Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 22, 2005
BY AND BETWEEN
IBT BANCORP, INC.
AND
THE XXXXXXX STATE SAVINGS BANK
TABLE OF CONTENTS
ARTICLE I - CERTAIN DEFINITIONS............................................ 1
1.1. Certain Definitions................................................ 1
ARTICLE II - THE MERGER.................................................... 6
2.1. Merger............................................................. 6
2.2. Closing; Effective Time............................................ 6
2.3. Articles of Incorporation and Bylaws............................... 7
2.4. Directors and Officers of Surviving Corporation.................... 7
2.5. Effects of the Merger.............................................. 7
2.6. Tax Consequences................................................... 7
2.7. Possible Alternative Structures.................................... 7
ARTICLE III - CONVERSION OF SHARES......................................... 7
3.1. Conversion of FSSB Common Stock; Merger Consideration.............. 7
3.2. Procedures for Exchange of FSSB Common Stock....................... 9
3.3. Reservation of Shares.............................................. 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF FSSB........................ 11
4.1. Representations and Warranties of FSSB............................. 11
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF IBT.......................... 24
5.1. Representations and Warranties of IBT.............................. 24
ARTICLE VI - COVENANTS OF FSSB............................................. 33
6.1. Conduct of Business................................................ 33
6.2. Current Information................................................ 36
6.3. Access to Properties and Records................................... 37
6.4. Financial and Other Statements..................................... 37
6.5. Maintenance of Insurance........................................... 37
6.6. Disclosure Supplements............................................. 38
6.7. Consents and Approvals of Third Parties............................ 38
6.8. All Reasonable Efforts............................................. 38
6.9. Failure to Fulfill Conditions...................................... 38
6.10. No Solicitation................................................... 38
6.11. Xxxxxxxx-Xxxxx Certification of Financial Statements.............. 39
6.12 FSSB Audit for 2005............................................... 39
ARTICLE VII - COVENANTS OF IBT............................................. 39
7.1. Conduct of Business................................................ 39
7.2. Disclosure Supplements............................................. 40
7.3. Consents and Approvals of Third Parties............................ 40
7.4. All Reasonable Efforts............................................. 40
7.5. Failure to Fulfill Conditions...................................... 40
7.6. Employee Benefits.................................................. 40
7.7. Access to Properties and Records................................... 40
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7.8. Financial and Other Statements..................................... 41
7.9. Directors and Officers Indemnification; Insurance.................. 41
ARTICLE VIII - REGULATORY AND OTHER MATTERS................................ 42
8.1. Meetings of Shareholders........................................... 42
8.2. Proxy Statement--Prospectus; Merger Registration Statement......... 43
8.3. Regulatory Approvals............................................... 44
8.4. Affiliates......................................................... 44
8.5. Employment Agreement............................................... 44
8.6. Post-Closing Operations............................................ 44
ARTICLE IX - CLOSING CONDITIONS............................................ 45
9.1. Conditions to Each Party's Obligations Under This Agreement........ 45
9.2. Conditions to the Obligations of IBT under this Agreement.......... 46
9.3. Conditions to the Obligations of FSSB under this Agreement......... 46
ARTICLE X - THE CLOSING.................................................... 47
10.1. Time and Place.................................................... 47
10.2. Deliveries at the Closing......................................... 47
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER............................. 47
11.1. Termination....................................................... 47
11.2. Effect of Termination............................................. 49
11.3. Amendment, Extension and Waiver................................... 49
ARTICLE XII - MISCELLANEOUS................................................ 50
12.1. Confidentiality................................................... 50
12.2. Public Announcements.............................................. 50
12.3. Survival.......................................................... 51
12.4. Notices........................................................... 51
12.5. Parties in Interest............................................... 51
12.6. Complete Agreement................................................ 51
12.7. Counterparts...................................................... 52
12.8. Severability...................................................... 52
12.9. Governing Law..................................................... 52
12.10. Interpretation................................................... 52
12.11. Specific Performance............................................. 52
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is dated as of December 22, 2005 (the
"Agreement"), by and between IBT Bancorp, Inc., a Michigan financial services
holding company ("IBT") and The Xxxxxxx State Savings Bank, a Michigan chartered
commercial bank ("FSSB").
WHEREAS, the Board of Directors of each of IBT and FSSB (i) has determined
that this Agreement and the business combination and related transactions
contemplated hereby are in the best interests of their respective companies and
shareholders and (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with and in furtherance of their respective
business strategies, and (iii) has approved this Agreement at meetings of each
of such Boards of Directors;
WHEREAS, in accordance with the terms of this Agreement, a to be formed,
wholly-owned subsidiary of IBT will merge with and into FSSB (the "Merger").
Concurrently, shareholders of FSSB shall exchange their shares of FSSB for
shares of IBT and cash;
WHEREAS, the parties currently intend that the Merger shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - CERTAIN DEFINITIONS
1.1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (unless the context otherwise requires, references
to articles and sections refer to articles and sections of this Agreement).
"Affiliate" means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person and any Affiliate of
such executive officer or director.
"Agreement" means this agreement, and any amendment hereto.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the FDIC, the Bureau and the FRB, which regulates
Xxxxxxxx Bank and Trust, Farmers State Bank of Breckenridge or FSSB, or IBT or
subsidiaries, as the case may be.
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"Bureau" shall mean the Office of Financial and Insurance Services of the
State of Michigan.
