Merger
Consideration (the "Letter of Transmittal").
(f) Missing Certificates.
--------------------
(i) If any holder of Somerset Shares convertible into the right
to receive the Merger Consideration is unable to deliver the
certificate which represents such shares, the Exchange Agent shall
deliver to such holder the Merger Consideration to which the holder is
entitled for such shares upon presentation of the following:
(A) evidence to the reasonable satisfaction of Xxxxxx that
any such certificate has been lost, wrongfully taken or
destroyed;
(B) such security or indemnity as may be reasonably
requested by Xxxxxx to indemnify and hold harmless Xxxxxx and the
Exchange Agent; and
(C) evidence satisfactory to Xxxxxx that such person is the
owner of the shares theretofore represented by each certificate
claimed to be lost, wrongfully taken or destroyed and that the
holder is the person who would be entitled to present such
certificate for payment pursuant to this Agreement
(ii) Xxxxxx shall receive any remaining Cash Consideration and
Xxxxxx Stock Consideration on deposit with the Exchange Agent on the
date which is one year after the Effective Date and any shareholder of
Somerset who has not surrendered his certificate(s) to the Exchange
Agent prior to such time shall be entitled to receive the Merger
Consideration without interest upon the surrender of such
certificate(s) to Xxxxxx, subject to applicable escheat or abandoned
property laws.
(iii) In the event that any Certificates have not been
surrendered for exchange in accordance with this Section on or before
the first anniversary of the Effective Time, Xxxxxx may at any time
thereafter, with or without notice to the holders of record of such
Certificates, sell for the accounts of any or all of such holders any
or all of the shares of Xxxxxx Common Stock which such holders are
entitled to receive under Article II hereof (the "Unclaimed Shares").
Any such sale may be made by public or private sale or sale at any
broker's board or on any securities exchange in such manner and at
such times as Xxxxxx shall determine. If, in the opinion of counsel
for Xxxxxx, it is necessary or desirable, any
10
Unclaimed Shares may be registered for sale under the Securities Act
of 1933, as amended (the "1933 Act"), and applicable state laws,
Xxxxxx shall not be obligated to make any sale of Unclaimed Shares if
it shall determine not to do so, even if notice of the sale of the
Unclaimed Shares has been given. The net proceeds of any such sale of
Unclaimed Shares shall be held for holders of the unsurrendered
Certificates whose Unclaimed Shares have been sold, to be paid to them
upon surrender of the certificates for shares of Xxxxxx Common Stock.
From and after any such sale, the sole right of the holders of the
unsurrendered Certificates whose Unclaimed Shares have been sold shall
be the right to collect the net sale proceeds held by Xxxxxx for their
respective accounts, and such holders shall not be entitled to receive
any interest on such net sale proceeds held by Xxxxxx. If outstanding
certificates are not surrendered or the payment for them is not
claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency,
the unclaimed items shall, to the extent permitted by abandoned
property laws, escheat laws and any other applicable law, become the
property of Xxxxxx (and to the extent not in its possession shall be
paid over to it), free and clear of all claims or interest of any
person previously entitled to such claims. Notwithstanding the
foregoing, none of Xxxxxx, Somerset, the Exchange Agent or any other
person shall be liable to any former holder of shares of Somerset
Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) Withholding Rights. Xxxxxx shall be entitled to deduct and
-------------------
withhold, or cause the Exchange Agent to deduct and withhold, from funds
provided by the holder or from the consideration otherwise payable pursuant
to this Agreement to any holder of Somerset Shares, the minimum amounts (if
any) that Xxxxxx is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of tax law. To the
extent that amounts are so withheld by Xxxxxx, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
holder of Somerset Shares in respect of which such deduction and
withholding was made by Xxxxxx.
(h) Expenses. All costs and expenses associated with the foregoing
--------
surrender and exchange procedure shall be borne by Xxxxxx.
Section 2.3 Treatment of Outstanding Somerset Options.
(a) At the Effective Time, each option (collectively, "Somerset
Options") to purchase shares of Somerset Common Stock that (i) is
outstanding at the Effective Time, (ii) has been granted pursuant to
Somerset's 1997 Restated Incentive Stock Option Plan, 2000 Incentive Stock
Option Plan, as amended, 2000 Directors Stock Option Plan and 2003
Directors Stock Option Plan (collectively, the "Somerset Stock Option
Plans"); and (iii) would otherwise survive the Effective Time, in the
absence of the transactions contemplated by this Agreement, shall, at the
option of the holder of a Somerset Option exercised on or before the
Election Deadline, either (A) be entitled to cash in the amount of the
number of
11
shares of Somerset stock covered by such Somerset Option multiplied by
excess, if any, of $21.00 over the exercise price per share of such
Somerset Option or (B) be assumed by Xxxxxx through the grant of an option
to acquire shares of Xxxxxx Common Stock on the terms set forth below (each
Somerset Option, as assumed, a "Xxxxxx Stock Option"). In the absence of an
election by the holder of a Somerset Option and subject to the next
sentence, Somerset Options held by such holder shall be converted to Xxxxxx
Stock Options; provided, however, that a minimum of twenty percent (20%) of
the Somerset Shares covered by Somerset Options shall be converted into
cash. In the event that holders of less than such percentage elect
conversion into cash, Xxxxxx and Somerset shall agree upon a proration
procedure that achieves such a minimum percentage.
(b) A Xxxxxx Stock Option shall be a stock option to acquire shares of
Xxxxxx Common Stock with the following terms: (i) the number of shares of
Xxxxxx Common Stock which may be acquired pursuant to such Xxxxxx Stock
Option shall be equal to the product of the number of shares of Somerset
Common Stock covered by the Somerset Option multiplied by the Conversion
Ratio, provided that any fractional share of Xxxxxx Common Stock resulting
from such multiplication shall be rounded to the nearest whole share; (ii)
the exercise price per share of Xxxxxx Common Stock shall be equal to the
exercise price per share of Somerset Common Stock of such Somerset Option,
divided by the Conversion Ratio, provided that such exercise price shall be
rounded to the nearest whole cent; (iii) the duration and other terms of
such Xxxxxx Stock Option shall be identical to the duration and other terms
of such Somerset Option (except to the extent that vesting thereof is to be
accelerated under the terms of the Somerset Stock Option Plans or the
Somerset Options) except that all references to Somerset shall be deemed to
be references to Xxxxxx and its affiliates, where the context so requires
and shall remain exercisable until the stated expiration date of the
corresponding Somerset Option; (iv) Xxxxxx shall assume such Somerset stock
option, whether vested or not vested, as contemplated by Section 424(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and (v) to the
extent Somerset Options qualify as incentive stock options under Section
422 of the Code, the Xxxxxx Stock Options exchanged therefor shall also so
qualify. In connection with the foregoing, (i) the foregoing is intended to
effect an assumption of a Somerset Option by Xxxxxx under Section 424(a) of
the Code and (ii) neither a Xxxxxx Option nor the assumption of a Somerset
Option shall give the holder of a Somerset Option additional benefits which
he did not have under such Somerset Option within the meaning of Section
424(a)(1) of the Code. Subject to the Xxxxxx Stock Options and the
foregoing, the Somerset Stock Option Plans and all options or other rights
to acquire Somerset Common Stock issued thereunder shall terminate at the
Effective Time. Xxxxxx shall not issue or pay for any fractional shares
otherwise issuable upon exercise of a Xxxxxx Stock Option.
(c) Prior to the Effective Time, Xxxxxx shall take appropriate action
to reserve for issuance and, if not previously registered pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), register the number of
shares of Xxxxxx Common Stock necessary to satisfy Xxxxxx'x obligations
with respect to the issuance of Xxxxxx Common Stock pursuant to the
exercise of Xxxxxx Stock Options and under Section 2.3.
12
(d) On or before the Election Deadline (to the extent required as
determined by Xxxxxx or Somerset under applicable law, the terms of the
Somerset Stock Option Plans or otherwise), Xxxxxx shall receive agreements
from each holder of a Somerset Option that does not elect to exercise such
Somerset Option immediately prior to the Effective Time and have the
Somerset Common Stock acquired as a result of such exercise converted into
cash or Xxxxxx Common Stock pursuant to Section 2.1 of this Agreement,
pursuant to which each such holder agrees to accept cash or a Xxxxxx Stock
Option in substitution for the Somerset Option, as of the Effective Time.
(e) Schedule 2.3 sets forth a listing of each Somerset Option as of
------------
the date of this Agreement (copies of which have been provided to Xxxxxx),
including the optionee, date of grant, shares of Somerset Common Stock
subject to such Option, the exercise price of such Option, expiration date,
and classification as an incentive stock option or a nonqualified stock
option.
Section 2.4 Reservation of Shares. Xxxxxx agrees that (i) prior to the
Effective Time it will take appropriate action to reserve a sufficient number of
authorized but unissued shares of Xxxxxx Common Stock to be issued in accordance
with this Agreement, and (ii) at the Effective Time, Xxxxxx will issue shares of
Xxxxxx Common Stock to the extent set forth in, and in accordance with, this
Agreement.
Section 2.5 Taking Necessary Action. Xxxxxx and Somerset shall take all
such actions as may be reasonably necessary or appropriate in order to
effectuate the transactions contemplated hereby including, without limitation,
providing information necessary for preparation of any filings needed to obtain
the regulatory approvals required to consummate the Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Xxxxxx with full title to all
properties, assets, rights, approvals, immunities and franchises of Somerset,
the officers and directors of Somerset, at the expense of Xxxxxx, shall use
commercially reasonable efforts to take all such necessary action.
Section 2.6 Press Releases, Etc. Xxxxxx and Somerset agree that all press
releases or other public communications relating to this Agreement or the
transactions contemplated hereby will require mutual approval by Xxxxxx and
Somerset, unless counsel has advised any such party that such release or other
public communication must immediately be issued and the issuing party has not
been able, despite its good faith efforts, to obtain such approval.
Section 2.7 Xxxxxx Common Stock. Each share of Xxxxxx Common Stock that is
issued and outstanding immediately before the Effective Time shall, on and after
the Effective Time, remain issued and outstanding as one (1) share of Xxxxxx
Common Stock, and each holder thereof shall retain his rights therein. The
holders of the shares of Xxxxxx Common Stock outstanding immediately prior to
the Effective Time shall, immediately after the Effective Time, continue to hold
a majority of the outstanding shares of Xxxxxx Common Stock.
Section 2.8 Dissenters' Rights. Pursuant to Section 14A:11-1(1)(a)(i)(B) of
the BCA, the shareholders of Somserset shall not be entitled to exercise
dissenters' rights.
13
Section 2.9 Certain Actions. Prior to the Effective Time, Xxxxxx and
Somerset shall take all such steps as may be required to cause any dispositions
of shares of Somerset Common Stock (including derivative securities with respect
to such shares) resulting from the transactions contemplated by Article II of
this Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), with respect to Somerset to be exempt under Rule 16b-3 promulgated under
the 1934 Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999 issued by the SEC to Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SOMERSET
Somerset represents and warrants to Xxxxxx, as of the date
of this Agreement, as follows:
Section 3.1 Authority. The execution and delivery of this Agreement, the
Warrant Agreement and the Warrant and the performance of the transactions
contemplated herein and therein have been authorized by the Board of Directors
of Somerset. At a meeting duly called and held, by a vote of at least a majority
of the members of the Board of Directors, the Board of Directors (i) approved
the Merger and this Agreement, and (ii) directed that this Agreement and Merger
be submitted for approval by its shareholders with the recommendation of the
Board of Directors that the shareholders of Somerset approve this Agreement, the
Merger and the transactions contemplated thereby, and, except for the approval
of this Agreement by its shareholders, Somerset has taken all corporate action
necessary on its part to authorize this Agreement, the Warrant Agreement and the
Warrant and the performance of the transactions contemplated herein and therein.
This Agreement, the Warrant Agreement and the Warrant have been duly executed
and delivered by Somerset and, assuming due authorization, execution and
delivery by Xxxxxx, constitute valid and binding obligations of Somerset,
enforceable in accordance with their respective terms, except to the extent
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting creditor's rights and the laws, regulations and rules affecting
financial institutions. The execution, delivery and performance of this
Agreement, the Warrant Agreement and the Warrant will not constitute a violation
or breach of or default under (i) the Certificate of Incorporation or Bylaws of
Somerset, (ii) the Certificate of Incorporation or Bylaws of Somerset Bank,
(iii) any statute, rule, regulation, order, decree or directive of any
governmental authority or court applicable to Somerset or any Somerset
Subsidiary, subject to the receipt of all required governmental approvals, or
(iv) any agreement, contract, memorandum of understanding, indenture or other
instrument to which Somerset or any Somerset Subsidiary is a party or by which
Somerset or any Somerset Subsidiary or any of their properties are bound.
Section 3.2 Organization and Standing. Somerset is a corporation that is
duly organized, validly existing and in good standing under the laws of the
State of New Jersey. Somerset is a bank holding company under the BHC Act, and
has full power and lawful authority to own and hold its properties and to carry
on its business as presently conducted. Somerset Bank is a banking corporation
that is duly organized, validly existing and in good standing under the laws of
the State of New Jersey. Somerset Bank is an insured bank under the provisions
of the Federal Deposit Insurance Act, as amended (the "FDI Act"), and is not a
member of the Federal Reserve System. Somerset Bank has full power and lawful
authority to
14
own and hold its properties and to carry on its business as
presently conducted. Each of the Somerset Subsidiaries currently conducting
operations other than Somerset Bank is an entity or business trust that is duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation. Each of the Somerset Subsidiaries currently
conducting operations has full power and lawful authority to own and hold its
properties and to carry on its business as presently conducted.
Section 3.3 Subsidiaries. Somerset Bank, SVB Bald Eagle Statutory Trust I
and SVB Bald Eagle Statutory Trust II are wholly-owned subsidiaries of Somerset
(except that Somerset owns 100% of the common securities of such trusts and
third parties own the capital securities issued by such trusts). Somerset Valley
Investment Company, Inc. is a wholly-owned subsidiary of Somerset Bank, and West
End One Corp. is a wholly owned subsidiary of Somerset Valley Investment
Company, Inc. Except for the Somerset Subsidiaries, Somerset owns no
subsidiaries, directly or indirectly, other than as described on Schedule 3.3.
-------------
Section 3.4 Capitalization. The authorized capital of Somerset consists
exclusively of 20,000,000 shares of Somerset Common Stock. As of the date of
this Agreement 4,060,445 shares of Somerset Common Stock are outstanding, all of
which are validly issued, fully paid and non-assessable. In addition, 421,826
shares of Somerset Common Stock are subject to issuance upon the exercise of
Somerset Options and 1,008,775 shares of Somerset Common Stock will be reserved
for issuance upon exercise of the Warrant. Except for the Somerset Options and
the Warrant, there are no outstanding obligations, options or rights of any kind
entitling other persons to acquire shares of Somerset Common Stock and there are
no outstanding securities or other instruments of any kind that are convertible
into shares of Somerset Common Stock. The authorized capital of Somerset Bank
consists exclusively of shares of common stock (the "Somerset Bank Common
Stock") and preferred stock ("Somerset Bank Preferred Stock"). All of the
outstanding shares of Somerset Bank Common Stock and Somerset Bank Preferred
Stock are owned beneficially and of record by Somerset and are validly issued,
outstanding and fully-paid and non-assessable. There are no outstanding
obligations, options or rights of any kind entitling other persons to acquire
shares of Somerset Bank Common Stock, and there are no outstanding securities or
instruments of any kind that are convertible into shares of Somerset Bank Common
Stock. All outstanding shares of the capital stock or membership interests, as
applicable, of the other Somerset Subsidiaries are owned beneficially and of
record by Somerset or Somerset Bank, as appropriate, except that, in the case of
SVB Bald Eagle Statutory Trust I and SVB Bald Eagle Statutory Trust II, Somerset
owns 100% of the common securities and the purchasers thereof own the capital
securities issued by each said trust. There are no outstanding obligations,
options or rights of any kind entitling other persons to acquire shares of such
Somerset Subsidiaries, and there are no outstanding securities or instruments of
any kind that are convertible into shares of such Somerset Subsidiaries. The
Common Stock of Somerset Bank and the common stock or membership interests of
the other Somerset Subsidiaries are sometimes collectively referred to herein as
the "Somerset Subsidiaries Common Equity".
Section 3.5 Charter, Bylaws and Minute Books. The copies of the Certificate
of Incorporation and Bylaws or Certificate of Organization and Operating
Agreements (or, with respect to SVB Bald Eagle Statutory Trust I and SVB Bald
Eagle Statutory Trust II, their trust
15
declarations) of Somerset and the Somerset Subsidiaries that have been made
available to Xxxxxx for inspection are true, correct and complete. Except as
previously disclosed to Xxxxxx in writing, the minute books of Somerset and the
Somerset Subsidiaries that have been made available to Xxxxxx for inspection are
true, correct and complete in all material respects and accurately record the
actions taken by the Boards of Directors and shareholders or members of Somerset
and the Somerset Subsidiaries at the meetings documented in such minutes,
excluding information related to the transactions contemplated by this Agreement
and to any other merger, consolidation, share exchange or sale, exchange or
other disposition of all, or substantially all, of Somerset's property or
assets.
Section 3.6 Financial Statements.
(a) Somerset has delivered to Xxxxxx the following financial
statements: Consolidated Balance Sheets of Somerset at December 31, 2003
and 2002 and Consolidated Statements of Income, Statements of Shareholders'
Equity, and Consolidated Statements of Cash Flows of Somerset for the years
ended December 31, 2001, 2002 and 2003, audited by Xxxxx Xxxxxxxx LLP, and
set forth in the 2003 Annual Report to Somerset's shareholders and
unaudited Consolidated Balance Sheets of Somerset at September 30, 2004 and
unaudited Consolidated Statements of Income for the nine-month periods
ended September 30, 2003 and 2004, unaudited Consolidated Statements of
Stockholders' Equity for the nine-month periods ended September 30, 2004
and 2003 and unaudited Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 2004 and 2003, as filed with the SEC
in a Quarterly Report on Form 10-Q (the aforementioned Balance Sheet as of
September 30, 2003 being hereinafter referred to as the "Somerset Balance
Sheet"). Each of the foregoing financial statements fairly present the
consolidated financial position, and results of operations and cash flows
of Somerset at their respective dates and for the respective periods then
ended and has been prepared in accordance with United States generally
accepted accounting principles consistently applied, except as otherwise
noted in a footnote thereto and except for (i) the omission of the notes
from the financial statements applicable to any interim period and (ii)
with respect to any interim period, normal year-end adjustments.
(b) Except (A) as reflected in Somerset's unaudited balance sheet at
September 30, 2004 or liabilities described in any notes thereto (or
liabilities for which neither accrual nor footnote disclosure is required
pursuant to GAAP) or (B) for liabilities incurred in the ordinary course of
business since September 30, 2004 consistent with past practices or in
connection with this Agreement or the transactions contemplated hereby,
neither Somerset nor any of its subsidiaries has any material liabilities
or obligations of any nature. Schedule 3.6 lists and Somerset has delivered
------------
to Xxxxxx copies of the documentation creating or governing, all
securitization transactions and "off-balance sheet arrangements" (as
defined in Item 303(c) of Regulation S-K of the SEC) effected by Somerset
or its subsidiaries since Xxxxx Xxxxxxxx LLP expressed its opinion with
respect to the financial statements of Somerset and its subsidiaries
included in Somerset's SEC Documents (including the related notes).
16
(c) Xxxxx Xxxxxxx LLP is and has been (x) since September 24, 2003, a
registered public accounting firm (as defined in Section 2(a)(12) of the
Xxxxxxxx-Xxxxx Act of 2002 (the "SOX Act")), (y) throughout the periods
covered by such financial statements, "independent" with respect to
Somerset within the meaning of Regulation S-X, and (z) since May 6, 2003,
in compliance with subsections (g) through (l) of Section 10A of the 1934
Act and the related Rules of the SEC and the Public Company Accounting
Oversight Board. Schedule 3.6 lists all non-audit services performed by
------------
Xxxxx Xxxxxxxx LLP for Somerset and its subsidiaries since January 1, 2002.
(d) Each of Somerset and the Somerset Subsidiaries maintains accurate
books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls which provide assurance
that (i) transactions are executed with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Somerset and to maintain
accountability for Somerset's consolidated assets; (iii) access to
Somerset's assets is permitted only in accordance with management's
authorization; (iv) the reporting of Somerset's assets is compared with
existing assets at regular intervals; and (v) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current
and timely basis.
(e) Somerset has, on a timely basis, filed all forms, reports and
documents required to be filed by it with the SEC since January 1, 2002.
Schedule 3.6 lists, and except to the extent available in full without
redaction on the SEC's website through the Electronic Data Gathering,
Analysis and Retrieval System ("XXXXX") has delivered to Xxxxxx copies in
the form filed with the SEC of (i) Somerset's Annual Reports on Form 10-K
for each fiscal year of Somerset from and after January 1, 2002, (ii) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters
in each of the fiscal years of Somerset referred to in clause (i) above,
(iii) all proxy statements relating to Somerset's meetings of stockholders
(whether annual or special) held, and all information statements relating
to stockholder consents since the beginning of the first fiscal year
referred to in clause (i) above, (iv) all certifications and statements
required by (x) the SEC's Order dated June 27, 2002 pursuant to Section
21(a)(1) of the 1934 Act (File No. 4-460), (y) 18 U.S.C. ss.1350 (Section
906 of the SOX Act) with respect to any report referred to in clause (i) or
(iii) above, (y) all other forms, reports, registration statements and
other documents (other than preliminary materials if the corresponding
definitive materials have been provided to Xxxxxx pursuant to this Section
3.6) filed by Somerset with the SEC since the beginning of the first fiscal
year referred to in clause (i) above (the forms, reports, registration
statements and other documents referred to in clauses (i), (ii), (iii),
(iv) and (v) above are, collectively, the "Somerset SEC Reports" and, to
the extent available in full without redaction on the SEC's website through
XXXXX two days prior to the date of this Agreement, are, collectively, the
"Filed Somerset SEC Reports"), and (vi) all comment letters received by
Somerset from the Staff of the SEC since January 1, 2002 and all responses
to such comment letters by or on behalf of Somerset. The Somerset SEC
Reports (x) were or will be prepared in accordance with the requirements of
the 1933 Act and the 1934 Act, as the case may be, and the rules and
17
regulations thereunder and (y) did not at the time they were filed with the
SEC, or will not at the time they are filed with the SEC, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. No Subsidiary of Somerset is or has been required to file any
form, report, registration statement or other document with the SEC.
(f) Somerset maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the 1934 Act; such controls and procedures are
effective to ensure that all material information concerning Somerset and
its subsidiaries is made known on a timely basis to the individuals
responsible for the preparation of Somerset's filings with the SEC and
other public disclosure documents. Schedule 3.6 lists, and Somerset has
------------
delivered to Xxxxxx copies of, all written descriptions of, and all
policies, manuals and other documents promulgating, such disclosure
controls and procedures. To Somerset's knowledge, each director and
executive officer of Somerset has filed with the SEC on a timely basis all
statements required by Section 16(a) of the 1934 Act and the rules and
regulations thereunder since January 1, 2002. As used in this Section 3.6,
the term "file" shall be broadly construed to include any manner in which a
document or information is furnished, supplied or otherwise made available
to the SEC. To the extent required, Somerset and Somerset Bank have in
place "disclosure controls and procedures" as defined in Rules 13a-15(e)
and 15(d)-15(e) of the 1934 Act to allow Somerset's management to make
timely decisions regarding required disclosures and to make the
certifications of the Chief Executive Officer and Chief Financial Officer
of Somerset required under the 1934 Act. Since September 30, 2004, there
has not been any material change in the internal controls utilized by the
Somerset to assure that its consolidated financial statements conform with
GAAP. Without limiting the generality of the foregoing, Somerset's
disclosures and controls are designed and maintained to ensure that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization,
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences, (v) all information (both financial and non-financial)
required to be disclosed by Somerset in the reports that it files or
submits under the 1934 Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC, and
(vi) all such information is accumulated and communicated to Somerset's
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive Officer
and Chief Financial Officer of Somerset required under the 1934 Act with
respect to such reports. None of Somerset's or any Somerset Subsidiary's
records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by
any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto
and therefrom) are not under the exclusive ownership and direct control of
the Somerset or the Somerset Subsidiaries or their independent accountants.
18
(g) The Chief Executive Officer and the Chief Financial Officer of
Somerset has signed, and Somerset has furnished to the SEC, all
certifications required by Sections 302 and 906 of the SOX Act of 2002;
such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither
Somerset nor any of its officers has received notice from any Governmental
Entity questioning or challenging the accuracy, completeness, form or
manner of filing or submission of such certifications.
(h) Somerset heretofore has provided to Xxxxxx complete and correct
copies of all certifications filed with the SEC pursuant to Sections 302
and 906 of the SOX Act and hereby reaffirms, represents and warrants to
Xxxxxx the matters and statements made in such certificates.
Section 3.7 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.7, or as reflected, noted or adequately reserved against in the
-------------
Somerset Balance Sheet, at September 30, 2004, Somerset had no material
liabilities (whether accrued, absolute, contingent or otherwise) which were
required to be reflected, noted or reserved against in the Somerset Balance
Sheet under generally accepted accounting principles. Except as disclosed in
Schedule 3.7, Somerset and the Somerset Subsidiaries have not incurred, since
------------
September 30, 2004, any such liability, other than liabilities of the same
nature as those set forth in the Somerset Balance Sheet, all of which have been
incurred in the Ordinary Course of Business. For purposes of this Agreement, the
term "Ordinary Course of Business" shall mean the ordinary course of business
consistent with Somerset's and the Somerset Subsidiaries' customary business
practices.
Section 3.8 Absence of Changes. Since September 30, 2004, Somerset and the
Somerset Subsidiaries have each conducted their businesses in the Ordinary
Course of Business and, except as disclosed in Schedule 3.8, neither Somerset
------------
nor the Somerset Subsidiaries have undergone any changes in its condition
(financial or otherwise), assets, liabilities, business, operations, or future
prospects other than changes in the Ordinary Course of Business, which have not
been, in the aggregate, materially adverse as to Somerset and the Somerset
Subsidiaries on a consolidated basis.
Section 3.9 Dividends, Distributions and Stock Purchases. Since September
30, 2004, Somerset has not declared, set aside, made or paid any dividend or
other distribution in respect of the Somerset Common Stock, or purchased, issued
or sold any shares of Somerset Common Stock or the Somerset Subsidiaries Common
Equity other than a stock dividend of 5% paid on October 28, 2004.
Section 3.10 Taxes. Somerset and Somerset Bank have filed all federal,
state, county, municipal and foreign tax returns, reports and declarations which
are required to be filed by them or either of them as of September 30, 2004.
Except as disclosed in Schedule 3.10: (i) Somerset and Somerset Bank have paid
--------------
all taxes, penalties and interest which have become due pursuant thereto or
which became due pursuant to federal, state, county, municipal or foreign tax
laws applicable to the periods covered by the foregoing tax returns, (ii)
neither Somerset nor the Somerset Subsidiaries have received any notice of
deficiency or assessment of additional taxes, and no tax audits are in process;
and (iii) the Internal Revenue Service (the "IRS") has not
19
commenced or given notice of an intention to commence any examination or audit
of the federal income tax returns of Somerset or Somerset Bank for any year
through and including the year ended December 31, 2003. Except as disclosed in
Schedule 3.10, neither Somerset nor the Somerset Subsidiaries have granted any
-------------
waiver of any statute of limitations or otherwise agreed to any extension of a
period for the assessment of any federal, state, county, municipal or foreign
income tax. Except as disclosed in Schedule 3.10, the accruals and reserves
--------------
reflected in the Somerset Balance Sheet are adequate to cover all taxes
(including interest and penalties, if any, thereon) that are payable or accrued
as a result of Somerset's consolidated operations for all periods prior to the
date of such Balance Sheet.
Section 3.11 Title to and Condition of Assets. Except as disclosed in
Schedule 3.11, Somerset and the Somerset Subsidiaries have good and marketable
-------------
title to all material consolidated real and personal properties and assets
reflected in the Somerset Balance Sheet or acquired subsequent to September 30,
2004, (other than property and assets disposed of in the Ordinary Course of
Business), free and clear of all liens or encumbrances of any kind whatsoever;
provided, however, that the representations and warranties contained in this
sentence do not cover liens or encumbrances that: (i) are reflected in the
Somerset Balance Sheet or in Schedule 3.11; (ii) represent liens of current
--------------
taxes not yet due or which, if due, may be paid without penalty, or which are
being contested in good faith by appropriate proceedings; and (iii) represent
such imperfections of title, liens, encumbrances, zoning requirements and
easements, if any, as are not substantial in character, amount or extent and do
not materially detract from the value, or interfere with the present use, of the
properties and assets subject thereto. The material structures and other
improvements to real estate, furniture, fixtures and equipment reflected in the
Somerset Balance Sheet or acquired subsequent to September 30, 2004: (A) are in
good operating condition and repair (ordinary wear and tear excepted), and (B)
comply in all material respects with all applicable laws, ordinances and
regulations, including without limitation all building codes, zoning ordinances
and other similar laws, except where any noncompliance would not materially
detract from the value, or interfere with the present use, of such structures,
improvements, furniture, fixtures and equipment. Somerset and the Somerset
Subsidiaries own or have the right to use all real and personal properties and
assets that are material to the conduct of their respective businesses as
presently conducted.
Section 3.12 Contracts.
(a) Each written or oral contract entered into by Somerset or the
Somerset Subsidiaries (other than loan agreements, promissory notes, deeds
of trust and other contracts with customers reasonably entered into by
Somerset or the Somerset Subsidiaries in the Ordinary Course of Business)
which involves aggregate payments or receipts in excess of $50,000 per
year, including without limitation every employment contract, employee
benefit plan, agreement, lease, license, indenture, mortgage and other
commitment to which either Somerset or the Somerset Subsidiaries are a
party or by which Somerset or the Somerset Subsidiaries or any of their
properties may be bound (collectively referred to herein as "Material
Contracts") is identified in Schedule 3.12. Except as disclosed in Schedule
-------------- --------
3.12, all Material Contracts are enforceable against Somerset or the
----
Somerset Subsidiaries, as the case may be, and Somerset or the Somerset
Subsidiaries have in all material respects performed all obligations
required to be
20
performed by them to date and are not in default in any material respect and
Somerset has no Knowledge (as defined in Section 3.13) of any default by a third
party under a Material Contract. Schedule 3.12 identifies all Material Contracts
-------------
which require the consent or approval of third parties to the execution and
delivery of this Agreement or to the consummation of the transactions
contemplated herein.
(b) Except for the Warrant Agreement and as set forth in Schedule 3.12, as
of the date of this Agreement, neither Somerset nor the Somerset Subsidiaries is
a party to, or bound by, any oral or written:
(i) "material contract" as such term is defined in Item 601(b)(10) of
Regulation S-K promulgated by the SEC;
(ii) consulting agreement not terminable on thirty (30) days or less
notice involving the payment of more than $20,000 per annum, in the case of
any such agreement;
(iii) agreement with any officer or other key employee the benefits of
which are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction of the nature contemplated by this
Agreement;
(iv) agreement with respect to any officer providing any term of
employment or compensation guarantee extending for a period longer than one
year or for a payment in excess of $25,000;
(v) agreement or plan, including any stock option plan, stock
appreciation rights plan, employee stock ownership plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement;
(vi) agreement containing covenants that limit its ability to compete
in any line of business or with any person, or that involve any restriction
on the geographic area in which, or method by which, it may carry on its
business (other than as may be required by law or any regulatory agency);
(vii) agreement, contract or understanding, other than this Agreement,
and the Warrant Agreement, regarding the capital stock of Somerset and/or
Somerset Bank or committing to dispose of some or all of the capital stock
or substantially all of the assets of Somerset and/or Somerset Bank;
(viii) collective bargaining agreement, contract, or other agreement
or understanding with a labor union or labor organization;
(ix) deferred compensation plan or arrangement; or
21
(x) joint venture agreements.
Section 3.13 Litigation and Governmental Directives. Except as disclosed in
Schedule 3.13, (i) there is no litigation, investigation or proceeding pending,
-------------
or to the Knowledge (as that term is defined below) of Somerset or the Somerset
Subsidiaries, threatened, that involves Somerset or the Somerset Subsidiaries or
any of their properties and that, if determined adversely, would materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business or operations or future prospects of Somerset or the Somerset
Subsidiaries taken as a whole; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent agreements or
memoranda of understanding issued by any federal, state or local court or
governmental agency or authority or arbitration tribunal issued against or with
the consent of Somerset or the Somerset Subsidiaries that materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business operations or future prospects of Somerset or the Somerset Subsidiaries
taken as a whole or that in any material manner restrict the right of Somerset
or the Somerset Subsidiaries to carry on their businesses as presently conducted
taken as a whole; and (iii) neither Somerset nor the Somerset Subsidiaries have
Knowledge of any fact or condition presently existing that might give rise to
any litigation, investigation or proceeding which, if determined adversely to
either Somerset or the Somerset Subsidiaries, would materially and adversely
affect the consolidated condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Somerset or the Somerset
Subsidiaries or would restrict in any material manner the right of Somerset or
the Somerset Subsidiaries to carry on their businesses as presently conducted
taken as a whole. All litigation (except for bankruptcy proceedings in which
Somerset or the Somerset Subsidiaries have filed proofs of claim) in which
Somerset or the Somerset Subsidiaries are involved as a plaintiff (other than
routine collection and foreclosure suits initiated in the Ordinary Course of
Business) in which the amount sought to be recovered is greater than $50,000 is
identified in Schedule 3.13. In this Agreement, the terms "Knowledge of Somerset
-------------
or Somerset Bank" and "Knowledge of Somerset and the Somerset Subsidiaries"
shall mean the actual knowledge of the Contract Employees (as defined in Section
3.17).
Section 3.14 Compliance with Laws; Governmental Authorizations. Except as
disclosed in Schedule 3.14 or where noncompliance would not have a material and
-------------
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Somerset or the Somerset
Subsidiaries taken as a whole: (i) Somerset and the Somerset Subsidiaries are in
compliance with all statutes, laws, ordinances, rules, regulations, judgments,
orders, decrees, directives, consent agreements, memoranda of understanding,
permits, concessions, grants, franchises, licenses, and other governmental
authorizations or approvals applicable to Somerset or the Somerset Subsidiaries
or to any of their properties; and (ii) all material permits, concessions,
grants, franchises, licenses and other governmental authorizations and approvals
necessary for the conduct of the business of Somerset or the Somerset
Subsidiaries as presently conducted have been duly obtained and are in full
force and effect, and there are no proceedings pending or, to the Knowledge of
Somerset threatened, which may result in the revocation, cancellation,
suspension or materially adverse modification of any thereof.
22
Section 3.15 Insurance. All policies of insurance relating to Somerset's
and Somerset Subsidiaries' operations (except for title insurance policies),
including without limitation all financial institutions bonds, held by or on
behalf of Somerset or the Somerset Subsidiaries are listed in Schedule 3.15. All
--------------
such policies of insurance are in full force and effect, and no notices of
cancellation have been received in connection therewith.
Section 3.16 Financial Institutions Bonds. Since January 1, 2000, Somerset
Bank has continuously maintained in full force and effect one or more financial
institutions bonds listed in Schedule 3.16 insuring Somerset Bank against acts
-------------
of dishonesty by each of its employees. No claim has been made under any such
bond and Somerset Bank has no Knowledge of any fact or condition presently
existing which might form the basis of a claim under any such bond. Somerset
Bank has received no notice that its present financial institutions bond or
bonds will not be renewed by its carrier on substantially the same terms as
those now in effect.
Section 3.17 Labor Relations and Employment Agreements. Neither Somerset
nor any of the Somerset Subsidiaries is a party to or bound by any collective
bargaining agreement. To their Knowledge, Somerset and the Somerset Subsidiaries
enjoy good working relationships with their employees, and there are no labor
disputes pending, or to the Knowledge of Somerset or Somerset Bank threatened,
that might materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or prospects of Somerset
or the Somerset Subsidiaries. Except as disclosed in Schedule 3.17, neither
--------------
Somerset nor any of the Somerset Subsidiaries has any employment contract,
change of control agreement or policy, severance agreement, deferred
compensation agreement, consulting agreement or similar obligation (including
the amendments referred to, an "Employment Obligation") with any director,
officer, employee, agent or consultant; provided however, that, (i) as of the
date of this Agreement (and effective as of the Effective Time), each of Xxxxxx
X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx has executed employment agreements (the
"Employment Agreements") with Xxxxxx and Somerset Bank so as to, among other
things, (A) consent to certain changes in their respective duties, powers and
functions following the Merger, such agreements to be substantially in the form
of Exhibit D attached hereto and (B) provide for the payment of the "change of
---------
control" payments due under the existing employment agreements of Messrs.
Xxxxxxxx and Xxxxxxxx with Somerset and (ii) at the Closing, Xxxxx X. XxXxxxxx
shall be paid the "change in control" payments provided for under his existing
employment agreement and his existing deferred compensation agreement with
Somerset as a result of the Merger. For the purposes of this Agreement, Messrs.
Xxxxxxxx, XxXxxxxx and Xxxxxxxx, shall be referred to herein as the "Contract
Employees". Except with respect to Xx. XxXxxxxx and as disclosed in Schedule
--------
3.17, as of the Effective Time (as defined in Section 9.2 herein), neither
----
Somerset nor the Somerset Subsidiaries will have any liability for employee
termination rights arising out of any Employment Obligation and neither the
execution of this Agreement nor the consummation of the Merger shall, by itself,
entitle any employee of Somerset or the Somerset Subsidiaries to any "change of
control" payments or benefits. Except as set forth on Schedule 3.17, no payment
-------------
that is owed or may become due to any director, officer, employee, or agent of
Somerset or any Somerset Subsidiary as a result of the consummation of the
Merger will be non-deductible to Somerset or any Somerset Subsidiary or subject
to tax under IRC ss. 280G or ss. 4999; nor, except as set forth on Schedule
--------
3.17, will Somerset or any Somerset Subsidiary be required to "gross
----
23
up" or otherwise compensate any such person because of the imposition of any
excise tax on a payment to such person as a result of the consummation of the
Merger.