"Certificate" shall mean a certificate evidencing shares of FSSB Common
Stock.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" shall mean the confidentiality agreements
referred to in Section 12.1 of this Agreement.
"Dissenting Shareholder" shall have the meaning set forth in Section
3.1(d).
"Dissenting Shares" shall have the meaning set forth in Section 3.1(d).
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource) and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, et seq.; the resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 901, et seq.; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601, et seq.; the Emergency Planning and Community Right to Know Act,
42 U.S.C. Section 11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f, et seq.; and all comparable state and local laws, and (b) any common law
(including without limitation common law that may impose strict liability) that
may impose liability or obligations for injuries or damages due to the presence
of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Exchange Agent" shall mean Xxxxxxxx Bank and Trust, or such other bank or
trust company or other agent designated by IBT, and reasonably acceptable to
FSSB, which shall act as agent for IBT in connection with the exchanging
Certificates for the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.2(a).
"Exchange Ratio" shall mean the number of shares IBT Common Stock and cash
into which a share of FSSB Common Stock shall be converted which shall be equal
to the amount (rounded to the nearest one thousandth) as set forth below:
3.0382 shares of IBT Common Stock plus $29.00 in cash for each share
of FSSB Common Stock; said per share cash to be reduced by the amount
any 2005 cash dividends paid by FSSB exceed $11.00 per share and
increased by the amount any cash dividends paid by IBT exceed $.70 per
share during 2005.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FRB" shall mean the Board of Governors of the Federal Reserve System or
any successor thereto.
"FSSB" shall mean The Xxxxxxx State Savings Bank, with its principal
offices located at 000 Xxxx Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, 00000.
"FSSB Common Stock" shall mean the common stock, par value $10.00 per
share, of FSSB.
"FSSB Disclosure Schedule" shall mean a written disclosure schedule
delivered by FSSB to IBT specifically referring to the appropriate section of
this Agreement.
"FSSB Financial Statements" shall mean (i) the audited statements of
financial condition (including related notes and schedules, if any) of FSSB as
of December 31, 2004, 2003 and 2002 and the statements of income, changes in
shareholders' equity and cash flows (including related notes and schedules, if
any) of FSSB for each of the three years ended December 31, 2004, 2003 and 2002,
as set forth in FSSB's annual report for the year ended December 31, 2004 and
(ii) the unaudited interim consolidated financial statements of FSSB as of the
end of the three-month period ended March 31, 2005, six-month period ended June
30, 2005, and nine-month period ended September 30, 2005.
"FSSB Shareholders Meeting" shall have the meaning set forth in Section
8.1.
"FSSB Stock Benefit Plans" shall mean any and all stock-based benefit plans
and amendments thereto of FSSB.
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"FSSB Subsidiary" means any corporation or entity, 50% or more of the
equity interest of which is owned, either directly or indirectly, by FSSB,
except any corporation or entity the equity interest of which is held in the
ordinary course of the lending activities of FSSB.
"GAAP" shall mean accounting principles generally accepted in the United
States of America.
"Governmental Entity" shall mean any Federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"IBT" shall mean IBT Bancorp, Inc., a Michigan corporation, with its
principal executive offices located at 000 Xxxx Xxxxxxxx Xxxxxx, Xx. Xxxxxxxx,
Xxxxxxxx, 00000.
"IBT Common Stock" shall mean the common stock, no par value per share, of
IBT.
"IBT Disclosure Schedule" shall mean a written disclosure schedule
delivered by IBT to FSSB specifically referring to the appropriate section of
this Agreement.
"IBT Financial Statements" shall mean the (i) the audited consolidated
statements of financial condition (including related notes and schedules) of IBT
as of December 31, 2004, 2003 and 2002 and the consolidated statements of
income, changes in shareholders' equity and cash flows (including related notes
and schedules, if any) of IBT for each of the three years ended December 31,
2004, 2003 and 2002, as set forth in IBT's annual report for the year ended
December 31, 2004, and (ii) the unaudited interim consolidated financial
statement of IBT as of the end of the three-month period ended March 31, 2005,
six-month period ended June 30, 2005, and nine-month period ended September 30,
2005 as filed by IBT in its Securities Documents.
"IBT Stock Benefit Plans" shall mean any and all stock-based benefit plans
and amendments thereto of IBT.
"IBT Subsidiary" means any corporation or entity, 50% or more of the equity
interest of which is owned, either directly or indirectly, by IBT, Xxxxxxxx Bank
and Trust or Farmers State Bank of Breckenridge, except any corporation or
entity, the equity interest of which is held in the ordinary course of the
lending activities of Xxxxxxxx Bank and Trust or Farmers State Bank of
Breckenridge.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to such
person being aware of a particular matter) means those facts that are known by
the current executive officers and directors of such Person, and includes any
and all facts, matters or circumstances set forth in any written notice from any
Bank Regulator or any other material written notice received by such executive
officer or director of that Person.
"Loan Property" shall have the meaning set forth in Section 4.1(o).
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"Material Adverse Effect" shall mean, with respect to IBT or FSSB,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of IBT and its Subsidiaries taken
as a whole, or FSSB and its Subsidiaries taken as a whole, respectively, or (ii)
does or would materially impair the ability of either FSSB, on the one hand, or
IBT, on the other hand, to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
transactions contemplated by this Agreement; provided that "Material Adverse
Effect" shall not be deemed to include the impact of (a) changes in laws and
regulations affecting banks generally or interpretations thereof by courts or
governmental agencies, (b) changes in GAAP or regulatory accounting principles
generally applicable to financial institutions and their holding companies, (c)
actions and omissions of a party hereto (or any of its Subsidiaries) taken with
the prior written consent of the other party, (d) compliance with this Agreement
on the business, financial condition or results of operations of the parties and
their respective Subsidiaries, including the expenses incurred by the parties
hereto in consummating the transactions contemplated by this Agreement
(consistent with the information included in the Disclosure Schedules) and (e)
any change in the value of the securities portfolio of IBT or FSSB,
respectively, whether held as available for sale or held to maturity, resulting
from a change in interest rates value of the securities portfolio of IBT or
FSSB, respectively, whether held as available for sale or held to maturity,
resulting from a change in interest rates generally.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"MBCA" shall mean the Michigan Business Corporation Act, as amended.
"Merger" shall mean the merger of a to be formed wholly-owned subsidiary of
IBT with and into FSSB pursuant to the terms hereof.
"Merger Consideration" shall mean the IBT Common Stock and cash, to be paid
by IBT for each share of FSSB Common Stock, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of IBT Common Stock to be offered to holders
of FSSB Common Stock in connection with the Merger.
"Michigan Banking Law" shall mean the Michigan Banking Code of 1999, as
amended, and the rules and regulations promulgated thereunder, as amended, as
administered by the Bureau.
"Participation Facility" shall have the meaning set forth in Section
4.1(o).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" shall have the meaning set forth in Section 4.1(m).
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"Person" shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, trust "group" (as that term is defined
under the Exchange Act) or entity.
"Proxy Statement - Prospectus" shall have the meaning set forth in Section
8.2.
"Regulatory Agreement" shall have the meaning set forth in Section 4.1(l).
"Regulatory Approvals" means the approval of any Bank Regulator that is
necessary in connection with the consummation of the Merger and the related
transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed pursuant to
the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination Date" shall mean June 30, 2006.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II - THE MERGER
2.1. Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, a to be formed wholly-owned subsidiary of IBT shall merge with
FSSB, with FSSB as the resulting or surviving corporation (the "Surviving
Corporation"). As part of the Merger, each share of FSSB Common Stock shall be
converted into the right to receive the Merger Consideration pursuant to the
terms of Article III hereof.
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2.2. Closing; Effective Time. Subject to the satisfaction or waiver of all
conditions to closing contained in Article IX hereof, the Closing shall occur no
later than five (5) business days following the latest to occur of (i) the
receipt of all required Regulatory Approvals, and the expiration of any
applicable waiting periods, (ii) the approval of the Merger by the shareholders
of FSSB, or (iii) at such other date or time upon which IBT and FSSB mutually
agree (the "Closing"). The Merger shall be effected by the filing of a
certificate of merger with the Bureau on the day of the Closing (the "Closing
Date"), in accordance with Michigan Banking Law. The "Effective Time" means the
date and time upon which the certificate of merger is filed with the Bureau, or
as otherwise stated in the certificate of merger, in accordance with Michigan
Banking Law.
2.3. Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of FSSB as in effect immediately prior to the Effective Time shall be
the Articles of Incorporation and Bylaws of the Surviving Corporation, until
thereafter amended as provided therein and by applicable law.
2.4. Directors and Officers of Surviving Corporation. The board directors
of the Surviving Corporation shall consist of the directors of FSSB in office
immediately prior to the Effective Time and one (1) director to be designated by
IBT, each to hold office in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation. Board member compensation of the Surviving
Corporation shall not change as a result of the Merger; however, IBT shall
conduct periodic reviews of director compensation to assess reasonableness and
consistency. The officers of FSSB immediately prior to the Effective Time shall
be the initial officers of Surviving Corporation in each case until their
respective successors are duly elected or appointed and qualified.
2.5. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects as set forth in the Michigan Banking Law.
2.6. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" as that term is used in
Sections 354 and 361 of the Code. From and after the date of this Agreement and
until the Closing, each party hereto shall use its reasonable best efforts to
cause the Merger to qualify, and will not knowingly take any action, cause any
action to be taken, fail to take any action or cause any action to fail to be
taken which action or failure to act could prevent the Merger from qualifying as
a reorganization under Section 368(a) of the Code other than is contemplated by
this Agreement. Following the Closing, neither IBT nor FSSB nor any of their
Affiliates shall knowingly take any action, cause any action to be taken, fail
to take any action or cause any action to fail to be taken, which action or
failure to act could cause the Merger to fail to qualify as a reorganization
under Section 368(a) of the Code.
2.7. Possible Alternative Structures. Notwithstanding anything to the
contrary contained in this Agreement and subject to the satisfaction of the
conditions set forth in Article IX, prior to the Effective Time, IBT shall, with
the consent of FSSB, which will not be unreasonably withheld, be entitled to
revise the structure of the Merger described in Section 2.1
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hereof provided that (i) there are no adverse Federal or state income tax
consequences to FSSB shareholders as a result of the modification; (ii) the
consideration to be paid to the holders of FSSB Common Stock under this
Agreement is not thereby changed in kind or value (or the relative mix thereof),
or reduced in amount; and (iii) such modification will not delay materially or
jeopardize receipt of any required Regulatory Approvals or other consents and
approvals relating to the consummation of the Merger. The parties hereto agree
to appropriately amend this Agreement and any related documents in order to
reflect any such revised structure.