Section 3.18 Employee Benefit Plans. All employee benefit plans, contracts
or arrangements to which Somerset or the Somerset Subsidiaries are a party or by
which Somerset or the Somerset Subsidiaries are bound, including without
limitation all pension, retirement, deferred compensation, savings, incentive,
bonus, profit sharing, stock purchase, stock option, life insurance, death or
survivor's benefit, health insurance, sickness, disability, medical, surgical,
hospital, severance, layoff or vacation plans, contracts or arrangements
(collectively the "Somerset Benefit Plans"), but not including the Employment
Obligations described in Section 3.17, are identified in Schedule 3.18. Each of
--------------
the Somerset Benefit Plans which is an "employee pension benefit plan" as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"; each such Plan being herein called a "Somerset Pension
Plan") is exempt from tax under Sections 401 and 501 of the Code and has been
maintained and operated in material compliance with all applicable provisions of
the Code and ERISA. No "prohibited transaction" (as such term is defined in
Section 4975 of the Code or in ERISA) and not otherwise exempt under ERISA or
the Code has occurred in respect of the Somerset Pension Plans. There have been
no material breaches of fiduciary duty by any fiduciary under or with respect to
the Somerset Pension Plans or any other Somerset Benefit Plan which is an
employee welfare benefit plan as defined in ERISA, and no claim is pending or,
to the Knowledge of Somerset, threatened with respect to any Somerset Benefit
Plan other than claims for benefits made in the Ordinary Course of Business.
Neither Somerset nor the Somerset Subsidiaries have incurred any material
penalty imposed by the Code or by ERISA with respect to the Somerset Pension
Plans or any other Somerset Benefit Plan. Within the past five years, there has
not been any audit of any Somerset Benefit Plan by the U.S. Department of Labor
or the IRS.
Section 3.19 Related Party Transactions.
(a) Except as disclosed in Schedule 3.19, neither Somerset nor any of
-------------
the Somerset Subsidiaries has any contract, extension of credit, or
business arrangement of any kind with any of the following persons: (i) any
executive officer or director (including any person who has served in such
capacity since January 1, 2000) of Somerset or any of the Somerset
Subsidiaries; (ii) any shareholder owning five percent (5%) or more of the
outstanding Somerset Common Stock; and (iii) any "associate" (as defined in
Rule 405 under the 0000 Xxx) of the foregoing persons or any business in
which any of the foregoing persons is an officer, director, employee or
five percent (5%) or greater equity owner. Each such contract or extension
of credit disclosed in Schedule 3.19, except as otherwise specifically
--------------
described therein, has been made in the Ordinary Course of Business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable arms' length transactions with
other persons that do not involve more than a normal risk of collectability
or present other unfavorable features.
(b) Somerset has not, since July 30, 2002, extended or maintained
credit, arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any director or executive
officer (or equivalent thereof) of
24
Somerset. Schedule 3.19 identifies any loan or extension of credit
--------------
maintained by Somerset to which the second sentence of Section 13(k)(l) of
the 1934 Act applies.
Section 3.20 No Finder. Except as disclosed in Schedule 3.20, neither
--------------
Somerset nor any of the Somerset Subsidiaries have paid or become obligated to
pay any fee or commission of any kind whatsoever to any investment banker,
broker, finder, financial advisor or other intermediary for, on account of or in
connection with the transactions contemplated in this Agreement.
Section 3.21 Complete and Accurate Disclosure. Neither this Agreement
(insofar as it relates to Somerset, the Somerset Subsidiaries, the Somerset
Common Stock, the Somerset Subsidiaries' Common Equity, and the involvement of
Somerset and the Somerset Subsidiaries in the transactions contemplated hereby)
nor any Exhibits or Schedules to this Agreement nor the Financial Statements
delivered by Somerset to Xxxxxx pursuant to Section 3.6 contains any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or omits to state any
material fact necessary to make the statements contained herein or therein not
false or misleading.
Section 3.22 Environmental Matters. Except as disclosed in Schedule 3.22,
neither Somerset nor any of the Somerset Subsidiaries has any material liability
relating to any environmental contaminant, pollutant, toxic or hazardous waste
or other similar substance that has been generated, used, stored, processed,
disposed of or discharged onto any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right) or leased by Somerset or
any of the Somerset Subsidiaries and which is required to be reflected, noted or
adequately reserved against in Somerset's consolidated financial statements
under United States generally accepted accounting principles. In particular,
without limiting the generality of the foregoing sentence, but subject to the
materiality standard therein, except as disclosed in Schedule 3.22, neither
Somerset nor any of the Somerset Subsidiaries have used or incorporated: (i) any
materials containing asbestos in any building or other structure or improvement
located on any of the real estate now or previously owned or acquired (including
without limitation any real estate acquired by means of foreclosure or exercise
of any other creditor's right) or leased by Somerset or any of the Somerset
Subsidiaries; (ii) any electrical transformers, fluorescent light fixtures with
ballasts or other equipment containing PCB's on any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right) or
leased by Somerset or any of the Somerset Subsidiaries; or (iii) any underground
storage tanks for the storage of gasoline, petroleum products or other toxic or
hazardous wastes or similar substances located on any of the real estate now or
previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditor's right) or
leased by Somerset or any of the Somerset Subsidiaries.
Section 3.23 Proxy Statement/Prospectus. At the time the Proxy
Statement/Prospectus (as defined in Section 6.1(b) herein) is mailed to the
shareholders of Somerset and at all times subsequent to such mailing, up to and
including the Effective Time, the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements
25
thereto), with respect to all information relating to Somerset, the Sfomerset
Subsidiaries, Somerset Common Stock, the Somerset Subsidiaries Common Equity and
all actions taken and statements made by Somerset and the Somerset Subsidiaries
in connection with the transactions contemplated herein (except for information
provided by Xxxxxx to Somerset or the Somerset Subsidiaries) will: (i) comply in
all material respects with applicable provisions of the 1933 Act, and the 1934
Act and the applicable rules and regulations of the SEC thereunder; and (ii) not
contain any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact, or
omit to state any material fact that is required to be stated therein or
necessary in order (A) to make the statements therein not false or misleading,
or (B) to correct any statement in an earlier communication with respect to the
Proxy Statement/Prospectus which has become false or misleading.
Section 3.24 SEC Filings. No registration statement, offering circular,
proxy statement, schedule or report filed and not withdrawn by Somerset or
Somerset Bank with the SEC under the 1933 Act or the 1934 Act, on the date of
effectiveness (in the case of any registration statement or offering circular)
or on the date of filing (in the case of any report or schedule) or on the date
of mailing (in the case of any proxy statement), contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Section 3.25 Reports. Somerset and Somerset Bank have filed all material
reports, registrations and statements that are required to be filed with the
Federal Reserve Board (the"FRB"), the Federal Deposit Insurance Company
("FDIC"), the Department of Banking and Insurance of the State of New Jersey
(the "Department") and any other applicable federal, state or local governmental
or regulatory authorities and such reports, registrations and statements
referred to in this Section 3.25 were, as of their respective dates, in
compliance in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the governmental or regulatory authority
with which they were filed; provided, however, that the failure to file any such
report, registration, or statement or the failure of any report, registration or
statement to comply with the applicable regulatory standard shall not be deemed
to be a breach of the foregoing representation unless such failure has or may
have a material adverse impact on Somerset and the Somerset Subsidiaries on a
consolidated basis. Somerset has furnished Xxxxxx with, or made available to
Xxxxxx, copies of all such filings made in the last three fiscal years and in
the period from January 1, 2004 through the date of this Agreement. Somerset is
required to file reports with the SEC pursuant to Section 12 of the 1934 Act,
and, Somerset has made all appropriate filings under the 1934 Act and the rules
and regulations promulgated thereunder; provided, however, that the failure to
make any such filing shall not be deemed to be a breach of the foregoing
representation unless such failure has or may have a material adverse impact on
Somerset and the Somerset Subsidiaries on a consolidated basis. The Somerset
Common Stock is traded on NASDAQ under the symbol "SVBF".
Section 3.26 Loan Portfolio of Somerset Bank.
(a) Attached hereto as Schedule 3.26 is a list of (i) all outstanding
-------------
commercial loans, commercial loan commitments and commercial letters of
credit, of Somerset Bank
26
in excess of $1,500,000, (ii) all loans of Somerset Bank classified by
Somerset Bank or any regulatory authority as "Monitor," "Substandard,"
"Doubtful" or "Loss," (iii) all commercial and mortgage loans of Somerset
Bank classified as "non-accrual," and (iv) all commercial loans of Somerset
Bank classified as "in substance foreclosed."
(b) Somerset Bank has adequately reserved for or charged off loans in
accordance with applicable regulatory requirements, United States generally
accepted accounting principles and current written policies of Somerset
Bank.
(c) Except as set forth on Schedule 3.26, Somerset Bank does not
--------------
engage in so-called "subprime Section 32 lending." For the purposes of this
representation, "subprime lending" shall be deemed to refer to programs
that target borrowers with weakened credit histories typically
characterized by payment delinquencies, previous charge-offs, judgments or
bankruptcies, or that target borrowers with questionable repayment capacity
evidenced by low credit scores or high debt-burden ratios.
Section 3.27 Investment Portfolio. Attached hereto as Schedule 3.27 is a
-------------
list of all securities held by Somerset and the Somerset Subsidiaries for
investment, showing the holder, principal amount, book value and market value of
each security as of a recent date, and of all short-term investments held by
them as of September 30, 2004. These securities are free and clear of all liens,
pledges and encumbrances, except as shown on Schedule 3.27. Except as set forth
-------------
on Schedule 3.27, the investment portfolio of Somerset or the Somerset
--------------
Subsidiaries does not include any financial derivatives.
Section 3.28 Regulatory Examinations.
(a) Except for normal examinations conducted by a regulatory agency in
the Ordinary Course of Business, no regulatory agency has initiated any
proceeding or investigation into the business or operations of Somerset or
any of the Somerset Subsidiaries within the past ten (10) years. Except as
otherwise disclosed in Schedule 3.28, neither Somerset nor any of the
Somerset Subsidiaries have received any objection from any regulatory
agency to Somerset's or any of the Somerset Subsidiaries' response to any
violation, criticism or exception with respect to any report or statement
relating to any examinations of Somerset and any of the Somerset
Subsidiaries which would have a materially adverse effect on Somerset and
any of the Somerset Subsidiaries on a consolidated basis.
(b) Neither Somerset nor any of the Somerset Subsidiaries are required
to divest any assets currently held by it or discontinue any activity
currently conducted as a result of the Federal Deposit Insurance
Corporation Improvement Act of 1991, any regulations promulgated
thereunder, or otherwise which would have a materially adverse effect on
Somerset and any of the Somerset Subsidiaries on a consolidated basis.
Section 3.29 Regulatory Agreements and Matters.
(a) Except as set forth on Schedule 3.29, on the date hereof, neither
-------------
Somerset nor Somerset Bank is a party to any assistance agreement,
directive, commitment letter,
27
supervisory agreement or letter, memorandum of understanding, consent
order, cease and desist order, or condition of any regulatory order, decree
or similar directive with or by the FDIC, the FRB, the Department or any
other financial services regulatory agency having jurisdiction over
Somerset or Somerset Bank that relates to the conduct of the business of
Somerset or Somerset Bank, nor has Somerset or Somerset Bank been advised
by any such regulatory agency or other governmental entity that it is
considering issuing or requesting any such agreement, order or decree.
(b) Schedule 3.29 lists, and Somerset has delivered to Xxxxxx copies
--------------
of, all reports made by any attorney to Somerset's chief legal officer,
chief executive officer, board of directors (or committee thereof) or other
representative pursuant to 17 CFR Part 205, and all responses thereto.
(c) Somerset is, or will timely be in all material respects, in
compliance with all current and proposed listing and corporate governance
requirements of NASDAQ, and is in compliance in all material respects, and
will continue to remain in compliance following the Effective Time, with
all rules, regulations, and requirements of the SOX Act and the SEC.
(d) Each of Somerset, its directors and its senior financial officers
has had the opportunity to consult with Somerset's independent auditors and
with Somerset's outside counsel with respect to, and (to the extent
applicable to the Company) is familiar in all material respects, with all
of the requirements of the SOX Act. The Company is in compliance with the
provisions of the SOX Act applicable to it as of the date hereof and has
implemented such programs and has taken reasonable steps, upon the advice
of Somerset's independent auditors and outside counsel, respectively, to
ensure Somerset's future compliance (not later than the relevant statutory
and regulatory deadlines therefore) and all provisions of the SOX Act which
shall become applicable to Somerset after the date hereof.
Section 3.30 Beneficial Ownership of Xxxxxx Common Stock. Somerset and the
Somerset Subsidiaries do not, and prior to the Effective Time, Somerset and the
Somerset Subsidiaries will not, own beneficially (within the meaning of SEC Rule
13d 3(d)(1)) more than five percent (5%) of the outstanding shares of Xxxxxx
Common Stock.
Section 3.31 Fairness Opinion. Somerset's Board of Directors has received a
written opinion from Xxxxxxxxx Associates, Inc. to be updated in writing prior
to the publication of the Proxy Statement/Prospectus (a copy of such updated
written opinion being provided simultaneously to Xxxxxx at the time of receipt),
to the effect that the Conversion Ratio and the Cash Consideration, at the time
of execution of this Agreement and the mailing of the Proxy
Statement/Prospectus, is fair to Somerset's shareholders from a financial point
of view.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx represents and warrants to Somerset, as of the date of this
Agreement and as of the date of the Closing, as follows:
Section 4.1 Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been authorized by the
Board of
28
Directors of Xxxxxx, and no other corporate action on the part of Xxxxxx is
necessary to authorize this Agreement or the consummation by Xxxxxx of the
transactions contemplated herein. This Agreement has been duly executed and
delivered by Xxxxxx and, assuming due authorization, execution and delivery by
Somerset, constitutes a valid and binding obligation of Xxxxxx. The execution,
delivery and consummation of this Agreement will not constitute a violation or
breach of or default under the Articles of Incorporation or Bylaws of Xxxxxx or
any statute, rule, regulation, order, decree, directive, agreement, indenture or
other instrument to which Xxxxxx is a party or by which Xxxxxx or any of its
properties are bound.
Section 4.2 Organization and Standing. Xxxxxx is a business corporation
that is duly organized, validly existing and in good standing under the laws of
the Commonwealth of Pennsylvania. Xxxxxx is a registered financial holding
company under the BHC Act and has full power and lawful authority to own and
hold its properties and to carry on its business as presently conducted.
Section 4.3 Capitalization. The authorized capital of Xxxxxx consists
exclusively of 400,000,000 shares of Xxxxxx Common Stock and 10,000,000 shares
of preferred stock without par value (the "Xxxxxx Preferred Stock"). As of
December 31, 2004, there were 134,241,577 shares of Xxxxxx Common Stock validly
issued, fully paid and non-assessable and 8,521,456 shares are held as treasury
shares. No shares of Xxxxxx Preferred Stock have been issued as of the date of
this Agreement, and Xxxxxx has no present intention to issue any shares of
Xxxxxx Preferred Stock. As of the date of this Agreement, there are no
outstanding obligations, options or rights of any kind entitling other persons
to acquire shares of Xxxxxx Common Stock or shares of Xxxxxx Preferred Stock and
there are no outstanding securities or other instruments of any kind convertible
into shares of Xxxxxx Common Stock or into shares of Xxxxxx Preferred Stock,
except as follows: (i) 5,225,274 shares of Xxxxxx Common Stock were issuable
upon the exercise of outstanding stock options granted under the Xxxxxx
Incentive Stock Option Plan and the Xxxxxx Employee Stock Purchase Plan and (ii)
there were outstanding 139,466,851 Rights representing the right under certain
circumstances to purchase shares of Xxxxxx Common Stock pursuant to the terms of
a Xxxxxx Rights Agreement and (iii) 12,651,481 shares of Xxxxxx Common Stock
reserved from time to time for issuance pursuant to Xxxxxx'x Employee Stock
Purchase and Dividend Reinvestment Plans. All shares of Xxxxxx Common Stock that
are issued in the Merger shall include purchase Rights under the Xxxxxx Rights
Agreement unless, prior to the Effective Date, all Rights issued under said
Agreement shall have been redeemed by Xxxxxx without a Distribution Date having
occurred under such Agreement.
Section 4.4 Articles of Incorporation and Bylaws. The copies of the
Articles of Incorporation, as amended, and of the Bylaws, as amended, of Xxxxxx
that have been delivered to Somerset are true, correct and complete.
Section 4.5 Subsidiaries. Schedule 4.5 contains a list of all subsidiaries
------------
("Xxxxxx Subsidiaries") which Xxxxxx owns, directly or indirectly. Except as
otherwise disclosed on Schedule 4.5: (i) Xxxxxx owns, directly or indirectly,
------------
all of the outstanding shares of capital stock of each Subsidiary, and (ii) as
of the date of this Agreement: (A) there are no outstanding obligations, options
or rights of any kind entitling persons (other than Xxxxxx or any Subsidiary) to
acquire shares of capital stock of any Subsidiary, and (B) there are no
outstanding securities or
29
other instruments of any kind held by persons (other than Xxxxxx or any
Subsidiary) that are convertible into shares of capital stock of any Subsidiary.
Each Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction pursuant to which it is incorporated. Each
Subsidiary has full power and lawful authority to own and hold its properties
and to carry on its business as presently conducted. Each Subsidiary which is a
banking institution is an insured bank under the provisions of the FDI Act.
Section 4.6 Financial Statements.
(a) Xxxxxx has delivered to Somerset the following financial
statements: Consolidated Balance Sheets at December 31, 2003 and 2002 and
Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity, and Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001, (audited by Xxxxxx Xxxxxxxx LLP for the
year 2002 and KPMG LLP for the years 2002 and 2003) and set forth in the
Annual Report to the shareholders of Xxxxxx for the year ended December 31,
2003, and unaudited Consolidated Balance Sheets as of September 30, 2004,
unaudited Consolidated Statements of Income for the nine-month periods
ended September 30, 2004 and 2003, and unaudited Consolidated Statements of
Cash Flows for the nine-months ended September 30, 2004 and 2003 as filed
with the SEC in a Quarterly Report on Form 10-Q (the Consolidated Balance
Sheet as of September 30, 2004 being hereinafter referred to as the "Xxxxxx
Balance Sheet"). Each of the foregoing financial statements fairly presents
the consolidated financial position, assets, liabilities and results of
operations of Xxxxxx at their respective dates and for the respective
periods then ended and has been prepared in accordance with generally
accepted accounting principles consistently applied, except as otherwise
noted in a footnote thereto.
(b) Except (A) as reflected in Xxxxxx'x unaudited balance sheet at
September 30, 2004 or liabilities described in any notes thereto (or
liabilities for which neither accrual nor footnote disclosure is required
pursuant to GAAP) or (B) for liabilities incurred in the ordinary course of
business since September 30, 2004 consistent with past practices or in
connection with this Agreement or the transactions contemplated hereby,
neither Xxxxxx nor any of its subsidiaries has any material liabilities or
obligations of any nature. Schedule 4.6 lists and Xxxxxx has delivered to
------------
Somerset copies of the documentation creating or governing, all
securitization transactions and "off-balance sheet arrangements" (as
defined in Item 303(c) of Regulation S-K of the SEC) effected by Xxxxxx or
its subsidiaries since KPMG LLP expressed its opinion with respect to the
financial statements of Xxxxxx and its subsidiaries included in Xxxxxx'x
SEC Documents (including the related notes).
(c) KPMG LLP is and has been (x) since September 24, 2003, a
registered public accounting firm (as defined in Section 2(a)(12) of the
SOX Act), (y) throughout the periods covered by such financial statements,
"independent" with respect to Xxxxxx within the meaning of Regulation S-X,
and (z) since May 6, 2003, in compliance with subsections (g) through (l)
of Section 10A of the 1934 Act and the related Rules of the SEC and the
Public Company Accounting Oversight Board. Schedule 4.6 lists all non-
30
audit services performed by KPMG LLP for Xxxxxx and its subsidiaries since
January 1, 2002.