ARTICLE III - CONVERSION OF SHARES
3.1. Conversion of FSSB Common Stock; Merger Consideration. At the
Effective Time, by virtue of the Merger and without any action on the part of
IBT, FSSB or the holders of any of the shares of FSSB Common Stock, the Merger
shall be effected in accordance with the following terms:
(a) Each share of IBT Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
following the Effective Time and shall be unchanged by the Merger.
(b) All shares of FSSB Common Stock held in the treasury of FSSB and
each share of FSSB Common Stock owned by IBT or any direct or indirect wholly
owned subsidiary of IBT or of FSSB immediately prior to the Effective Time,
shall cease to exist, and the certificates for such shares shall be canceled as
promptly as practicable thereafter, and no payment or distribution shall be made
in consideration therefor.
(c) Except as set forth above, each share of FSSB Common Stock issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall become and be converted into, as provided in and subject to the
limitations set forth in this Agreement, the right to receive shares of IBT
Common Stock and cash based on the Exchange Ratio (the "Merger Consideration").
(d) Each outstanding share of FSSB Common Stock the holder of which
has perfected his right to dissent under Michigan Banking Law and has not
effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration hereunder, and the holder thereof shall be entitled
only to such rights as are granted by Michigan Banking Law. FSSB shall give IBT
prompt notice upon receipt by FSSB of any such demands for payment of the fair
value of such shares of FSSB Common Stock and of withdrawals of such demands and
any other instruments provided pursuant to applicable law (any shareholder duly
making such demand being hereinafter called a "Dissenting Shareholder"), and IBT
shall have the right to participate in all negotiations and proceedings with
respect to any such demand for payment, or waive any failure to timely deliver a
written demand for appraisal or the taking of any other action by such
Dissenting Shareholder as may be necessary to perfect appraisal rights under
Michigan Banking Law. Any payments made in respect to Dissenting Shares shall be
made by the Surviving Corporation.
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(e) If any Dissenting Shareholder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment at or prior
to the Effective Time, such holder's share of FSSB Common Stock shall be
converted into a right to receive the Merger Consideration in accordance with
the applicable provisions of this Agreement.
(f) After the Effective Time, shares of FSSB Common Stock shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and shall thereafter by operation of this section be converted into the
right to receive the Merger Consideration.
(g) Notwithstanding anything to the contrary contained herein, no
certificates or script representing fractional shares of IBT Common Stock shall
be issued upon the surrender and exchange of Certificates, no dividend or
distribution with respect to IBT Common Stock shall be payable on or with
respect to any fractional share interest, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
shareholder of IBT. In lieu of the issuance of any such fractional share, IBT
shall pay to each former holder of FSSB Common Stock who otherwise would be
entitled to receive a fractional share of IBT Common Stock, an amount in cash,
rounded to the nearest cent and without interest, equal to the product of (i)
the fraction of a share to which such holder would otherwise have been entitled
and (ii) $42.00. For purposes of determining any fractional share interest, all
shares of FSSB Common Stock owned by a FSSB shareholder shall be combined so as
to calculate the maximum number of whole shares of IBT Common Stock issuable to
such FSSB Shareholder.
(h) In the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the outstanding shares of IBT Common Stock and/or
FSSB Common Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities through a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, or exchanged or
converted into shares or securities of another corporation, then an appropriate,
equitable and proportionate adjustment shall be made to the Exchange Ratio.
3.2. Procedures for Exchange of FSSB Common Stock.
(a) IBT to Make Merger Consideration Available. No later than the
Closing Date, IBT shall deposit, or shall cause to be deposited, in an account
with the Exchange Agent for the benefit of the holders of FSSB Common Stock, for
exchange in accordance with this Section 3.2, certificates representing the
shares of IBT Common Stock and an aggregate amount of cash sufficient to pay the
aggregate amount of cash payable pursuant to this Article III (such cash and
certificates for shares of IBT Common Stock, together with any dividends or
distributions with respect thereto (without any interest thereon) being
hereinafter referred to as the "Exchange Fund").
(b) Exchange of Certificates. IBT shall take any steps necessary to
cause the Exchange Agent, within five (5) business days after the Effective
Time, to mail to each holder of a Certificate or Certificates, a form letter of
transmittal for return to the Exchange Agent and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. The letter of transmittal shall be in customary form and shall
specify that
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delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent. Upon proper
surrender of a Certificate for exchange and cancellation to the Exchange Agent,
together with a properly completed letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefore
the Merger Consideration to which such holder of FSSB Common Stock shall have
become entitled pursuant to Section 3.1(c) and 3.1(g) hereof, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on any cash payable hereunder or any unpaid dividends and
distributions, if any, payable to holders of Certificates.
(c) Rights of Certificate Holders After the Effective Time. The holder
of a Certificate that prior to the Merger represented issued and outstanding
FSSB Common Stock shall have no rights (excluding dissenter's rights of those
shareholders properly exercising dissenter's rights), after the Effective Time,
with respect to such FSSB Common Stock except to surrender the Certificate in
exchange for the Merger Consideration as provided in this Agreement. No
dividends or other distributions declared after the Effective Time with respect
to IBT Common Stock or interest with respect to cash, shall be paid to the
holder of any unsurrendered Certificate until the holder thereof shall surrender
such Certificate in accordance with this Section 3.2. After the surrender of a
Certificate in accordance with this Section 3.2, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
IBT Common Stock represented by such Certificate.
(d) Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the accompanying letter of transmittal is
not the record holder thereof, then it shall be a condition of the payment of
the Merger Consideration that: (i) such Certificate is properly endorsed to such
Person or is accompanied by appropriate stock powers, in either case signed
exactly as the name of the record holder appears on such Certificate, and is
otherwise in proper form for transfer, or is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and signing the
letter of transmittal to do so on behalf of the record holder; and (ii) the
person requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the payment to a Person other than
the registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(e) Closing of Transfer Books. From and after the Effective Time,
there shall be no transfers on the stock transfer books of FSSB of the FSSB
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be exchanged for the Merger
Consideration and canceled as provided in this Section 3.2. Certificates
surrendered for exchange by any person constituting an "affiliate" of FSSB for
purposes of Rule 145 under the Securities Act, shall not be exchanged until IBT
has received a written agreement from such person as provided in Section 8.4.
10
(f) Return of Exchange Fund. At any time following the twelve (12)
month period after the Effective Time, IBT shall be entitled to require the
Exchange Agent to deliver to it any portions of the Exchange Fund which has been
made available to the Exchange Agent and not disbursed to holders of
Certificates (including, without limitation, all interest and other income
received by the Exchange Agent in respect of all funds made available to it),
and thereafter such holders shall be entitled to look to IBT (subject to
abandoned property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither IBT nor the Exchange Agent shall be
liable to any holder of a Certificate for any Merger Consideration delivered in
respect of such Certificate to a public official pursuant to any abandoned
property, escheat or other similar law.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by IBT, the posting by such person of a
bond in such amount as IBT may reasonably direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration deliverable in respect thereof.
(h) Withholding. IBT or the Exchange Agent will be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
or the transactions contemplated hereby to any holder of FSSB Common Stock such
amounts as IBT (or any Affiliate thereof) or the Exchange Agent are required to
deduct and withhold with respect to the making of such payment under the Code,
or any applicable provision of U.S. Federal, state, local or non-U.S. tax law.
To the extent that such amounts are properly withheld by IBT or the Exchange
Agent, such withheld amounts will be treated for all purposes of this Agreement
as having been paid to the holder of the FSSB Common Stock in respect of whom
such deduction and withholding were made by IBT or the Exchange Agent and such
amounts shall be delivered to the applicable taxing authorities.
3.3. Reservation of Shares. IBT shall reserve for issuance a sufficient
number of shares of IBT Common Stock for the purpose of issuing shares of IBT
Common Stock to the FSSB shareholders in accordance with this Article III.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF FSSB
4.1. Representations and Warranties of FSSB. FSSB represents and warrants
to IBT that the statements contained in this Article IV are correct as of the
date of this Agreement, except as set forth in the FSSB Disclosure Schedule
delivered by FSSB to IBT on the date hereof, and except as to any representation
or warranty which specifically relates to an earlier date. FSSB has made a good
faith effort to ensure that the disclosure on each schedule of the FSSB
Disclosure Schedule corresponds to the section referenced herein. However, for
purposes of the FSSB Disclosure Schedule, any item disclosed on any schedule
therein is deemed to be
11
fully disclosed with respect to all schedules under which such item may be
relevant as and to the extent that it is reasonably apparent that such item
applies to such other schedule.
(a) Organization, Standing and Power.
(i) FSSB is a Michigan chartered commercial bank duly organized,
validly existing and in good standing under the laws of the State of Michigan.
FSSB has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The deposits of
FSSB are insured by the FDIC to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid by FSSB when due.
(ii) FSSB Disclosure Schedule 4.1(a)(ii) sets forth each FSSB
Subsidiary. Each FSSB Subsidiary is a corporation, limited liability company or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization.
(iii) The respective minute books of FSSB and each FSSB
Subsidiary accurately records, in all material respects, all material corporate
actions of the respective shareholders and boards of directors (including
committees) since January 1, 2003.
(iv) Prior to the date of this Agreement, FSSB has made available
to IBT, true and correct copies of the articles of incorporation or charter and
bylaws of FSSB and each FSSB Subsidiary. FSSB Disclosure Schedule 4.1(a)(iv)
sets forth any and all current noncompliance with FSSB's charter and bylaws.
Such noncompliance has not, and will not have, a Material Adverse Effect on
FSSB.
(b) Capital Structure.
(i) The authorized capital stock of FSSB consists of 262,500
shares of FSSB Common Stock, of which 262,500 shares are outstanding, validly
issued, fully paid and nonassessable (except for assessments by the Bureau
pursuant to Section 3807 of the Michigan Banking Code of 1999) and free of
preemptive rights. There are no shares of FSSB Common Stock held by FSSB as
treasury stock. FSSB has no outstanding options, warrants or other rights which
are convertible into shares of FSSB Common Stock, except as disclosed on FSSB
Disclosure Schedule 4.1(b)(i). Neither FSSB nor any FSSB Subsidiary has or is
bound by any Rights of any character relating to the purchase, sale or issuance
or voting of, or right to receive dividends or other distributions on any shares
of FSSB Common Stock, or any other security of FSSB or any securities
representing the right to vote, purchase or otherwise receive any shares of FSSB
Common Stock or any other security of FSSB, other than shares issuable under the
FSSB Stock Benefit Plans. FSSB Disclosure Schedule 4.1(b)(i) sets forth: the
name of each holder of an award granted under any FSSB Stock Benefit Plan,
identifying the nature, number of shares, grant and vesting dates of the award.