(d) Each of Xxxxxx and its subsidiaries maintains accurate books and
records reflecting its assets and liabilities and maintains proper and
adequate internal accounting controls which provide assurance that (i)
transactions are executed with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of the
consolidated financial statements of the Xxxxxx and to maintain
accountability for Xxxxxx'x consolidated assets; (iii) access to Xxxxxx'x
assets is permitted only in accordance with management's authorization;
(iv) the reporting of Xxxxxx'x assets is compared with existing assets at
regular intervals; and (v) accounts, notes and other receivables and
inventory are recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely basis.
(e) Xxxxxx has, on a timely basis, filed all forms, reports and
documents required to be filed by it with the SEC since January 1, 2002.
Schedule 4.6 lists, and except to the extent available in full without
redaction on the SEC's website through XXXXX ("XXXXX") has delivered to
Somerset copies in the form filed with the SEC of (i) Xxxxxx'x Annual
Reports on Form 10-K for each fiscal year of Xxxxxx'x beginning since
January 1, 2002, (ii) its Quarterly Reports on Form 10-Q for each of the
first three fiscal quarters in each of the fiscal years of Xxxxxx referred
to in clause (i) above, (iii) all proxy statements relating to Xxxxxx'x
meetings of stockholders (whether annual or special) held, and all
information statements relating to stockholder consents since the beginning
of the first fiscal year referred to in clause (i) above, (iv) all
certifications and statements required by (x) the SEC's Order dated June
27, 2002 pursuant to Section 21(a)(1) of the 1934 Act (File No. 4-460), (y)
18 U.S.C. ss.1350 (Section 906 of the SOX Act) with respect to any report
referred to in clause (i) or (iii) above, (v) all other forms, reports,
registration statements and other documents (other than preliminary
materials if the corresponding definitive materials have been provided to
Somerset pursuant to this Section 4.6) filed by Xxxxxx with the SEC since
the beginning of the first fiscal year referred to in clause (i) above (the
forms, reports, registration statements and other documents referred to in
clauses (i), (ii), (iii), (iv) and (v) above are, collectively, the "Xxxxxx
SEC Reports" and, to the extent available in full without redaction on the
SEC's website through XXXXX two days prior to the date of this Agreement,
are, collectively, the `Filed Xxxxxx SEC Reports"), and (vi) all comment
letters received by Xxxxxx from the Staff of the SEC since January 1, 2002
and all responses to such comment letters by or on behalf of Xxxxxx. The
Xxxxxx SEC Reports (x) were or will be prepared in accordance with the
requirements of the 1933 Act and the 1934 Act, as the case may be, and the
rules and regulations thereunder and (y) did not at the time they were
filed with the SEC, or will not at the time they are filed with the SEC
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. No Subsidiary of Xxxxxx is or has been required
to file any form, report, registration statement or other document with the
SEC.
31
(f) Xxxxxx maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the 1934 Act; such controls and procedures are
effective to ensure that all material information concerning Xxxxxx and its
subsidiaries is made known on a timely basis to the individuals responsible
for the preparation of Xxxxxx'x filings with the SEC and other public
disclosure documents. Schedule 4.6 lists, and Xxxxxx has delivered to
Somerset copies of, all written descriptions of, and all policies, manuals
and other documents promulgating, such disclosure controls and procedures.
To Xxxxxx'x knowledge, each director and executive officer of Xxxxxx has
filed with the SEC on a timely basis all statements required by Section
16(a) of the 1934 Act and the rules and regulations thereunder since
January 1, 2002. As used in this Section 4.6, the term "file" shall be
broadly construed to include any manner in which a document or information
is furnished, supplied or otherwise made available to the SEC. To the
extent required, Xxxxxx has in place "disclosure controls and procedures"
as defined in Rules 13a-15(e) and 15(d)-15(e) of the 1934 Act to allow
Xxxxxx'x management to make timely decisions regarding required disclosures
and to make the certifications of the Chief Executive Officer and Chief
Financial Officer of Xxxxxx required under the 1934 Act. Since September
30, 2004, there has not been any material change in the internal controls
utilized by the Xxxxxx to assure that its consolidated financial statements
conform with GAAP. Without limiting the generality of the foregoing,
Xxxxxx'x disclosures and controls are designed and maintained to ensure
that (i) transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization,
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences, (v) all information (both financial and non-financial)
required to be disclosed by Xxxxxx in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC, and (vi) all
such information is accumulated and communicated to Xxxxxx'x management as
appropriate to allow timely decisions regarding required disclosure and to
make the certifications of the Chief Executive Officer and Chief Financial
Officer of Xxxxxx required under the 1934 Act with respect to such reports.
None of Xxxxxx'x or any Xxxxxx'x Subsidiary's records, systems, controls,
data or information are recorded, stored, maintained, operated or otherwise
wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process, whether computerized or
not) which (including all means of access thereto and therefrom) are not
under the exclusive ownership and direct control of the Xxxxxx or the
Xxxxxx Subsidiaries or their independent accountants.
(g) The Chief Executive Officer and the Chief Financial Officer of
Xxxxxx has signed, and Xxxxxx has furnished to the SEC, all certifications
required by Sections 302 and 906 of the SOX Act of 2002; such
certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither
Xxxxxx nor any of its officers has received notice from any Governmental
Entity questioning or challenging the accuracy, completeness, form or
manner of filing or submission of such certifications.
32
(h) Xxxxxx heretofore has provided to Somerset complete and correct
copies of all certifications filed with the SEC pursuant to Sections 302
and 906 of the SOX Act and hereby reaffirms, represents and warrants to
Somerset the matters and statements made in such certificates.
Section 4.7 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 4.7 or as reflected, noted or adequately reserved against in the Xxxxxx
------------
Balance Sheet, at September 30, 2004 Xxxxxx had no material liabilities (whether
accrued, absolute, contingent or otherwise) which were required to be reflected,
noted or reserved against in the Xxxxxx Balance Sheet under generally accepted
accounting principles. Except as described in Schedule 4.7, since September 30,
------------
2004, Xxxxxx has not incurred any such liability other than liabilities of the
same nature as those set forth in the Xxxxxx Balance Sheet, all of which have
been reasonably incurred in the ordinary course of business.
Section 4.8 Absence of Changes; Dividends, Etc. Since September 30, 2004
(a) there has not been any material and adverse change in the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of Xxxxxx and the Xxxxxx Subsidiaries on a consolidated basis and (b)
except as disclosed in Schedule 4.8, Xxxxxx has not declared, set aside, made or
------------
paid any dividend or other distribution in respect of the Xxxxxx Common Stock,
or purchased, issued or sold any shares of Xxxxxx Common Stock or the Xxxxxx
Subsidiaries Common Stock.
Section 4.9 Litigation and Governmental Directives. Except as disclosed in
Schedule 4.9: (i) there is no litigation, investigation or proceeding pending,
------------
or to the knowledge of Xxxxxx threatened, that involves Xxxxxx or any Xxxxxx
Subsidiary or its properties and that, if determined adversely to Xxxxxx or the
Xxxxxx Subsidiary, would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of Xxxxxx; (ii) there are no outstanding orders, writs, injunctions,
judgments, decrees, regulations, directives, consent agreements or memoranda of
understanding issued by any federal, state or local court or governmental agency
or authority or of any arbitration tribunal against Xxxxxx which materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Xxxxxx or restrict in any manner the
right of Xxxxxx to carry on its business as presently conducted; and (iii)
Xxxxxx has no knowledge of any fact or condition presently existing that might
give rise to any litigation, investigation or proceeding which, if determined
adversely to Xxxxxx, would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of Xxxxxx or restrict in any material manner the right of Xxxxxx to
carry on its business as presently conducted.
Section 4.10 Compliance with Laws; Governmental Authorizations. Except as
disclosed in Schedule 4.10 or where noncompliance would not have a material and
-------------
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Xxxxxx: (i) Xxxxxx and each of its
Subsidiaries are in compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders, decrees, directives, consent agreements,
memoranda of understanding, permits, concessions, grants, franchises, licenses,
and other governmental
33
authorizations or approvals applicable to their respective operations and
properties; and (ii) all permits, concessions, grants, franchises, licenses and
other governmental authorizations and approvals necessary for the conduct of the
respective businesses of Xxxxxx and each of its Subsidiaries as presently
conducted have been duly obtained and are in full force and effect, and there
are no proceedings pending or threatened which may result in the revocation,
cancellation, suspension or materially adverse modification of any thereof.
Section 4.11 Complete and Accurate Disclosure. Neither this Agreement
(insofar as it relates to Xxxxxx, Xxxxxx Common Stock, and the involvement of
Xxxxxx in the transactions contemplated hereby) nor any financial statement,
schedule (including, without limitation, its Schedules to this Agreement),
certificate or other statement or document delivered by Xxxxxx to Somerset in
connection herewith contains any statement which, at the time and under the
circumstances under which it is made, is false or misleading with respect to any
material fact or omits to state any material fact necessary to make the
statements contained herein or therein not false or misleading. In particular,
without limiting the generality of the foregoing sentence, the information
provided and the representations made by Xxxxxx to Somerset in connection with
the Registration Statement (as defined in Section 6.1(b)), both at the time such
information and representations are provided and made and at the time of the
Closing, will be true and accurate in all material respects and will not contain
any false or misleading statement with respect to any material fact or omit to
state any material fact required to be stated therein or necessary in order (i)
to make the statements made not false or misleading, or (ii) to correct any
statement contained in an earlier communication with respect to such information
or representations which has become false or misleading.
Section 4.12 Labor Relations. Neither Xxxxxx nor any of its Subsidiaries is
a party to or bound by any collective bargaining agreement. To its knowledge,
Xxxxxx and each of its Subsidiaries enjoy good working relationships with their
employees, and there are no labor disputes pending, or to the knowledge of
Xxxxxx or any Subsidiary threatened, that might materially and adversely affect
the condition (financial or otherwise), assets, liabilities, business,
operations or prospects of Xxxxxx.
Section 4.13 Employee Benefits Plans. Xxxxxx'x contributory profit-sharing
plan, defined benefits pension plan and 401(k) plan (hereinafter collectively
referred to as the "Xxxxxx Pension Plans") are exempt from tax under Sections
401 and 501 of the Code, have been maintained and operated in compliance with
all applicable provisions of the Code and ERISA, are not subject to any
accumulated funding deficiency within the meaning of ERISA and the regulations
promulgated thereunder, and do not have any outstanding liability to the Pension
Benefit Guaranty Corporation (the "PBGC"). No "prohibited transaction" or
"reportable event" (as such terms are defined in the Code or ERISA) has occurred
with respect to the Xxxxxx Pension Plans or any other employee benefit plan to
which Xxxxxx or any of its subsidiaries are a party or by which Xxxxxx or any of
its subsidiaries are bound (each hereinafter called a "Xxxxxx Benefit Plan").
There have been no breaches of fiduciary duty by any fiduciary under or with
respect to the Xxxxxx Pension Plans or any other Xxxxxx Benefit Plan, and no
claim is pending or threatened with respect to any Xxxxxx Benefit Plan other
than claims for benefits made in the Ordinary Course of Business. Neither Xxxxxx
or any of its subsidiaries have incurred any liability for any tax imposed by
Section 4975 of the Code or for any penalty imposed by the Code or by ERISA with
respect to the Xxxxxx Pension Plans or any other Xxxxxx Benefit Plan. There has
not
34
been any audit of any Xxxxxx Benefit Plan by the U.S. Department of Labor, the
IRS or the PBGC since 1990.
Section 4.14 Environmental Matters. Except as disclosed in Schedule 4.14,
-------------
Xxxxxx has no material liability relating to any environmental contaminant,
pollutant, toxic or hazardous waste or other similar substance that has been
used, generated, stored, processed, disposed of or discharged onto any of the
real estate now or previously owned or acquired (including without limitation
real estate acquired by means of foreclosure or other exercise of any creditor's
right) or leased by Xxxxxx and which is required to be reflected, noted or
adequately reserved against in Xxxxxx'x consolidated financial statements under
generally accepted accounting principles. In particular, without limiting the
generality of the foregoing sentence, but subject to the materiality standard
therein, except as disclosed in Schedule 4.14, neither Xxxxxx nor any of the
--------------
Xxxxxx Subsidiaries have used or incorporated: (i) any materials containing
asbestos in any building or other structure or improvement located on any of the
real estate now or previously owned or acquired (including without limitation
any real estate acquired by means of foreclosure or exercise of any other
creditor's right) or leased by Xxxxxx or any of the Xxxxxx Subsidiaries; (ii)
any electrical transformers, fluorescent light fixtures with ballasts or other
equipment containing PCB's on any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right) or leased by Xxxxxx or
any of the Xxxxxx Subsidiaries; or (iii) any underground storage tanks for the
storage of gasoline, petroleum products or other toxic or hazardous wastes or
similar substances located on any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right) or leased by Xxxxxx or
any of the Xxxxxx Subsidiaries.
Section 4.15 SEC Filings. No registration statement, offering circular,
proxy statement, schedule or report filed and not withdrawn by Xxxxxx with the
SEC under the 1933 Act or the 1934 Act, on the date of effectiveness (in the
case of any registration statement or offering circular) or on the date of
filing (in the case of any report or schedule) or on the date of mailing (in the
case of any proxy statement), contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 4.16 Proxy Statement/Prospectus. At the time the Proxy
Statement/Prospectus (as defined in Section 6.1(b)) is mailed to the
shareholders of Somerset and at all times subsequent to such mailing, up to and
including the Effective Time, the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements thereto), with respect to all
information relating to Xxxxxx, Xxxxxx Common Stock, and actions taken and
statements made by Xxxxxx in connection with the transactions contemplated
herein (other than information provided by Somerset or Somerset Bank to Xxxxxx),
will: (i) comply in all material respects with applicable provisions of the 1933
Act and 1934 Act and the pertinent rules and regulations thereunder; and (ii)
not contain any statement which, at the time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or omits to state any material fact that is required to be stated therein
or necessary in order (A) to make the statements therein not false or
misleading, or (B) to correct any
35
statement in an earlier communication with respect to the Proxy
Statement/Prospectus which has become false or misleading.
Section 4.17 Regulatory Approvals. Xxxxxx is not aware of any reason why
any of the required regulatory approvals to be obtained in connection with the
Merger should not be granted by such regulatory authorities or why such
regulatory approvals should be conditioned on any requirement which would be a
significant impediment to Xxxxxx'x ability to carry on its business.
Section 4.18 No Finder. Xxxxxx has not paid or become obligated to pay any
fee or commission of any kind whatsoever to any broker, finder, advisor or other
intermediary for, on account of, or in connection with the transactions
contemplated in this Agreement.
Section 4.19 Taxes. Xxxxxx has filed, or has received extension for filing,
all federal, state, county, municipal and foreign tax returns, reports and
declarations which are required to be filed by it as of December 31, 2004.
Except as disclosed in Schedule 4.19, (i) Xxxxxx has paid all taxes, penalties
-------------
and interest which have become due pursuant thereto or which became due pursuant
to federal, state, county, municipal or foreign tax laws applicable to the
periods covered by the foregoing tax returns, and (ii) Xxxxxx has not received
any notice of deficiency or assessment of additional taxes. Except as disclosed
in Schedule 4.19, the accruals and reserves reflected in the Xxxxxx Balance
--------------
Sheet are adequate to cover all material taxes (including interest and
penalties, if any, thereon) that are payable or accrued as a result of Xxxxxx'x
consolidated operations for all periods prior to the date of such Balance Sheet.
Section 4.20 Title to and Condition of Assets. Xxxxxx has good and
marketable title to all material consolidated real and personal properties and
assets reflected in the Xxxxxx Balance Sheet or acquired subsequent to September
30, 2004 (other than property and assets disposed of in the Ordinary Course of
Business), free and clear of all liens or encumbrances of any kind whatsoever;
provided, however, that the representations and warranties contained in this
sentence do not cover liens or encumbrances that: (i) are reflected in the
Xxxxxx Balance Sheet; (ii) represent liens of current taxes not yet due or
which, if due, may be paid without penalty, or which are being contested in good
faith by appropriate proceedings; and (iii) represent such imperfections of
title, liens, encumbrances, zoning requirements and easements, if any, as are
not substantial in character, amount or extent and do not materially detract
from the value, or interfere with the present or proposed use, of the properties
and assets subject thereto.
Section 4.21 Contracts. All Xxxxxx Material Contracts are enforceable
against Xxxxxx, and Xxxxxx has in all material respects performed all
obligations required to be performed by it to date and is not in default in any
material respect. "Xxxxxx Material Contracts" shall be defined as each written
or oral contract entered into by Xxxxxx or any Xxxxxx Subsidiary (other than
contracts with customers reasonably entered into by Xxxxxx in the Ordinary
Course of Business) which involves aggregate payments or receipts in excess of
$100,000 per year, including without limitation every employment contract,
employee benefit plan, agreement, lease, license, indenture, mortgage and other
commitment to which either Xxxxxx or Xxxxxx Subsidiaries are a party or by which
Xxxxxx or any of the Xxxxxx Subsidiaries or any of their properties may be
bound.
36
Section 4.22 Insurance. All policies of insurance covering operations of
Xxxxxx which are, in the aggregate, material (except for title insurance
policies), including without limitation all financial institutions bonds, held
by or on behalf of Xxxxxx are in full force and effect, and no notices of
cancellation have been received in connection therewith.
Section 4.23 Reports. Xxxxxx and the Xxxxxx Subsidiaries have filed all
material reports, registrations and statements that are required to be filed
with the FRB, the FDIC, the Pennsylvania Department of Banking, and any other
applicable federal, state or local governmental or regulatory authorities and
such reports, registrations and statements referred to in this Section 4.23
were, as of their respective dates, in compliance in all material respects with
all of the statutes, rules and regulations enforced or promulgated by the
governmental or regulatory authority with which they were filed; provided,
however, that the failure to file any such report, registration or statement or
the failure of any report, registration or statement to comply with the
applicable regulatory standard shall not be deemed to be a breach of the
foregoing representation unless such failure has or may have a material adverse
impact on Xxxxxx and the Xxxxxx Subsidiaries on a consolidated basis. Xxxxxx has
furnished Somerset with, or made available to Somerset, copies of all such
filings made in the last three fiscal years and in the period from January 1,
2004 to the date of this Agreement. Xxxxxx is required to file reports with the
SEC pursuant to Section 12 of the 1934 Act, and Xxxxxx has made all appropriate
filings under the 1934 Act and the rules and regulations promulgated thereunder;
provided, however, that the failure to make any such filing shall not be deemed
to be a breach of the foregoing representation unless such failure has or may
have a material adverse impact on Xxxxxx and the Xxxxxx subsidiaries. The Xxxxxx
Common Stock is traded on NASDAQ under the symbol "FULT."
Section 4.24 Regulatory Agreements and Matters.
(a) Except as set forth on Schedule 4.24, on the date hereof, neither
-------------
Xxxxxx nor any Xxxxxx Subsidiary is a party to any assistance agreement,
directive, commitment letter, supervisory agreement or letter, memorandum
of understanding, consent order, cease and desist order, or condition of
any regulatory order, decree or similar directive with or by the FDIC, the
FRB, the Department or any other financial services regulatory agency
having jurisdiction over Xxxxxx or any Xxxxxx Subsidiary that relates to
the conduct of the business of Xxxxxx or any Xxxxxx Subsidiary Bank, nor
has Xxxxxx or any Xxxxxx Subsidiary been advised by any such regulatory
agency or other governmental entity that it is considering issuing or
requesting any such agreement, order or decree.