(ii) Except for the FSSB Subsidiaries and as set forth in FSSB
Disclosure Schedule 4.1(b)(ii), FSSB does not possess, directly or indirectly,
any material equity interest in any
12
corporate entity, except for equity interests held in the investment portfolios
of FSSB or any FSSB Subsidiary, equity interests held by FSSB in a fiduciary
capacity, and equity interests held in connection with the lending activities of
FSSB. FSSB owns each of its outstanding shares of capital stock of each FSSB
Subsidiary free and clear of all liens, security interests, pledges, charges,
encumbrances, agreements and restrictions of any kind or nature.
(iii) To FSSB's Knowledge, except as set forth on FSSB Disclosure
Schedule 4.1(b)(iii), no Person is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding shares of FSSB
Common Stock.
(iv) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which FSSB's shareholders may vote has been
issued by FSSB and are outstanding.
(c) Authority.
(i) FSSB has full corporate power and authority to execute and
deliver this Agreement and, subject to the receipt of the Regulatory Approvals
described in Section 8.3 and the approval of this Agreement by FSSB's
shareholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by FSSB and the completion by FSSB of the
transactions contemplated hereby, up to and including the Merger, have been duly
and validly approved by the Board of Directors of FSSB. This Agreement has been
duly and validly executed and delivered by FSSB, and subject to approval by the
shareholders of FSSB and receipt of the Regulatory Approvals, constitutes the
valid and binding obligation of FSSB, enforceable against FSSB in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and subject, as to enforceability, to
general principles of equity.
(ii) (A) The execution and delivery of this Agreement by FSSB,
(B) subject to receipt of Regulatory Approvals, and FSSB's and IBT's compliance
with any conditions contained therein, and subject to the receipt of the
approval of the shareholders of FSSB, the consummation of the transactions
contemplated hereby, and (C) compliance by FSSB with any of the terms or
provisions hereof will not (i) conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of FSSB or any FSSB
Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to FSSB or any FSSB
Subsidiary or any of their respective properties or assets; or (iii) except as
set forth in FSSB Disclosure Schedule 4.1(c)(ii), violate, conflict with, result
in a breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default), under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of FSSB or any
FSSB Subsidiary under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
investment or obligation to which FSSB or any FSSB Subsidiary is a party, or by
which they or any of their respective properties or assets may be bound or
affected, except for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either
13
individually or in the aggregate, will not have a Material Adverse Effect on
FSSB and the FSSB Subsidiaries taken as a whole.
(d) Information Supplied. None of the information supplied or to be
supplied by FSSB or any FSSB Subsidiary for inclusion or incorporation by
reference in (i) the Registration Statement on Form S-4 to be filed with the SEC
by IBT in connection with the issuance of shares of IBT Common Stock in the
Merger (including the Proxy Statement and prospectus constituting a part
thereof, the "S-4") will, at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement - Prospectus and
any amendment or supplement thereto will, at the date of mailing to FSSB
shareholders and at the time of the meeting of shareholders of FSSB to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The Proxy Statement -
Prospectus (except for such portions thereof that relate only to IBT) will
comply in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, and the S-4 (except for such portions thereof
that relate only to IBT) will comply in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
(e) Consents. Except for the Regulatory Approvals referred to in
Section 8.3 hereof and consents set forth in FSSB Disclosure Schedule 4.1(e) and
compliance with any conditions contained therein, and the approval of this
Agreement by the requisite vote of the shareholders of FSSB, no consents,
waivers or approvals of, or filings or registrations with, any Governmental
Entity or Bank Regulator are necessary, and, to FSSB's Knowledge, no consents,
waivers or approvals of, or filings or registrations with, any other third
parties are necessary, in connection with the execution and delivery of this
Agreement by FSSB, and the completion by FSSB of the Merger. To FSSB's
knowledge, (i) it has not received notice as of the date hereof that any Bank
Regulator intends to disapprove or object to the completion of the transactions
contemplated by this Agreement, and (ii) there is no reason to expect that all
Regulatory Approvals required for the consummation of the transactions
contemplated by this Agreement will not be received.
(f) Financial Statements.
(i) FSSB has previously made available to IBT the FSSB Financial
Statements. Except as disclosed in FSSB Disclosure Schedule 4.1(f)(i), the FSSB
Financial Statements have been prepared in accordance with GAAP, and (including
the related notes where applicable) fairly present in each case in all material
respects (subject to the case of the unaudited interim statements to normal
year-end adjustments) the consolidated financial position, results of operations
and cash flows of FSSB and the FSSB Subsidiaries on a consolidated basis as of
and for the respective periods ending on the dates thereof, in accordance with
GAAP during the periods involved, except as indicated in the notes thereto.
14
(ii) Except as disclosed in FSSB Disclosure Schedule 4.1(f)(ii),
at the date of each balance sheet included in the FSSB Financial Statements,
FSSB did not have any liability, obligation or loss contingency of any nature
(whether absolute, accrued, contingent or otherwise) of a type required to be
reflected in such FSSB Financial Statements or in the footnotes thereto which
were not fully reflected or reserved against therein or fully disclosed in a
footnote thereto, except for liabilities, obligations and loss contingencies
which were not material individually or in the aggregate or which are incurred
in the ordinary course of business, consistent with past practice, and except
for liabilities, obligations and loss contingencies which are within the subject
matter of a specific representation and warranty herein and subject, in the case
of any unaudited statements, to normal, recurring audit adjustments and the
absence of footnotes.
(g) Taxes. Except as set forth in FSSB Disclosure Schedule 4.1(g),
FSSB and the FSSB Subsidiaries that are at least 80% owned by FSSB are members
of the same affiliated group within the meaning of Code Section 1504(a) and (A)
FSSB has duly filed all federal, state and material local tax returns required
to be filed by or with respect to FSSB and each Significant Subsidiary of FSSB
on or prior to the Closing Date, taking into account any extensions (all such
returns, to FSSB's Knowledge, being accurate and correct in all material
respects) and has duly paid or made provisions for the payment of all material
federal, state and local taxes which have been incurred by or are due or claimed
to be due from FSSB and any Significant Subsidiary of FSSB by any taxing
authority or pursuant to any written tax sharing agreement on or prior to the
Closing Date other than taxes or other charges which (i) are not delinquent,
(ii) are being contested in good faith, or (iii) have not yet been fully
determined, (B) as of the date of this Agreement, FSSB has received no written
notice of, and to FSSB's Knowledge there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
FSSB or any of its Significant Subsidiaries, and no claim has been made by any
authority in a jurisdiction where FSSB or any of its Significant Subsidiaries do
not file tax returns that FSSB or any such Significant Subsidiary is subject to
taxation in that jurisdiction and (C) FSSB and its Significant Subsidiaries have
not executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect.
FSSB and each of its Significant Subsidiaries has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party, and FSSB and each of its Significant Subsidiaries, to FSSB's Knowledge,
has timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Code and similar applicable state
and local information reporting requirements.
(h) No Material Adverse Effect. Except as disclosed in FSSB Disclosure
Schedule 4.1(h), FSSB and the FSSB Subsidiaries, taken as a whole, have not
suffered any Material Adverse Effect since December 31, 2004, and, to FSSB's
Knowledge, no event has occurred or circumstance arisen since that date which,
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect on FSSB and the FSSB Subsidiaries, taken as a whole.
(i) Material Contracts; Leases; Defaults.
15
(i) Except as set forth in FSSB Disclosure Schedule 4.1(i)(i),
neither FSSB nor any FSSB Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract with any past or present officer,
director or employee of FSSB or any FSSB Subsidiary, except for "at will"
arrangements; (ii) any plan or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit sharing or similar
material arrangements for or with any past or present officers, directors or
employees of FSSB or any FSSB Subsidiary; (iii) any collective bargaining
agreement with any labor union relating to employees of FSSB or any FSSB
Subsidiary; (iv) any agreement (other than this Agreement) which by its terms
limits the payment of dividends by FSSB or any FSSB Subsidiary; (v) any
instrument evidencing or related to material indebtedness for borrowed money
whether directly or indirectly, by way of purchase money obligation, conditional
sale, lease purchase, guaranty or otherwise, in respect of which FSSB or any
FSSB Subsidiary is an obligor to any person, which instrument evidences or
relates to indebtedness other than deposits, repurchase agreements, bankers'
acceptances, and "treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which contains
financial covenants or other restrictions (other than those relating to the
payment of principal and interest when due) which would be applicable on or
after the Closing Date to IBT or any IBT Subsidiary; (vi) any other agreement,
written or oral, that obligates FSSB or any FSSB Subsidiary for the payment of
more than $50,000 annually; or (vii) any agreement (other than this Agreement),
contract, arrangement, commitment or understanding (whether written or oral)
that restricts or limits in any material way the conduct of business by FSSB or
any FSSB Subsidiary (it being understood that any non-compete or similar
provision shall be deemed material).
(ii) Each real estate lease that will require the consent of the
lessor or its agent or the assignment to IBT as a result of the Merger by virtue
of the terms of any such lease, is listed in FSSB Disclosure Schedule 4.1(i)(ii)
identifying the section of the lease that contains such prohibition or
restriction. Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, to its Knowledge, neither FSSB nor
any FSSB Subsidiary is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its assets, business, or operations
may be bound or affected, or under which it or its assets, business, or
operations receive benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
(iii) True and correct copies of agreements, contracts,
arrangements and instruments referred to in Section 4.1(i)(i) and 4.1(i)(ii)
have been made available to IBT on or before the date hereof, are listed on FSSB
Disclosure Schedule 4.1(i)(i) and 4.1(i)(ii) and are in full force and effect on
the date hereof. Except as set forth in FSSB Disclosure Schedule 4.1(i)(iii), no
plan, contract, employment agreement, termination agreement, or similar
agreement or arrangement to which FSSB or any FSSB Subsidiary is a party or
under which FSSB or any FSSB Subsidiary may be liable contains provisions which
permit an employee or independent contractor to terminate it without cause and
continue to accrue future benefits thereunder. Except as set forth in FSSB
Disclosure Schedule 4.1(i)(iii), no such agreement, plan, contract, or
arrangement (x) provides for acceleration in the vesting of benefits or payments
due thereunder upon the occurrence of a change in ownership or control of FSSB
or any FSSB Subsidiary; or (y) requires FSSB or any FSSB
16
Subsidiary to provide a benefit in the form of FSSB Common Stock or determined
by reference to the value of FSSB Common Stock. FSSB Disclosure Schedule
4.1(i)(iii) sets forth an analysis of FSSB Pension Plan liability including the
amounts that are funded and unfunded.