(b) Schedule 4.24 lists, and Xxxxxx has delivered to Somerset copies
of, all reports made by any attorney to Xxxxxx'x chief legal officer, chief
executive officer, board of directors (or committee thereof) or other
representative pursuant to 17 CFR Part 205, and all responses thereto.
(c) Xxxxxx is, or will timely be in all material respects, in
compliance with all current and proposed listing and corporate governance
requirements of NASDAQ, and is in compliance in all material respects, and
will continue to remain in compliance following the Effective Time, with
all rules, regulations, and requirements of the SOX Act and the SEC.
37
(d) Each of Xxxxxx, its directors and its senior financial officers
has had the opportunity to consult with Xxxxxx'x independent auditors and
with Xxxxxx'x outside counsel with respect to, and (to the extent
applicable to the Company) is familiar in all material respects with all of
the requirements of the SOX Act. Xxxxxx is in compliance with the
provisions of, the SOX Act applicable to it as of the date hereof and has
implemented such programs and has taken reasonable steps, upon the advice
of Xxxxxx'x independent auditors and outside counsel, respectively, to
ensure Xxxxxx'x future compliance (not later than the relevant statutory
and regulatory deadlines therefore) and all provisions of the SOX Act which
shall become applicable to Xxxxxx after the date hereof.
ARTICLE V - COVENANTS OF SOMERSET
From the date of this Agreement until the Effective Time, Somerset
covenants and agrees to do, and shall cause the Somerset Subsidiaries to do, the
following:
Section 5.1 Conduct of Business. Except as otherwise consented to by Xxxxxx
in writing (such consent not to be unreasonably withheld) or as set forth on
Schedule 5.1, Somerset and the Somerset Subsidiaries shall:
(i) use all reasonable efforts to carry on their respective
businesses in, and only in, the Ordinary Course of Business;
(ii) use all reasonable efforts to preserve their present
business organizations, to retain the services of their present
officers and employees, and to maintain their relationships with
customers, suppliers and others having business dealings with Somerset
or any of the Somerset Subsidiaries;
(iii) maintain all of their structures, equipment and other real
property and tangible personal property in good repair, order and
condition, except for ordinary wear and tear and damage by unavoidable
casualty;
(iv) use all reasonable efforts to preserve or collect all
material claims and causes of action belonging to Somerset or any of
the Somerset Subsidiaries;
(v) keep in full force and effect all insurance policies now
carried by Somerset or any of the Somerset Subsidiaries;
(vi) perform in all material respects each of their obligations
under all Material Contracts (as defined in Section 3.12 herein) to
which Somerset or any of the Somerset Subsidiaries are a party or by
which any of them may be bound or which relate to or affect their
properties, assets and business;
(vii) maintain their books of account and other records in the
Ordinary Course of Business;
38
(viii) comply in all material respects with all statutes, laws,
ordinances, rules and regulations, decrees, orders, consent
agreements, memoranda of understanding and other federal, state, and
local governmental directives applicable to Somerset or any of the
Somerset Subsidiaries and to the conduct of their businesses;
(ix) not amend Somerset's or any of the Somerset Subsidiaries'
Certificate of Incorporation or Bylaws, except in accordance with the
terms hereof or to the extent necessary to consummate the transactions
contemplated by this Agreement;
(x) not enter into or assume any Material Contract, incur any
material liability or obligation, or make any material commitment,
except in the Ordinary Course of Business;
(xi) not make any material acquisition or disposition of any
properties or assets (except for acquisitions or dispositions of
properties or assets in accordance with any Material Contract
disclosed on Schedule 3.12 or which do not exceed, in any case,
--------------
$50,000), or subject any of their properties or assets to any material
lien, claim, charge, or encumbrance of any kind whatsoever, except for
loan and investment activity engaged in the Ordinary Course of
Business and consistent with past practice;
(xii) not knowingly take or permit to be taken any action which
would constitute or cause a material breach of any representation,
warranty or covenant set forth in this Agreement as of or subsequent
to the date of this Agreement or as of the Effective Date;
(xiii) except for the September Split or as permitted in Section
5.10 herein, not declare, set aside or pay any dividend or make any
other distribution in respect of Somerset Common Stock or of Somerset
Preferred Stock;
(xiv) not authorize, purchase, redeem, issue (except upon the
exercise of outstanding options under the Somerset Stock Option Plans)
or sell (or grant options or rights to purchase or sell) any shares of
Somerset Common Stock or any other equity or debt securities of
Somerset (other than the Warrant or the Somerset Common Stock issuable
under the Warrant);
(xv) not increase the rate of compensation of, pay a bonus or
severance compensation to, establish or amend any Somerset Benefit
Plan (as defined in Section 3.18 herein), except as required by law,
or enter into or amend any Employment Obligation (as defined in
Section 3.17 herein), severance or "change in control" agreement or
arrangement with any officer, director, employee or consultant of
Somerset or any of the Somerset Subsidiaries, except that Somerset and
the Somerset Subsidiaries may grant reasonable salary increases and
bonuses to their officers and employees in the Ordinary Course of
Business to the extent consistent with past practice or their current
policy disclosed in writing to Xxxxxx,
39
and are consistent, in magnitude and otherwise, with the current
policy disclosed in writing to Xxxxxx of Somerset and the Somerset
Subsidiaries (provided, however, that no Contract Employees shall
receive a salary increase or bonus, except as set forth on Schedule
5.1); --------
---
(xvi) not enter into any related party transaction of the kind
contemplated in Section 3.19 herein;
(xvii) in determining the additions to loan loss reserves and the
loan write-offs, writedowns and other adjustments that reasonably
should be made by Somerset Bank and classifying, valuing and retaining
its investment portfolio, during the fiscal year ending December 31,
2004 and thereafter, Somerset and the Somerset Subsidiaries shall
consult with Xxxxxx and shall act in accordance with generally
accepted accounting principles;
(xviii) file with appropriate federal, state, local and other
governmental agencies all tax returns and other material reports
required to be filed, pay in full or make adequate provisions for the
payment of all taxes, interest, penalties, assessments or deficiencies
shown to be due on tax returns or by any taxing authorities and report
all information on such returns truthfully, accurately and completely;
(xix) not renew any existing contract for services, goods,
equipment or the like or enter into, amend in any material respect or
terminate any contract or agreement (including without limitation any
settlement agreement with respect to litigation) involving an amount
in excess of $50,000 or for a term of one year or more;
(xx) except as permitted by (xi) above, not make any capital
expenditures other than in the Ordinary Course of Business or as
necessary to maintain existing assets in good repair;
(xxi) not make application for the opening or closing of any, or
open or close any, branches or automated banking facility other than
branches in Hunterdon County and Middlesex County in June, 2005 and
early 2006, respectively, or as disclosed on Schedule 5.1(xxi);
(xxii) not make any equity investment or commitment to make such
an investment in real estate or in any real estate development
project, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructuring in the
Ordinary Course of Business consistent with customary banking
practice;
(xxiii) not take any other action which would cause the Merger
not to qualify as a tax-free reorganization under Section 368 of the
Code; and
40
(xxiv) following receipt of both shareholder and regulatory
approval of the Merger and upon agreement as to the Effective Date by
Xxxxxx and Somerset, conform its practices to the standards used by
Xxxxxx, with respect to its investment and loan portfolios and loan
loss reserve; provided, however, (A) in taking such actions, Somerset
shall not be required to breach any existing contractual obligations
and (B) any such actions taken at the request of Xxxxxx shall be
subject to the provisions of subparagraph (a) of Section 7.2(f)
herein.
Section 5.2 Best Efforts. Somerset and the Somerset Subsidiaries shall
cooperate with Xxxxxx and shall use their best efforts to do or cause to be done
all things necessary or appropriate on their part in order to fulfill the
conditions precedent set forth in Article VII of this Agreement and to
consummate the transactions contemplated by this Agreement, including the
Merger. In particular, without limiting the generality of the foregoing
sentence, Somerset and the Somerset Subsidiaries shall: (i) cooperate with
Xxxxxx in the preparation of all required applications for regulatory approval
of the transactions contemplated by this Agreement and in the preparation of the
Registration Statement (as defined in Section 6.1(b)); and (ii) cooperate with
Xxxxxx in making Somerset's and the Somerset Subsidiaries' employees reasonably
available for training by Xxxxxx at Somerset's and the Somerset Subsidiaries'
facilities prior to the Effective Time, to the extent that such training is
deemed reasonably necessary by Xxxxxx to ensure that Somerset's and the Somerset
Subsidiaries' facilities will be properly operated in accordance with Xxxxxx'x
policies after the Merger.
Section 5.3 Access to Properties and Records. Somerset and the Somerset
Subsidiaries shall give to Xxxxxx and its authorized employees and
representatives (including without limitation its counsel, accountants, economic
and environmental consultants and other designated representatives) such access
during normal business hours to all properties, books, contracts, documents and
records of Somerset and the Somerset Subsidiaries as Xxxxxx may reasonably
request, subject to the obligation of Xxxxxx and its authorized employees and
representatives to maintain the confidentiality of all nonpublic information
concerning Somerset and the Somerset Subsidiaries obtained by reason of such
access and subject to applicable law.
Section 5.4 Subsequent Financial Statements. Between the date of signing of
this Agreement and the Effective Time, Somerset and the Somerset Subsidiaries
shall promptly prepare and deliver to Xxxxxx as soon as practicable all internal
monthly and quarterly financial statements, all quarterly and annual reports to
shareholders and all reports to regulatory authorities prepared by or for either
Somerset or any of the Somerset Subsidiaries (including, without limitation,
delivery of Somerset's audited annual financial statements for 2003 as soon as
they are available if the Effective Time has not occurred prior to the date
Somerset's Form 10-K for 2004 is due under the 0000 Xxx) (which additional
financial statements and reports are hereinafter collectively referred to as the
"Additional Somerset Financial Statements"). Somerset shall be deemed to make
the representations and warranties set forth in Section 3.6, 3.7 and 3.8 to
Xxxxxx with respect to the Additional Somerset Financial Statements upon
delivery thereof.
41
Section 5.5 Update Schedules. Somerset or any of the Somerset Subsidiaries
shall promptly disclose to Xxxxxx in writing any material change, addition,
deletion or other modification to the information set forth in its Schedules
hereto.
Section 5.6 Notice. Somerset or any of the Somerset Subsidiaries shall
promptly notify Xxxxxx in writing of any actions, claims, investigations,
proceedings or other developments which, if pending or in existence on the date
of this Agreement, would have been required to be disclosed to Xxxxxx in order
to ensure the accuracy of the representations and warranties set forth in this
Agreement or which otherwise could materially and adversely affect the
condition(financial or otherwise), assets, liabilities, business, operations or
future prospects of Somerset or any of the Somerset Subsidiaries or restrict in
any manner their ability to carry on their respective businesses as presently
conducted.
Section 5.7 No Solicitation.
(a) Somerset and the Somerset Subsidiaries shall not, and shall not
authorize or permit any of their officers, directors or employees or any
investment banker, financial advisor or attorney to initiate or encourage
(including by way of furnishing non-public information), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal, provided, however, that if, at any time the Board of Directors of
Somerset determines in good faith, after consultation with outside counsel,
that failure to do so would be reasonably likely to constitute a breach of
its fiduciary duties under applicable law, Somerset, in response to a
written Acquisition Proposal that (i) was unsolicited or that did not
otherwise result from a breach of this Section, and (ii) is reasonably
likely to lead to a Superior Proposal, may (x) furnish non-public
information with respect to Somerset or the Somerset Subsidiaries to the
person who made such Acquisition Proposal pursuant to a customary
confidentiality agreement and (y) participate in negotiations regarding
such Acquisition Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence
by any director or officer of Somerset or any of the Somerset Subsidiaries
or any investment banker, financial advisor, attorney, accountant, or other
representative of Somerset or any of the Somerset Subsidiaries, whether or
not acting on behalf of Somerset or any of its subsidiaries, shall be
deemed to be a breach of this Section by Somerset.
(b) Somerset shall call a meeting of its shareholders to be held as
promptly as practicable for the purpose of voting upon this Agreement and
shall take, in good faith, all actions which are necessary or appropriate
on its part in order to secure the approval of this Agreement by its
shareholders at the meeting, including recommending the approval of this
Agreement by Somerset's shareholders; provided, however, that Somerset's
Board of Directors shall not be required to take any action otherwise
required by this sentence that it has determined in good faith, after
consultation with outside counsel, would be reasonably likely to constitute
a breach of its fiduciary duties under applicable law.
42
(c) The Board of Directors of Somerset shall not (1) fail to recommend
this Agreement, withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Xxxxxx, its approval or recommendation of this Agreement
or the Merger unless there is an Acquisition Proposal outstanding, (2)
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal or (3) cause Somerset to enter into any letter of intent,
agreement in principle, acquisition agreement or other agreement with
respect to an Acquisition Proposal unless (x) the Board of Directors of
Somerset shall have determined in good faith, after consultation with
outside counsel, that failure to do so would be reasonably likely to
constitute a breach of its fiduciary duties under applicable law and (y)
the applicable Acquisition Proposal is a Superior Proposal.
(d) Nothing contained in this Section shall prohibit Somerset from at
any time taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the 1934 Act, as amended, provided,
however, that neither Somerset nor its Board of Directors shall, except as
permitted by paragraph (b) or (c) of this section, propose to approve or
recommend, an Acquisition Proposal.
(e) Somerset shall promptly (but in any event within one day) advise
Xxxxxx orally and in writing of any Acquisition Proposal or any inquiry
regarding the making of an Acquisition Proposal including any request for
information, the material terms and conditions of such request, Acquisition
Proposal or inquiry and the identity of the person making such request,
Acquisition Proposal or inquiry. Somerset will, to the extent reasonably
practicable, keep Xxxxxx fully informed of the status and details
(including amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry.
(i) In the event the Board of Directors of Somerset takes any of
the actions set forth in clauses (1), (2) and/or (3) of Section 5.7(c)
in compliance with the standards in (x) and (y) therein, such action
shall allow termination of this Agreement by Xxxxxx under Section
8.1(b)(iii) herein which shall be treated in the same manner as
termination under Section 8.1(a) herein and shall allow exercise of
the Warrant. In the event the Board of Directors of Somerset takes any
of the actions set forth in clauses (1), (2) and/or (3) of Section
5.7(c) without compliance with the standards in (x) and (y) therein,
such action shall constitute a breach allowing termination of this
Agreement by Xxxxxx under Section 8.1(b)(iii) herein which shall be
treated in the same manner as termination by Xxxxxx under Section
8.1(b)(i) herein and shall allow exercise of the Warrant.
(ii) This Agreement may be terminated by Somerset prior to the
shareholders meeting of Somerset if (A) the Board of Directors of
Somerset shall have determined in good faith after consultation with
outside counsel that failure to do so would be reasonably likely to
constitute a breach of its fiduciary duties to Somerset's shareholders
under applicable law, (B) it is not in breach of its obligations under
this Section 5.7 in any material respect and has complied with, and
continues to comply with, all requirements and procedures of this
Section 5.7 in all material respects and the Board of Directors of
Somerset has authorized,
43
subject to complying with the terms of this Agreement, Somerset to
enter into a binding written agreement for a transaction that
constitutes a Superior Proposal and Somerset notifies Xxxxxx in
writing that it intends to enter into such agreement, attaching the
most current version of such agreement to such notice; (C) Xxxxxx does
not make, within five (5) business days after receipt of Somerset's
written notice of its intention to enter into a binding agreement for
a Superior Proposal, any offer that the Board of Directors of Somerset
reasonably and in good faith determines, after consultation with its
financial and legal advisors, is at least as favorable to the
shareholders of Somerset as the Superior Proposal and during such
period Somerset reasonably considers and discusses in good faith all
proposals submitted by Xxxxxx and, without limiting the foregoing,
meets with, and causes its financial and legal advisors to meet with,
Xxxxxx and its advisors from time to time as required by Xxxxxx to
consider and discuss in good xxxxx Xxxxxx'x proposals, and (D) prior
to Somerset's termination pursuant to this Section 5.7(e)(ii),
Somerset confirms in writing that such termination allows exercise of
the Warrant. Somerset agrees (x) that it will not enter into a binding
agreement referred to in clause (B) above until at least the five (5)
business days after Xxxxxx has received the notice to Xxxxxx required
by clause (C) and (y) to notify Xxxxxx promptly if its intention to
enter into a binding agreement referred to in its notice to Xxxxxx
shall change at any time after giving such notice.
(f) For the purpose of this Section 5.7:
(i) "Acquisition Proposal" shall mean a written proposal or
written offer (other than by another party hereto) for a tender or
exchange offer for securities of Somerset or any of the Somerset
Subsidiaries, or a merger, consolidation or other business combination
involving an acquisition of Somerset or any of the Somerset
Subsidiaries or any proposal to acquire in any manner a substantial
equity interest in or a substantial portion of the assets of Somerset
or any of the Somerset Subsidiaries.
(ii) A "Superior Proposal" shall be an Acquisition Proposal that
the Board of Directors of Somerset believes in good faith (after
consultation with its financial advisor) is reasonably capable of
being completed, taking into account all relevant legal, financial,
regulatory and other aspects of the Acquisition Proposal and the
source of its financing, on the terms proposed and, believes in good
faith (after consultation with its financial advisor), would, if
consummated, result in a transaction more favorable to the
shareholders of Somerset from a financial point of view, than the
transactions contemplated by this Agreement and believes in good faith
(after consultation with its financial advisor) that the person making
such Acquisition Proposal has, or is reasonably likely to have or
obtain, any necessary funds or customary commitments to provide any
funds necessary to consummate such Acquisition Proposal.
Section 5.8 Affiliate Letters. Somerset shall use its best efforts to
deliver or cause to be delivered to Xxxxxx, at or before the Closing, a letter
from each of the officers and directors of
44
Somerset and shall use its best efforts to obtain and deliver such a letter from
each shareholder of Somerset who may be deemed to be an "affiliate" (as that
term is defined for purposes of Rules 145 and 405 promulgated by the SEC under
the 0000 Xxx) of Somerset, in form and substance satisfactory to Xxxxxx and
Somerset, under the terms of which each such officer, director or shareholder
acknowledges and agrees to abide by all limitations imposed by the 1933 Act and
by all rules, regulations and releases promulgated thereunder by the SEC with
respect to the sale or other disposition of the shares of Xxxxxx Common Stock to
be received by such person pursuant to this Agreement.
Section 5.9 No Purchases or Sales of Xxxxxx Common Stock During Price
Determination Period. Somerset and the Somerset Subsidiaries shall not, and
shall use their best efforts to ensure that their executive officers and
directors do not, and shall use their best efforts to ensure that each
shareholder of Somerset who may be deemed an "affiliate" (as defined in SEC
Rules 145 and 405) of Somerset does not, purchase or sell on NASDAQ, or submit a
bid to purchase or an offer to sell on NASDAQ, directly or indirectly, any
shares of Xxxxxx Common Stock or any options, rights or other securities
convertible into shares of Xxxxxx Common Stock during the Price Determination
Period.
Section 5.10 Dividends. Between the date of this Agreement and the
Effective Date, Somerset shall not declare or pay cash dividends on the Somerset
Common Stock.
Section 5.11 Internal Controls. Between the date of this Agreement and the
Closing Date, Somerset shall permit Fulton senior officers to meet with the
Chief Financial Officer of Somerset and other officers responsible for the
Somerset Financial Statements, the internal controls of Somerset and the
disclosure controls and procedures of Somerset to discuss such matters as Xxxxxx
may deem reasonably necessary or appropriate for Xxxxxx to satisfy its
obligations under Sections 302, 404 and 906 of the SOX Act and any rules and
regulations relating thereto. Xxxxxx shall have continuing access through the
Effective Time to both the Somerset books and records and internal audit team
for the purpose of ongoing assessment of internal controls and shall cause its
outside auditors to provide any documentation regarding Somerset's internal
control to Xxxxxx and cause its auditors to be available for discussions with
Xxxxxx'x representatives regarding Somerset's systems of internal controls.
Section 5.12 Certain Matters, Certain Revaluations, Changes and
Adjustments.
Notwithstanding that Somerset believes that it and the Somserset
Subsidiaries have established all reserves and taken all provisions for possible
loan losses required by GAAP and applicable laws, rules and regulations,
Somerset recognizes that Xxxxxx may have adopted different loan, accrual and
reserve policies (including loan classifications and levels of reserves for
possible loan losses). At or before the Effective Time, upon the request of
Xxxxxx and Xxxxxx'x written confirmation that all conditions precedent under
Article VII (other than the delivery of customary closing documents) have been
satisfied or waived, and in order to formulate the plan of integration for the
Merger, Somerset shall, consistent with GAAP, modify and change its loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to be applied consistently on a
mutually satisfactory basis with those of Xxxxxx and establish such accruals and
reserves as shall be necessary to reflect
45
Merger-related expenses and costs incurred by Somerset and its Subsidiaries,
provided, however, that Somerset shall not be required to take such action prior
to receipt of shareholder and regulatory approvals; and provided further,
however, that no accrual or reserve made by Somerset or any Somerset Subsidiary
pursuant to this Section 5.12 or any litigation or regulatory proceeding arising
out of any such accrual or reserve, shall constitute or be deemed to be a
breach, violation of or failure to satisfy any representation, warranty,
covenant, condition or other provision of this Agreement or otherwise be
considered in determining whether any such breach, violation or failure to
satisfy shall have occurred.
Section 5.13 Other Policies. Between the date of this Agreement and the
Effective Time, Somerset shall cooperate with Xxxxxx to reasonably conform the
policies and procedures of Somerset and its Subsidiaries regarding applicable
regulatory matters to those of Xxxxxx and its Subsidiaries, as Xxxxxx may
reasonably identify to Somerset from time to time, provided, however, that
implementation of such conforming actions may at Somerset's discretion be
delayed until the time period following satisfaction of the conditions set forth
in Section 5.12.
Section 5.14 Other Transactions. Somerset acknowledges that Xxxxxx may be
in the process of acquiring other banks and financial institutions or in
offering securities to the public and that in connection with such transactions,
information concerning Somerset and its Subsidiaries may be required to be
included in the registration statements, if any, for the sale of securities of
Xxxxxx or in SEC reports in connection with such transactions. Xxxxxx shall
provide Somerset and its counsel with copies of such registration statements at
the time of filing. Somerset agrees to provide Xxxxxx with any information,
certificates, documents or other materials about Somerset and its Subsidiaries
as are reasonably necessary to be included in such SEC reports or registration
statements, including registration statements which may be filed by Xxxxxx prior
to the Effective Time. Somerset shall use its reasonable efforts to cause its
attorneys and accountants to provide Xxxxxx and any underwriters for Xxxxxx with
any consents, comfort letters, opinion letters, reports or information which are
necessary to complete the registration statements and applications for any such
acquisition or issuance of securities. Xxxxxx shall not file with the SEC any
registration statement or amendment thereto or supplement thereof containing
information regarding Somerset unless Somerset shall have consented in writing
to such filing, which consent shall not be unreasonably delayed or withheld.
Section 5.15 Transaction Expenses of the Company.
(a) Somerset shall cause its and its Subsidiaries' professionals to
render monthly invoices within 30 days after the end of each month.
Somerset shall advise Xxxxxx monthly of all out-of-pocket expenses which
Somerset and its Subsidiaries have incurred in connection with the
transactions contemplated hereby. Somerset shall not, and shall cause each
of its Subsidiaries not to, pay fees and expenses to its accountants or
attorneys on any basis different than the basis on which such professionals
would be paid in the absence of any business combination.
(b) Somerset, in reasonable consultation with Xxxxxx and at Xxxxxx'x
expense, shall make all arrangements with respect to the printing and
mailing of the Prospectus/Proxy Statement.
46
ARTICLE VI - COVENANTS OF XXXXXX
From the date of this Agreement until the Effective Time, or until such
later date as may be expressly stipulated in any Section of this Article VI,
Xxxxxx covenants and agrees to do the following:
Section 6.1 Best Efforts. Xxxxxx shall cooperate with Somerset and the
Somerset Subsidiaries and shall use its best efforts to do or cause to be done
all things necessary or appropriate on its part in order to fulfill the
conditions precedent set forth in Article VII of this Agreement and to
consummate the transactions contemplated by this Agreement, including the
Merger. In particular, without limiting the generality of the foregoing
sentence, Xxxxxx agrees to do the following:
(a) Applications for Regulatory Approval. Xxxxxx shall promptly
---------------------------------------
prepare and file, with the cooperation and assistance of (and after review
by) Somerset and its counsel and accountants, all required applications for
regulatory approval of the transactions contemplated by this Agreement,
including without limitation applications for approval under the BHC Act
and the New Jersey Banking Act of 1948, as amended.
(b) Registration Statement. Xxxxxx shall promptly prepare, with the
-----------------------
cooperation and assistance of (and after review by) Somerset and its
counsel and accountants, and file with the SEC a registration statement
(the "Registration Statement") for the purpose of registering under the
1933 Act the shares of Xxxxxx Common Stock to be issued to shareholders of
Somerset under the provisions of this Agreement and a proxy statement and
prospectus which is prepared as a part thereof (the "Proxy
Statement/Prospectus") for the purpose of registering under the 1933 Act
the shares of Xxxxxx Common Stock to be issued to the shareholders of
Somerset, and the soliciting of the proxies of Somerset's shareholders in
favor of the Merger, under the provisions of this Agreement. Xxxxxx may
rely upon all information provided to it by Somerset and Somerset Bank in
this connection and Xxxxxx shall not be liable for any untrue statement of
a material fact or any omission to state a material fact in the
Registration Statement, or in the Proxy Statement/Prospectus, if such
statement is made by Xxxxxx in reliance upon any information provided to
Xxxxxx by Somerset or the Somerset Subsidiaries or by any of their
officers, agents or representatives. Xxxxxx shall provide a draft of the
Registration Statement to Somerset and its counsel for comment and review
at least ten (10) business days in advance of the anticipated filing date.
(c) State Securities Laws. Xxxxxx, with the cooperation and assistance
---------------------
of Somerset and its counsel and accountants, shall promptly take all such
actions as may be necessary or appropriate in order to comply with all
applicable securities laws of any state having jurisdiction over the
transactions contemplated by this Agreement.
(d) Stock Listing. Xxxxxx, with the cooperation and assistance of
--------------
Somerset and its counsel and accountants, shall promptly take all such
actions as may be necessary or appropriate in order to list the shares of
Xxxxxx Common Stock to be issued in the Merger on NASDAQ.
47
(e) Adopt Amendments. Xxxxxx shall not adopt any amendments to its
-----------------
charter or bylaws or other organizational documents that would alter the
terms of Xxxxxx'x Common Stock or could reasonably be expected to have a
material adverse effect on the ability of Xxxxxx to perform its obligations
under this Agreement.
(f) Tax Treatment. Xxxxxx shall take no action which would have the
--------------
effect of causing the Merger not to qualify as a tax-free reorganization
under Section 368 of the Code.
Section 6.2 Access to Properties and Records. Xxxxxx shall give to Somerset
and to its authorized employees and representatives (including without
limitation Somerset's counsel, accountants, economic and environmental
consultants and other designated representatives) such access during normal
business hours to all properties, books, contracts, documents and records of
Xxxxxx as Somerset may reasonably request, subject to the obligation of Somerset
and its authorized employees and representatives to maintain the confidentiality
of all nonpublic information concerning Xxxxxx obtained by reason of such
access.
Section 6.3 Subsequent Financial Statements. Between the date of signing of
this Agreement and the Effective Time, Xxxxxx shall promptly prepare and deliver
to Somerset as soon as practicable each Quarterly Report to Xxxxxx'x
shareholders and any Annual Report to Xxxxxx'x shareholders normally prepared by
Xxxxxx. Xxxxxx shall be deemed to make the representations and warranties set
forth in Sections 4.6, 4.7 and 4.8 herein to Somerset with respect to the
financial statements (hereinafter collectively referred to as the "Additional
Xxxxxx Financial Statements") set forth in the foregoing Quarterly Reports and
any Annual Report to Xxxxxx'x shareholders upon delivery thereof.
Section 6.4 Update Schedules. Xxxxxx shall promptly disclose to Somerset in
writing any change, addition, deletion or other modification to the information
set forth in its Schedules to this Agreement.
Section 6.5 Notice. Xxxxxx shall promptly notify Somerset in writing of any
actions, claims, investigations or other developments which, if pending or in
existence on the date of this Agreement, would have been required to be
disclosed to Somerset in order to ensure the accuracy of the representations and
warranties set forth in this Agreement or which otherwise could materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Xxxxxx or restrict in any manner the
right of Xxxxxx to carry on its business as presently conducted.
Section 6.6 No Purchase or Sales of Xxxxxx Common Stock During Price
Determination Period Neither Xxxxxx nor any Subsidiary of Xxxxxx, nor any
executive officer or director of Xxxxxx or any Subsidiary of Xxxxxx, nor any
shareholder of Xxxxxx who may be deemed to be an "affiliate" (as that term is
defined for purposes of Rules 145 and 405 promulgated by the SEC under the 0000
Xxx) of Xxxxxx, shall purchase or sell on NASDAQ, or submit a bid to purchase or
an offer to sell on NASDAQ, directly or indirectly, any shares of Xxxxxx Common
Stock or Somerset Common Stock or any options, rights or other securities
convertible into shares of Xxxxxx Common Stock or Somerset Common Stock during
the Price
48
Determination Period; provided, however, that Xxxxxx may purchase shares of
Xxxxxx Common Stock in the ordinary course of business during the Price
Determination Period for the benefit of Xxxxxx'x Benefit Plans or Xxxxxx'x
Dividend Reinvestment Plan.
Section 6.7 Assumption of Somerset Debentures. Xxxxxx agrees that,
effective with the Effective Date, it shall assume Somerset's Floating Rate
Junior Subordinated Deferrable Interest Debentures due 2031 and Subordinated
Debentures Floating Rate Junior Subordinated Deferrable Interest Debentures due
2032, and all of Somerset's obligations under the related Indentures, and shall
take all actions necessary or appropriate in accordance therewith, including, if
requested by the trustee, execution of a supplemental indenture and other
appropriate documents or certificates.
Section 6.8 Employment Arrangements.
(a) In arriving at the Merger Consideration, Xxxxxx anticipated that
there will be substantial consolidation of Somerset Bank's "back room"
operations. Subject to that caveat, from and after the Effective Time, (i)
Xxxxxx, Somerset Bank or another subsidiary of Xxxxxx (any such parties
employing employees of Somerset or a Somerset Subsidiary, the "Xxxxxx
Employers") shall: (A) satisfy each of the Employment Obligations (as
defined in Section 3.17 herein), and (B) use its good faith efforts to
retain each present employee of Somerset and the Somerset Subsidiaries in
such employee's current position and salary compensation (or, if offered
to, and accepted by, an employee, a position for which the employee is
qualified with the Xxxxxx Employers at a compensation commensurate with the
position), (ii) in the event that the Xxxxxx Employers shall continue to
employ officers or employees of Somerset and the Somerset Subsidiaries as
of the Effective Time, the Xxxxxx Employers shall employ such persons on
the Effective Time who are not Contract Employees (as defined in Section
3.17 herein) as "at-will" employees, and (iii) in the event the Xxxxxx
Employers are not willing to employ, or terminate the employment (other
than as a result of unsatisfactory performance of their respective duties)
of, any officers or employees of Somerset or the Somerset Subsidiaries who
are not Contract Employees, the Xxxxxx Employers shall pay severance
benefits to such employees (other than Contract Employees) as follows: (A)
in the event employment is terminated on or prior to the date which is one
year after the Effective Date, one week's salary and one week's salary for
each year of service with Somerset or a Somerset Subsidiary, thereafter, up
to a maximum of 26 weeks' salary; or (B) in the event employment is
terminated thereafter, in accordance with the then existing severance
policy of Xxxxxx or its successor.
(b) The Xxxxxx Employers shall be obligated to provide employee
benefits to each person who is an employee of Somerset or a Somerset
Subsidiary, on the Effective Time and continues to be employed that are
substantially equivalent, in the aggregate, to the benefits under the
Somerset Benefit Plans prior to the Effective Time, until the earlier of:
(A) at least three (3) years after the Effective Date, or (B) the date that
the Xxxxxx Employers can no longer satisfy the applicable qualified
retirement plan discrimination testing under the Code. For vesting and
eligibility purposes for employee benefits, under each Xxxxxx Benefit Plan
and/or any employee benefit plan established by Xxxxxx after the
49
Effective Date, employees of Somerset and the Somerset Subsidiaries shall
receive credit for years of service with Somerset and the Somerset
Subsidiaries.
Section 6.9 Insurance; Indemnification.
(a) For four (4) years after the Effective Date, Xxxxxx shall (and
Somerset Bank shall cooperate in these efforts) obtain and maintain "tail"
coverage relating to Somerset's existing directors and officers liability
insurance policy (provided that such insurance shall be in such amount and
with terms and conditions no less favorable than the director and officer
liability policy of Somerset as of the date of this Agreement and carry
such premium (not to exceed the greater of (i) 150% of the current premium
for Somerset's existing directors and officers liability insurance policy
or (ii) the applicable percentage increase payable by Xxxxxx during such
period for its directors and officers liability insurance policy) and that
Xxxxxx may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous) with respect to claims arising from facts or circumstances
which occur prior to the Effective Date (including facts or circumstances
relating to this Agreement and the transactions contemplated herein to the
extent coverage therefor is available) and covering persons who are covered
by such insurance immediately prior to the Effective Date.
(b) From and after the Effective Date, Xxxxxx shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Date, an officer,
employee, director or manager of Somerset or a Somerset Subsidiary (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including reasonable attorneys' fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior
written consent of Xxxxxx, which consent shall not be unreasonably
withheld) or in connection with any claim, action, suit, proceeding or
investigation (a "Claim") in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part out
of the fact that such person is or was a director, officer or employee of
Somerset or a Somerset Subsidiary if such Claim pertains to any matter of
fact arising, existing or occurring prior to the Effective Date (including,
without limitation, the Merger and other transactions contemplated by this
Agreement) regardless of whether such Claim is asserted or claimed prior
to, at, or after the Effective Date (the "Indemnified Liabilities") to the
full extent permitted under applicable law as of the date hereof or amended
prior to the Effective Date and under the Articles of Incorporation or
Bylaws of Somerset or a Somerset Subsidiary as in effect as of the date
hereof (and Xxxxxx shall pay expenses in advance of the full disposition of
any such action or proceeding to each of the Indemnified Parties to the
full extent permitted by applicable law (including the SOX Act) and
Xxxxxx'x Certificate of Incorporation and Bylaws). Any Indemnified Party
wishing to claim indemnification under this provision, upon learning of any
claim, shall notify Xxxxxx (but the failure to so notify Xxxxxx shall not
relieve Xxxxxx from any liability which Xxxxxx may have under this section
except to the extent Xxxxxx is materially prejudiced thereby). In the
defense of any action covered by this Section 6.9(b), Xxxxxx shall have the
right to direct the defense of such action and retain
50
counsel of its choice; provided, however, that, notwithstanding the
foregoing, the Indemnified Parties as a group may retain a single law firm
to represent them with respect to each matter under this section if there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of Xxxxxx and the Indemnified
Parties (the Indemnified Parties may also retain more than one law firm if
there is, under applicable standards of professional conduct, a conflict of
any significant issues between the positions of two or more Indemnified
Parties). Xxxxxx shall have an obligation to advance funds to satisfy an
obligation of Xxxxxx or any successor to Xxxxxx under this Section 6.9(b)
to the same extent that Xxxxxx would be obligated to advance funds under
the indemnification provisions of its Articles of Incorporation and/or
Bylaws.
Section 6.10 Appointment of Xxxxxx Director. Xxxxxx shall, on or promptly
after the Effective Date (but no later than Xxxxxx'x next Board of Directors
meeting following the Effective Date), appoint to Xxxxxx'x Board of Directors
one of Somerset's current directors designated, subject to the reasonable
approval of Xxxxxx, by vote of Somerset's Board of Directors prior to the
Effective Date, to serve as a director of Xxxxxx. Xxxxxx has a mandatory
retirement policy for directors who attain age 70; however, Xxxxxx would
"grandfather" the present director of Somerset appointed as set forth above from
the application of such policy for a three year period after the Effective Date
unless such director would have otherwise been obligated to retire from the
Board of Somerset under any policy it currently has in effect.
ARTICLE VII - CONDITIONS PRECEDENT
Section 7.1 Common Conditions. The obligations of the parties to consummate
this Agreement shall be subject to the satisfaction of each of the following
common conditions prior to or as of the Closing, except to the extent that any
such condition shall have been waived in accordance with the provisions of
Section 8.4 herein:
(a) Shareholder Approval: This Agreement shall have been duly
---------------------
authorized, approved and adopted by the shareholders of Somerset in
accordance with applicable law, NASDAQ rules and regulations, the BCA and
the Certificate of Incorporation of Somerset.
(b) Regulatory Approvals: The approval of each federal and state
---------------------
regulatory authority having jurisdiction over the transactions contemplated
by this Agreement (including the Merger), including without limitation, the
Federal Reserve Board and the Department, shall have been obtained and all
applicable waiting and notice periods shall have expired, subject to no
terms or conditions which would (i) require or could reasonably be expected
to require (A) any divestiture by Xxxxxx of a portion of the business of
Xxxxxx, or any subsidiary of Xxxxxx or (B) any divestiture by Somerset or
the Somerset Subsidiaries of a portion of their businesses which Xxxxxx in
its good faith judgment believes will have a significant and material
adverse impact on the business or prospects of Somerset or the Somerset
Subsidiaries, as the case may be, or (ii) impose any condition upon Xxxxxx
or Somerset Bank, or their other subsidiaries, taken as a whole, which in
Xxxxxx'x good faith judgment (x) would be materially burdensome to
51
Xxxxxx and its subsidiaries taken as a whole, (y) would significantly
increase the costs incurred or that will be incurred by Xxxxxx as a result
of consummating the Merger or (z) would prevent Xxxxxx from obtaining any
material benefit contemplated by it to be attained as a result of the
Merger.
(c) Stock Listing. The shares of Xxxxxx Common Stock to be issued in
--------------
the Merger shall have been authorized for listing on NASDAQ.
(d) Tax Opinion. Each of Xxxxxx and Somerset shall have received an
-----------
opinion of Xxxxxx'x counsel, Barley, Snyder, Xxxxx & Xxxxx, LLC, reasonably
acceptable to Xxxxxx and Somerset, addressed to Xxxxxx and Somerset, with
respect to federal tax laws or regulations, to the effect that:
(i) The Merger will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Code and Xxxxxx and Somerset
will each be a "party to a reorganization" within the meaning of
Section 368(b)(1) of the Code;
(ii) No gain or loss will be recognized by Xxxxxx or Somerset by
reason of the Merger;
(iii) The bases of the assets of Somerset in the hands of Xxxxxx
will be the same as the bases of such assets in the hands of Somerset
immediately prior to the Merger;
(iv) The holding period of the assets of Somerset in the hands of
Xxxxxx will include the period during which such assets were held by
Somerset prior to the Merger;
(v) A holder of Somerset Common Stock who receives shares of
Xxxxxx Common Stock in exchange for his Somerset Common Stock pursuant
to the reorganization (except with respect to cash received in lieu of
fractional shares of Xxxxxx Common Stock deemed issued as described
below) will not recognize any gain or loss upon the exchange.
(vi) A holder of Somerset Common Stock who receives cash in lieu
of a fractional share of Xxxxxx Common Stock will be treated as if he
received a fractional share of Xxxxxx Common Stock pursuant to the
reorganization which Xxxxxx then redeemed for cash. The holder of
Somerset Common Stock will recognize gain or loss on the constructive
redemption of the fractional share in an amount equal to the
difference between the cash received and the adjusted basis of the
fractional share.
(vii) The tax basis of the Xxxxxx Common Stock to be received by
the shareholders of Somerset pursuant to the terms of this Agreement
will include the holding period of the Somerset Common Stock
surrendered in exchange therefor, provided that such Somerset Common
Stock is held as a capital asset at the Effective Time.
52
(viii) The holding period of the shares of Xxxxxx Common Stock to
be received by the shareholders of Somerset will include the period
during which they held the shares of Somerset Common Stock
surrendered, provided the shares of Somerset Common Stock are held as
a capital asset on the date of the exchange.
(ix) A holder of Somerset Common Stock who receives Cash
Consideration and Xxxxxx Common Stock in exchange for his Somerset
Common Stock pursuant to the reorganization will recognize gain equal
to the lesser of (a) the amount of gain realized upon the exchange or
(b) the amount of Cash Consideration received.
(x) A holder of Somerset Common Stock who receives Cash
Consideration in exchange for his Somerset Common Stock will
recognized gain or less on exchange based on the difference between
the Cash Consideration received and the adjusted basis of his Somerset
Common Stock.
(e) Registration Statement: The Registration Statement (as defined in
----------------------
Section 6.1(b), including any amendments thereto) shall have been declared
effective by the SEC; the information contained therein shall be true,
complete and correct in all material respects as of the date of mailing of
the Proxy Statement/Prospectus (as defined in Section 6.1(b)) to the
shareholders of Somerset; regulatory clearance for the offering
contemplated by the Registration Statement (the "Offering") shall have been
received from each federal and state regulatory authority having
jurisdiction over the Offering; and no stop order shall have been issued
and no proceedings shall have been instituted or threatened by any federal
or state regulatory authority to suspend or terminate the effectiveness of
the Registration Statement or the Offering.
(f) No Suits: No action, suit or proceeding shall be pending or
--------
threatened before any federal, state or local court or governmental
authority or before any arbitration tribunal which seeks to modify, enjoin
or prohibit or otherwise adversely and materially affect the transactions
contemplated by this Agreement; provided, however, that if Xxxxxx agrees to
-------- -------
defend and indemnify Somerset and Somerset Bank and their respective
officers and directors with regard to any such action, suit or proceeding
pending or threatened against them or any of them on such specific terms
and conditions as are mutually agreeable to Somerset and Xxxxxx, then such
pending or threatened action, suit or proceeding shall not be deemed to
constitute the failure of a condition precedent to the obligation of
Somerset to consummate this Agreement.
(g) Federal and State Securities and Antitrust Laws: All applicable
--------------------------------------------------
securities and antitrust laws of the federal government and of any state
government having jurisdiction over the transactions contemplated by this
Agreement shall have been complied with.
Section 7.2 Conditions Precedent to Obligations of Xxxxxx. The obligations
of Xxxxxx to consummate this Agreement shall be subject to the satisfaction of
each of the following
53
conditions prior to or as of the Closing, except to the extent that any such
condition shall have been waived by Xxxxxx in accordance with the provisions of
Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
-------------------------------------------------
representations and warranties of Somerset as set forth in this Agreement
shall be true and correct in all material respects as of the Closing as if
made on such date (or on the date to which it relates in the case of any
representation or warranty which expressly relates to an earlier date).
(b) Covenants Performed: Somerset shall have performed or complied in
-------------------
all material respects with each of the covenants required by this Agreement
to be performed or complied with by it.
(c) Opinion of Counsel for Somerset: Xxxxxx shall have received an
--------------------------------
opinion, dated the Effective Time, from Xxxxxx, XxXxxxxxxx & Xxxxxx,
special counsel to Somerset, in substantially the form of Exhibit E hereto.
In rendering any such opinion, such special counsel may require and, to the
extent they deem necessary or appropriate may rely upon, opinions of other
counsel and upon representations made in certificates of officers of
Somerset, Xxxxxx, affiliates of the foregoing, and others.
(d) Affiliate Agreements: Shareholders of Somerset who are or will be
--------------------
affiliates of Somerset or Xxxxxx for the purposes of the 1933 Act shall
have entered into agreements with Xxxxxx, in form and substance
satisfactory to Xxxxxx, reasonably necessary to assure compliance with Rule
145 under the 1933 Act.
(e) Somerset Options: As may be required by Section 2.3 herein, all
-----------------
holders of Somerset Options who have not exercised such options shall have
delivered documentation reasonably satisfactory to Xxxxxx with respect to
the assumption by Xxxxxx of the Somerset Options and the payment of cash in
cancellation of the Somerset Options as set forth in Section 2.3.
(f) No Material Adverse Change: Xxxxxx (together with its accountants,
if the advice of such accountants is deemed necessary or desirable by
Xxxxxx) shall have established to its reasonable satisfaction that, since
the date of this Agreement, there shall not have been any material and
adverse change in the condition (financial or otherwise), assets,
liabilities, business, results of operations or future prospects of
Somerset and the Somerset Subsidiaries on a consolidated basis taken as a
whole. In particular, without limiting the generality of the foregoing
sentence, the Additional Somerset Financial Statements (as defined in
Section 5.4) shall indicate that the consolidated financial condition,
assets, liabilities and results of operations of Somerset as of the
respective dates reported therein do not vary adversely in any material
respect from the consolidated financial condition, assets, liabilities and
results of operations presented in the Somerset Balance Sheet. For purposes
of this Section 7.2(f), a material and adverse change shall mean an event,
change, or occurrence which, individually or together with any other event,
change, or occurrence, has a material adverse impact on (i) the financial
position, business, results of operations or future prospects of Somerset
or (ii) the ability of
54
Somerset to perform its obligations under this Agreement, provided that
"material and adverse change" shall not be deemed to include the impact of
any of the following (nor will any of the following be taken into account
in determining whether there has been a material adverse change): (a)
changes in law, rules, regulations, orders or other binding directives by
any governmental entity, including without limitation, changes in banking
and similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (b) changes in GAAP or regulatory
accounting principles generally applicable to banks and their holding
companies, (c) actions or omissions of Somerset taken at the direction or
behest of Xxxxxx with the prior written consent of Xxxxxx, including any
action or actions, individually or in the aggregate, taken by Somerset or
the Somerset Subsidiaries, (d) changes in economic conditions generally
affecting financial institutions or residential mortgage businesses,
including, without limitation, changes in the general level of interest
rates, (e) the direct effects of compliance with this Agreement and of
satisfying or causing to be satisfied the conditions set forth in this
Article VII on the operating performance of Somerset, including reasonable
expenses incurred by Somerset in consummating the transactions contemplated
by the Agreement, (f) changes in the relative percentages of Somerset's net
income generated by Somerset Bank's commercial lending activities and
residential mortgage lending activities, (g) national or international
political or social conditions, including without limitation the engagement
by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any
military or terrorist attack upon the United States, or any of its
territories, possessions or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States, (h)
changes in financial, banking or securities markets (including any
disruption thereof and any decline in the price of any security or market
index), and (i) any existing fact, event, occurrence, or circumstance with
respect to which Xxxxxx has knowledge as of the date hereof. At the
Closing, Somerset shall deliver to Xxxxxx a certificate confirming the
absence of a material adverse change described herein and a certificate
(from appropriate officers of Somerset or Somerset's transfer agent) as to
the issued and outstanding shares of Somerset Common Stock and Somerset
Preferred Stock, shares issuable under outstanding stock options granted
under Somerset's Stock Option Plans and any outstanding obligations,
options or rights of any kind entitling persons to purchase or sell any
shares of Somerset Common Stock or Somerset Preferred Stock and any
outstanding securities or other instruments of any kind that are
convertible into such shares.
(g) Accountants' Letter. Subject to the requirements of Statement of
--------------------
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants, Xxxxx Xxxxxxxx LLP, or any other accounting firm reasonably
acceptable to Xxxxxx and Somerset, shall have furnished to Xxxxxx an
"agreed upon procedures" letter, dated the Effective Date, in form and
substance satisfactory to Xxxxxx to the effect that:
(i) In their opinion, the consolidated financial statements of
Somerset examined by them and included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and
regulations thereunder; and
55
(ii) On the basis of limited procedures, not constituting an
audit, including a limited review of the unaudited financial
statements referred to below, a limited review of the latest available
unaudited consolidated interim financial statements of Somerset,
inspection of the minute books of Somerset and the Somerset
Subsidiaries since December 31, 2004, inquiries of officials of
Somerset and the Somerset Subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) any unaudited Consolidated Balance Sheets, Consolidated
Statements of Income, Consolidated Statements of Shareholders'
Equity and Consolidated Statements of Cash Flows of Somerset
included in the Registration Statement are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements covered by their report included in the Registration
Statement;
(B) as of a specified date not more than five days prior to
the date of delivery of such letter, there have been any changes
in the consolidated shareholders' equity of Somerset as compared
with amounts shown in the balance sheet as of December 31, 2004
included in the Registration Statement, except in each case for
such changes, increases or decreases which the Registration
Statement discloses have occurred or may occur and except for
such changes, decreases or increases as aforesaid which are
immaterial; and
(C) for the period from January 1, 2005 to such specified
date, there were any decreases in the consolidated total net
interest income, consolidated net interest income after provision
for loan losses, consolidated other income, consolidated net
income or net income per share amounts of Somerset as compared
with the comparable period of the preceding year, except in each
case for decreases which the Registration Statement discloses
have occurred or may occur, and except for such decreases which
are immaterial.
(h) Employment Agreements. The Employment Agreement shall remain in full
force and effect.
(i) Closing Documents: Somerset shall have delivered to Xxxxxx: (i) a
------------------
certificate signed by Somerset's President and Chief Executive Officer and by
its Chief Operating Officer (or other officers reasonably acceptable to Xxxxxx)
verifying that, to their knowledge, all of the representations and warranties of
Somerset set forth in this Agreement are true and correct in all material
respects as of the Closing and that Somerset has performed in all material
respects each of the covenants required to be performed by it under this
Agreement; and (ii) such other certificates and documents as
56
Xxxxxx and its counsel may reasonably request (all of the foregoing
certificates and other documents being herein referred to as the "Somerset
Closing Documents").
Section 7.3 Conditions Precedent to the Obligations of Somerset. The
obligation of Somerset to consummate this Agreement shall be subject to the
satisfaction of each of the following conditions prior to or as of the Closing,
except to the extent that any such condition shall have been waived by Somerset
in accordance with the provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
-------------------------------------------------
representations and warranties of Xxxxxx as set forth in this Agreement
shall be true and correct in all material respects as of the Closing as if
made on such date (or on the date to which it relates in the case of any
representation or warranty which expressly relates to an earlier date).
(b) Covenants Performed: Xxxxxx shall have performed or complied in
--------------------
all material respects with each of the covenants required by this Agreement
to be performed or complied with by Xxxxxx.
(c) Opinion of Counsel for Xxxxxx: Somerset shall have received an
-----------------------------
opinion from Barley, Snyder, Xxxxx & Xxxxx, LLC, counsel to Xxxxxx, dated
the Effective Time, in substantially the form of Exhibit F hereto. In
---------
rendering any such opinion, such counsel may require and, to the extent
they deem necessary or appropriate may rely upon, opinions of other counsel
and upon representations made in certificates of officers of Xxxxxx,
Somerset, affiliates of the foregoing, and others.
(d) Xxxxxx Options: Xxxxxx Stock Options or cash, as applicable, shall
--------------
have been substituted for the Somerset Options which have not been
exercised pursuant to Section 2.3 herein. Agreements evidencing the
assumption of the Somerset Options pursuant to Section 2.3 shall have been
delivered and the Registration Statement for the purpose of registering the
shares necessary to satisfy Xxxxxx'x obligation with respect to the
issuance of Xxxxxx Common Stock pursuant to the exercise of the Xxxxxx
Stock Options shall have been declared effective.
(e) No Material Adverse Change: Somerset (together with its
------------------------------
accountants, if the advice of such accountants is deemed necessary or
desirable by Somerset) shall have established to its reasonable
satisfaction that, since the date of this Agreement, there shall not have
been any material and adverse change in the condition (financial or
otherwise), assets, liabilities, business, or results of operations or
future prospects of Xxxxxx. In particular, without limiting the generality
of the foregoing sentence, the Additional Xxxxxx Financial Statements (as
defined in Section 6.3) shall indicate that the consolidated financial
condition, assets, liabilities and results of operations of Xxxxxx as of
the respective dates reported therein do not vary adversely in any material
respect from the consolidated financial condition, assets, liabilities and
results of operations presented in the Xxxxxx Balance Sheet. For purposes
of this Section 7.3(e), a material and adverse change shall mean an event,
change, or occurrence which, individually or together with any other event,
change, or occurrence, has a material adverse impact on (i) the financial
position, business, results of operations or future prospects of Xxxxxx or
(ii) the ability of
57
Xxxxxx to perform its obligations under this Agreement, provided that
"material and adverse change" shall not be deemed to include the impact of
any of the following (nor will any of the following be taken into account
in determining whether there has been a material adverse change): (a)
changes in law, rules, regulations, orders or other binding directives by
any governmental entity, including without limitation, changes in banking
and similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (b) changes in GAAP or regulatory
accounting principles generally applicable to banks and their holding
companies, (c) changes in economic conditions generally affecting financial
institutions or residential mortgage businesses, including, without
limitation, changes in the general level of interest rates, and (d) the
direct effects of compliance with this Agreement and of satisfying or
causing to be satisfied the conditions set forth in this Article VII on the
operating performance of Xxxxxx, including reasonable expenses incurred by
Xxxxxx in consummating the transactions contemplated by the Agreement, (e)
changes in the relative percentages of Xxxxxx'x net income generated by
Xxxxxx'x commercial lending activities and residential mortgage lending
activities, (f) national or international political or social conditions,
including without limitation the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack
upon the United States, or any of its territories, possessions or
diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, (g) changes in financial, banking or
securities markets (including any disruption thereof and any decline in the
price of any security or market index), and (h) any existing fact, event,
occurrence, or circumstance with respect to which Somerset has Knowledge as
of the date hereof. At the Closing, Xxxxxx shall deliver to Somerset a
certificate confirming the absence of a material adverse change described
herein and a certificate (from appropriate officers of Xxxxxx and/or
Xxxxxx'x transfer agent) as to the issued and outstanding shares of Xxxxxx
Common Stock, shares of Xxxxxx Common Stock reserved for issuance upon the
exercise of stock options, under Xxxxxx'x Employee Stock Purchase Plan,
under Xxxxxx'x Dividend Reinvestment Plan and under Xxxxxx'x Shareholders
Rights Plan, any outstanding obligations, options or rights of any kind
entitling persons to purchase or sell any shares of Xxxxxx'x Common Stock
and any outstanding securities or other instruments of any kind that are
convertible into such shares.
(f) Fairness Opinion: Somerset shall have obtained from Xxxxxxxxx
-----------------
Associates, Inc. or from another independent financial advisor selected by
the Board of Directors of Somerset, an opinion dated within five (5) days
of the Proxy Statement/Prospectus to be furnished to the Board of Directors
of Somerset stating that the Conversion Ratio and Cash Consideration
contemplated by this Agreement is fair to the shareholders of Somerset from
a financial point of view.
(g) Employment Agreements. The Employment Agreements shall remain in
full force and effect.
(h) Closing Documents: Xxxxxx shall have delivered to Somerset: (i) a
-----------------
certificate signed by Xxxxxx'x Chairman and Chief Executive Officer (or
other officer
58
reasonably acceptable to Somerset) verifying that, to their knowledge, all
of the representations and warranties of Xxxxxx set forth in this Agreement
are true and correct in all material respects as of the Closing and that
Xxxxxx has performed in all material respects each of the covenants
required to be performed by Xxxxxx; and (ii) such other certificates and
documents as Somerset and its counsel may reasonably request (all of the
foregoing certificates and documents being herein referred to as the
"Xxxxxx Closing Documents").
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
before the Effective Time (whether before or after the authorization, approval
and adoption of this Agreement by the shareholders of Somerset) as follows:
(a) Mutual Consent: This Agreement may be terminated by mutual consent
--------------
of the parties upon the affirmative vote of a majority of each of the
Boards of Directors of Somerset and Xxxxxx, followed by written notices
given to the other party.
(b) Unilateral Action by Xxxxxx: This Agreement may be terminated
----------------------------
unilaterally by the affirmative vote of the Board of Directors of Xxxxxx,
followed by written notice given promptly to Somerset, if: (i) there has
been a material breach by Somerset of any material representation or
warranty or material failure by Somerset to comply with any material
covenant set forth in this Agreement and such breach has not been cured
within thirty (30) days after written notice of such breach has been given
by Xxxxxx to Somerset; (ii) any condition precedent to Xxxxxx'x obligations
as set forth in Article VII of this Agreement remains unsatisfied, through
no fault of Xxxxxx or unless any such condition remains unsatisfied
primarily as a result of Xxxxxx breaching any of its representations,
warranties or covenants in this Agreement, on December 31, 2005; provided,
that such date may be extended until March 31, 2006 by Somerset by written
notice to Xxxxxx (given not later than December 31, 2005) if the Closing
shall not have occurred because of failure to obtain approval from one or
more regulatory authorities whose approval is required in connection with
this Agreement; or (iii) Xxxxxx'x Board of Directors makes an election
provided for in Section 5.7(e)(i) herein.
(c) Unilateral Action By Somerset: This Agreement may be terminated
------------------------------
unilaterally by the affirmative vote of a majority of the Board of
Directors of Somerset, followed by written notice given promptly to Xxxxxx,
if: (i) there has been a material breach by Xxxxxx of any material
representation, or warranty or material failure by Xxxxxx to comply with
any covenant set forth in this Agreement and such breach has not been cured
within thirty (30) days after written notice of such breach has been given
by Somerset to Xxxxxx; (ii) any condition precedent to Somerset's
obligations as set forth in Article VII of this Agreement remains
unsatisfied, through no fault of Somerset or unless any such condition
remains unsatisfied primarily as a result of Somerset breaching any of its
representations, warranties or covenants in this Agreement, on December 31,
2005; provided, that such date may be extended until March 31, 2006 by
Xxxxxx by written notice to Somerset (given not later than December 31,
2005) if the Closing shall not have
59
occurred because of failure to obtain approval from one or more regulatory
authorities whose approval is required in connection with this Agreement;
(iii) Somerset's Board of Directors makes an election provided for in, and
subject to the conditions of, Section 5.7(e)(ii) herein, (iv) the fairness
opinion described in Section 7.3(f) is withdrawn; (v) the shareholders of
Somerset do not approve the Merger at a shareholders meeting called for
such purpose or (vi) based on the Closing Market Price as follows:
(A) Subject to the provisions of subparagraph (B) below, Somerset
shall have the right to terminate this Agreement, through a resolution
adopted by its Board of Directors, if the Closing Market Price is less
than both (I) $17.65, i.e., eighty percent (80%) of the Starting Price
(the "Floor Price") and (II) the amount per share equal to (x) the
Starting Price multiplied by (y) .80 multiplied by (z) the quotient of
the Average NASDAQ Bank Index for the Price Determination Period (the
numerator) over the NASDAQ Bank Index on the Pre-Announcement Date
(the denominator).
(B) In the event the conditions in (A) above allowing Somerset to
terminate the Agreement are satisfied and Somerset makes such
election, Xxxxxx, through a resolution adopted by its Board of
Directors, shall have the option to cause Somerset to amend this
Agreement (and, upon such amendment, Somerset shall not have the right
to terminate this Agreement) to increase the Conversion Ratio to a
level, calculated to four decimal places, equal to the Conversion
Ratio multiplied by the quotient of the Floor Price (the numerator)
over the Closing Market Price (the denominator). For example, if the
Closing Market Price is $17.00 and the Floor Price is $17.65, Parent
would have the option to increase the Exchange Ratio to .9883 (.9519 x
$17.65/$17.00) in lieu of terminating this Agreement.
(C) For purposes of this Section 8.1(c), (I) "Pre-Announcement
Date" shall mean January 10, 2005, i.e., the trading day immediately
preceding the date of this Agreement, and (II) "Starting Price" shall
mean $22.06.
(D) The Starting Price, the Closing Market Price, the Floor Price
and the other amounts above shall be appropriately adjusted for an
event described in the definition of "Xxxxxx Stock Consideration" in
Section 2.1 (b) herein.
Section 8.2 Effect of Termination.
(a) Effect. In the event of a permitted termination of this Agreement
under Section 8.1 herein, the Agreement shall become null and void and the
transactions contemplated herein shall thereupon be abandoned, except that
the provisions relating to
60
limited liability and confidentiality set forth in Sections 8.2(b) and
8.2(c) herein shall survive such termination.
(b) Limited Liability. Subject to the terms of the Warrant Agreement
------------------
and the Warrant, the termination of this Agreement in accordance with the
terms of Section 8.1 herein shall create no liability on the part of either
party, or on the part of either party's directors, officers, shareholders,
agents or representatives, except that if this Agreement is terminated by
Xxxxxx by reason of a material breach by Somerset, or if this Agreement is
terminated by Somerset by reason of a material breach by Xxxxxx, and such
breach involves an intentional, willful or grossly negligent
misrepresentation or breach of covenant, the breaching party (i.e., Xxxxxx
or Somerset) shall be liable to the nonbreaching party for all costs and
expenses reasonably incurred by the nonbreaching party in connection with
the preparation, execution and attempted consummation of this Agreement,
including the reasonable fees of its counsel, accountants, consultants and
other advisors and representatives. In no event shall either party's
directors, officers, shareholders, agents or representatives have any
personal liability for any misrepresentation or breach in connection with
this Agreement.
(c) Confidentiality. In the event of a termination of this Agreement,
---------------
neither Xxxxxx nor Somerset nor Somerset Bank shall use or disclose to any
other person any confidential information obtained by it during the course
of its investigation of the other party or parties, except as may be
necessary in order to establish the liability of the other party or parties
for breach as contemplated under Section 8.2(b) herein.
Section 8.3 Amendment. To the extent permitted by law, this Agreement may
be amended at any time before the Effective Time (whether before or after the
authorization, approval and adoption of this Agreement by the shareholders of
Somerset), but only by a written instrument duly authorized, executed and
delivered by Xxxxxx and by Somerset; provided, however, that any amendment to
the provisions of Section 2.1 herein relating to the consideration to be
received by the former shareholders of Somerset in exchange for their shares of
Somerset Common Stock shall not take effect until such amendment has been
approved, adopted or ratified by the shareholders of Somerset in accordance with
applicable provisions of the BCA.
Section 8.4 Waiver. Any term or condition of this Agreement may be waived,
to the extent permitted by applicable federal and state law, by the party or
parties entitled to the benefit thereof at any time before the Effective Time
(whether before or after the authorization, approval and adoption of this
Agreement by the shareholders of Somerset) by a written instrument duly
authorized, executed and delivered by such party or parties.
ARTICLE IX - CLOSING AND EFFECTIVE TIME
Section 9.1 Closing. Provided that all conditions precedent set forth in
Article VII of this Agreement shall have been satisfied or shall have been
waived in accordance with Section 8.4 of this Agreement, the parties shall hold
a closing (the "Closing") at the offices of Xxxxxx at Xxx Xxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxx, no later than thirty (30) days after the receipt of all
required regulatory and shareholder approvals and after the expiration of all
applicable waiting
61
periods on a specific date to be agreed upon by the parties, at which time the
parties shall deliver the Somerset Closing Documents, the Xxxxxx Closing
Documents, the opinions of counsel required by Sections 7.1(d), 7.2(c) and
7.3(c) herein, and such other documents and instruments as may be necessary or
appropriate to effectuate the purposes of this Agreement.
Section 9.2 Effective Time. Immediately following the Closing, and provided
that this Agreement has not been terminated or abandoned pursuant to Article
VIII hereof, Xxxxxx and Somerset will cause Articles of Merger (the "Articles of
Merger") to be delivered and properly filed with the Department of State of the
Commonwealth of Pennsylvania (the "Department of State") and the Department of
the Treasury of the State of New Jersey (the "Department of Treasury" and, with
the Department of State, the "Filing Offices"). The Merger shall become
effective on 11:59 p.m. on the day on which the Closing occurs and Articles of
Merger are filed with the Filing Offices or such later date and time as may be
specified in the Articles of Merger (the "Effective Time"). The "Effective Date"
when used herein means the day on which the Effective Time occurs.
ARTICLE X - NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 10.1 No Survival. The representations and warranties of Somerset
and of Xxxxxx set forth in this Agreement shall expire and be terminated on the
Effective Time by consummation of this Agreement, and no such representation or
warranty shall thereafter survive. Except with respect to the agreements of the
parties which by their terms are intended to be performed either in whole or in
part after the Effective Time, the agreements of the parties set forth in this
Agreement shall not survive the Effective Time, and shall be terminated and
extinguished at the Effective Time, and from and after the Effective Time none
of the parties hereto shall have any liability to the other on account of any
breach of such agreements.
ARTICLE XI - GENERAL PROVISIONS
Section 11.1 Expenses. Except as provided in Section 8.2(b) herein, each
party shall pay its own expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated herein. For purposes of this
Section 11.1 herein, the cost of printing the Proxy Statement/Prospectus shall
be deemed to be an expense of Xxxxxx.
Section 11.2 Other Mergers and Acquisitions. Subject to the right of
Somerset to refuse to consummate this Agreement pursuant to Section 8.1(c)(i)
herein by reason of a material breach by Xxxxxx of the warranty and
representation set forth in Section 4.7 herein, nothing set forth in this
Agreement shall be construed: (i) to preclude Xxxxxx from acquiring, or to limit
in any way the right of Xxxxxx to acquire, prior to or following the Effective
Time, the stock or assets of any other financial services institution or other
corporation or entity, whether by issuance or exchange of Xxxxxx Common Stock or
otherwise; (ii) to preclude Xxxxxx from issuing, or to limit in any way the
right of Xxxxxx to issue, prior to or following the Effective Time, Xxxxxx
Common Stock, Xxxxxx Preferred Stock or any other equity or debt securities; or
(iii) to preclude Xxxxxx from taking, or to limit in any way the right of Xxxxxx
to take, any other action not expressly and specifically prohibited by the terms
of this Agreement.
62
Section 11.3 Notices. All notices, claims, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly delivered if delivered
in person, transmitted by telegraph or facsimile machine (but only if receipt is
acknowledged in writing), or mailed by registered or certified mail, return
receipt requested, as follows:
(a) If to Xxxxxx, to:
Xxxxx X. Xxxxxx, Xx., Chairman and
Chief Executive Officer
Xxxxxx Financial Corporation
Xxx Xxxx Xxxxxx, X.X. Xxx 0000
Xxxxxxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxx X. Xxxxxxxx, Esquire
Barley, Snyder, Xxxxx & Xxxxx, LLC
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(b) If to Somerset, to:
Xxxxxx X. Xxxxxxxx, President and
Chief Executive Officer
SVB Financial Services, Inc.
00 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxxxx, Esquire
Xxxxxx, XxXxxxxxxx & Xxxxxx, P.A.
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Section 11.4 Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original, but all such
counterparts together shall be deemed to be one and the same instrument.
Section 11.5 Governing Law. This Agreement shall be deemed to have been
made in, and shall be governed by and construed in accordance with the
substantive laws of, the Commonwealth of Pennsylvania, except to the extent that
the BCA or federal law specifically applies to the Merger and the transactions
contemplated thereby.
Section 11.6 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns and legal representatives; provided, however, that neither party may
assign its rights or delegate its duties under this Agreement without the prior
written consent of the other party (which consent may be withheld
63
in such other party's sole and absolute discretion). Other than the right to
receive the consideration payable as a result of the Merger pursuant to Article
II hereof and the provisions of Section 3.17 with respect to the Contract
Employees, this Agreement is not intended to and shall not confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 11.7 Disclosure Schedules. The inclusion of a given item in a
disclosure schedule annexed to this Agreement shall not be deemed a conclusion
or admission that such item (or any other item) is material or is a material and
adverse change. Information disclosed for one section shall constitute
disclosure for other sections whether or not specifically referenced.
Section 11.8 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto), together with the Warrant Agreement and the Warrant being
executed by the parties on the date hereof, sets forth the entire understanding
and agreement of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings, whether oral or written, relating to the
subject matter hereof and thereof.
Section 11.9 Definitions
Definitions of the following capitalized terms used in this Agreement are
set forth in the following sections:
-------------------------------------------------------------------------------
1933 Act Section 2.3(c)
-------------------------------------------------------------------------------
1934 Act Section 2.9
-------------------------------------------------------------------------------
Acquisition Proposal Section 5.7(f)(i)
-------------------------------------------------------------------------------
Additional Xxxxxx Financial Statements Section 6.3
-------------------------------------------------------------------------------
Additional Somerset Financial Statements Section 5.4
-------------------------------------------------------------------------------
Aggregate Cash Election Percentage Section 2.2(b)(iii)(C)
-------------------------------------------------------------------------------
Aggregate Cash Elections Section 2.2(b)(iii)
-------------------------------------------------------------------------------
Aggregate Stock Election Percentage Section 2.2(b)(iv)
-------------------------------------------------------------------------------
Aggregate Stock Elections Section 2.2(b)(iii)
-------------------------------------------------------------------------------
Articles of Merger Section 9.2
-------------------------------------------------------------------------------
BCA Section 1.1
-------------------------------------------------------------------------------
BCL Section 1.1
-------------------------------------------------------------------------------
BHC Act Background
-------------------------------------------------------------------------------
Cash Consideration Section 2.1(b)
-------------------------------------------------------------------------------
Cash Election Section 2.2(a)(i)
-------------------------------------------------------------------------------
Cash/Stock Election Section 2.2(a)(i)
-------------------------------------------------------------------------------
Claim Section 6.9(b)
-------------------------------------------------------------------------------
Closing Section 9.1
-------------------------------------------------------------------------------
Closing Market Price Section 2.1(e)
-------------------------------------------------------------------------------
Code Section 2.3(b)
-------------------------------------------------------------------------------
Contract Employees Section 3.17
-------------------------------------------------------------------------------
Conversion Ratio Section 2.1(b)
-------------------------------------------------------------------------------
64
-------------------------------------------------------------------------------
Department Section 3.25
-------------------------------------------------------------------------------
Department of State Section 9.2
-------------------------------------------------------------------------------
Department of Treasury Section 9.2
-------------------------------------------------------------------------------
XXXXX Section 3.6(e)
-------------------------------------------------------------------------------
Effective Date Section 9.2
-------------------------------------------------------------------------------
Effective Time Section 9.2
-------------------------------------------------------------------------------
Employment Agreement Section 3.17
-------------------------------------------------------------------------------
Employment Obligation Section 3.17
-------------------------------------------------------------------------------
Election Section 2.2(a)(i)
-------------------------------------------------------------------------------
Election Deadline Section 2.2(a)(iv)
-------------------------------------------------------------------------------
ERISA Section 3.18
-------------------------------------------------------------------------------
Exchange Agent Section 2.2(a)(iv)
-------------------------------------------------------------------------------
FDI Act Section 2.3
-------------------------------------------------------------------------------
FDIC Section 3.25
-------------------------------------------------------------------------------
Filed Xxxxxx SEC Reports Section 4.6(e)
-------------------------------------------------------------------------------
Filed Somerset SEC Reports Section 3.6(e)
-------------------------------------------------------------------------------
Filing Offices Section 9.2
-------------------------------------------------------------------------------
Floor Price Section 8.1(c)(i)
-------------------------------------------------------------------------------
Form of Election Section 2.2(a)(ii)
-------------------------------------------------------------------------------
FRB Section 3.25
-------------------------------------------------------------------------------
Xxxxxx Introduction
-------------------------------------------------------------------------------
Xxxxxx Balance Sheet Section 4.6(a)
-------------------------------------------------------------------------------
Xxxxxx Benefit Plan Section 4.13
-------------------------------------------------------------------------------
Xxxxxx Closing Documents Section 7.3(g)
-------------------------------------------------------------------------------
Xxxxxx Common Stock Background
-------------------------------------------------------------------------------
Xxxxxx Employers Section 6.8
-------------------------------------------------------------------------------
Xxxxxx Material Contracts Section 4.21
-------------------------------------------------------------------------------
Xxxxxx Pension Plans Section 4.13
-------------------------------------------------------------------------------
Xxxxxx Preferred Stock Section 4.3
-------------------------------------------------------------------------------
Xxxxxx Rights Section 2.1(b)
-------------------------------------------------------------------------------
Xxxxxx Rights Agreement Section 2.1(b)
-------------------------------------------------------------------------------
Xxxxxx SEC Reports Section 4.6(e)
-------------------------------------------------------------------------------
Xxxxxx Stock Option Section 2.3(a)
-------------------------------------------------------------------------------
Indemnified Liabilities Section 6.9(b)
-------------------------------------------------------------------------------
Indemnified Parties Section 6.9(b)
-------------------------------------------------------------------------------
IRS Section 3.10
-------------------------------------------------------------------------------
Knowledge of Somerset or Somerset Bank, Knowledge of Section 3.13
Somerset and the Somerset Subsidiaries
-------------------------------------------------------------------------------
Knowledge of Somerset or Somerset Bank Section 3.13
-------------------------------------------------------------------------------
Letter of Transmittal Section 2.2(e)
-------------------------------------------------------------------------------
Material Contracts Section 3.12(a)
-------------------------------------------------------------------------------
Maximum Cash Percentage Section 2.2(b)(i)
-------------------------------------------------------------------------------
Merger Background
-------------------------------------------------------------------------------
65
-------------------------------------------------------------------------------
Merger Consideration Section 2.1(a)
-------------------------------------------------------------------------------
Minimum Cash Percentage Section 2.2(b)(i)
-------------------------------------------------------------------------------
NASDAQ Section 2.1(e)
-------------------------------------------------------------------------------
Non-Electing Shares Section 2.2(b)(vi)
-------------------------------------------------------------------------------
Offering Section 7.1(e)
-------------------------------------------------------------------------------
Ordinary Course of Business Section 3.7
-------------------------------------------------------------------------------
PBGC Section 4.13
-------------------------------------------------------------------------------
Pre-Announcement Date Section 8.1(c)(iii)
-------------------------------------------------------------------------------
Price Determination Period Section 2.1(e)
-------------------------------------------------------------------------------
Pro-rated Cash Percentage Section 2.2(b)(iii)(C)
-------------------------------------------------------------------------------
Pro-rated Stock Percentage Section 2.2(b)(iv)(c)
-------------------------------------------------------------------------------
Proxy Statement/Prospectus Section 6.1(b)
-------------------------------------------------------------------------------
Registration Statement Section 6.1(b)
-------------------------------------------------------------------------------
Remaining Cash Percentage Section 2.2(b)(iv)(c)
-------------------------------------------------------------------------------
Remaining Stock Percentage Section 2.2(b)(iii)(C)
-------------------------------------------------------------------------------
SEC Section 2.2(a)(iv)
-------------------------------------------------------------------------------
Somerset Introduction
-------------------------------------------------------------------------------
Somerset Balance Sheet Section 3.6
-------------------------------------------------------------------------------
Somerset Bank Background
-------------------------------------------------------------------------------
Somerset Bank Common Stock Section 3.4
-------------------------------------------------------------------------------
Somerset Bank Preferred Stock Section 3.4
-------------------------------------------------------------------------------
Somerset Benefit Plans Section 3.18
-------------------------------------------------------------------------------
Somerset Closing Documents Section 7.2(h)
-------------------------------------------------------------------------------
Somerset Common Stock Background
-------------------------------------------------------------------------------
Somserset Options Section 2.3(a)
-------------------------------------------------------------------------------
Somerset Pension Plan Section 3.18
-------------------------------------------------------------------------------
Somerset SEC Reports Section 3.6(e)
-------------------------------------------------------------------------------
Somerset Share Section 2.1(a)
-------------------------------------------------------------------------------
Somerset Stock Option Plans Section 2.3(a)
-------------------------------------------------------------------------------
Somerset Subsidiaries Background
-------------------------------------------------------------------------------
Somerset Subsidiaries Common Equity Section 3.4
-------------------------------------------------------------------------------
SOX Act Section 3.6(c)
-------------------------------------------------------------------------------
Starting Price Section 8.1(c)(iii)
-------------------------------------------------------------------------------
Stock Election Section 2.2(a)(i)
-------------------------------------------------------------------------------
Superior Proposal Section 5.7(f)(ii)
-------------------------------------------------------------------------------
Surviving Corporation Section 1.1
-------------------------------------------------------------------------------
Unclaimed Shares Section 2.2(f)(iii)
-------------------------------------------------------------------------------
Voting Agreements Background
-------------------------------------------------------------------------------
Warrant Background
-------------------------------------------------------------------------------
Warrant Agreement Background
-------------------------------------------------------------------------------
66
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers all as of the day and year first above
written.
XXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxxx, Xx.
-------------------------------------
Xxxxx X. Xxxxxx, Xx.
Chairman and Chief Executive Officer
Attest: /s/ Xxxxxx X. Xxxx, Xx.
-------------------------------------
Xxxxxx X. Xxxx, Xx.
Secretary
SVB FINANCIAL SERVICES, INC.
By:
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
Attest:
/s/ Xxxxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxxxx X. Xxxxxxx
Secretary
67