(j) Ownership of Property; Insurance Coverage.
(i) FSSB and each FSSB Subsidiary has good and, as to real
property, marketable title to all material assets and properties owned by FSSB
or each FSSB Subsidiary in the conduct of its businesses, whether such assets
and properties are real or personal, tangible or intangible, including assets
and property reflected in the balance sheet contained in the most recent FSSB
Financial Statements or acquired subsequent thereto (except to the extent that
such assets and properties have been disposed of in the ordinary course of
business, since the date of such balance sheet), subject to no material
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items which secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to FHLB, inter-bank credit
facilities or any transaction by FSSB acting in a fiduciary capacity, and (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith. FSSB and the FSSB Subsidiaries, as lessee, have the right under
valid and existing leases of real and personal properties used by FSSB and the
FSSB Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Such existing leases
and commitments to lease constitute or will constitute operating leases for both
tax and financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in all material respects in the notes to the FSSB Financial Statements.
(ii) FSSB and each Significant Subsidiary of FSSB currently
maintain insurance considered by each of them to be reasonable for their
respective operations. Neither FSSB nor any Significant Subsidiary of FSSB has
received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no material claims pending under such policies of
insurance and no notices of material claims have been given by FSSB or any
Significant Subsidiary of FSSB under such policies. All such insurance is valid
and enforceable and in full force and effect, and within the last three (3)
years FSSB and each Significant Subsidiary of FSSB has received each type of
insurance coverage for which it has applied and during such periods has not been
denied indemnification for any material claims submitted under any of its
insurance policies. FSSB Disclosure Schedule 4.1(j) (ii) identifies all policies
of insurance maintained by FSSB and each Significant Subsidiary of FSSB.
(k) Legal Proceedings. Except as set forth in FSSB Disclosure Schedule
4.1(k), neither FSSB nor any FSSB Subsidiary is a party to any, and there are no
pending or, to FSSB's Knowledge, threatened legal, administrative, arbitration
or other proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature (i) against FSSB or any
FSSB Subsidiary, (ii) to which FSSB or any FSSB Subsidiary's assets are or may
be subject, (iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could adversely
affect the ability of FSSB to perform under this Agreement, except for any
proceeding, claim, action, investigation or inquiry
17
referred to in clauses (i) and (ii) which, individually or in the aggregate,
would not be reasonably expected to have a Material Adverse Effect.
(l) Compliance With Applicable Law.
(i) Except as set forth in FSSB Disclosure Schedule 4.1(l)(i), to
FSSB's Knowledge, each of FSSB and each FSSB Subsidiary is in compliance in all
material respects with all applicable federal, state, and local statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to it,
its properties, assets and deposits, its business, and its conduct of business
and its relationship with its employees, including, without limitation, the USA
Patriot Act, the Bank Secrecy Act, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act of 1977 ("CRA"), the Home Mortgage
Disclosure Act, and all other applicable fair lending laws and other laws
relating to discriminatory business practices and neither FSSB nor any FSSB
Subsidiary has received any written notice to the contrary.
(ii) Each of FSSB and each FSSB Subsidiary has all material
permits, licenses, authorizations orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Knowledge of FSSB, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.3.
(iii) Except as set forth in FSSB Disclosure Schedule 4.1(l)(iii)
for the period beginning January 1, 2003, neither FSSB nor any FSSB Subsidiary
has received any written notification or, to FSSB's Knowledge, any other
communication from any Bank Regulator (i) asserting that FSSB or any FSSB
Subsidiary is not in material compliance with any of the statutes, regulations
or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any
license, franchise, permit or governmental authorization which is material to
FSSB or any FSSB Subsidiary; (iii) requiring or threatening to require FSSB or
any FSSB Subsidiary, or indicating that FSSB or any FSSB Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of FSSB
or any FSSB Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting, or purporting
to direct, restrict or limit, in any material manner the operations of FSSB or
any FSSB Subsidiary (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Except as set forth in FSSB Disclosure Schedule 4.1(l)(iii),
neither FSSB nor any FSSB Subsidiary has consented to or entered into any
Regulatory Agreement that is currently in effect. Any such Regulatory Agreement
and all correspondence relating thereto is set forth in FSSB Disclosure Schedule
4.1(l)(iii). The most recent regulatory rating given to FSSB as to compliance
with the CRA is satisfactory or better.
18
(m) Employee Benefit Plans.
(i) FSSB Disclosure Schedule 4.1(m)(i) includes a descriptive
list of all existing bonus, incentive, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, stock appreciation,
phantom stock, severance, welfare benefit plans, fringe benefit plans,
employment, severance and change in control agreements and all other material
benefit practices, policies and arrangements maintained by FSSB or any FSSB
Subsidiary in which any employee or former employee, consultant or former
consultant or director or former director of FSSB or any FSSB Subsidiary
participates or to which any such employee, consultant or director is a party or
is otherwise entitled to receive benefits (the "Compensation and Benefit
Plans"). Except as set forth in FSSB Disclosure Schedule 4.1(m)(i), neither FSSB
nor any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to materially modify, change or renew any
existing Compensation and Benefit Plan (any modification or change that
increases the cost of such plans would be deemed material), except as required
to maintain the qualified status thereof. FSSB has made available to IBT true
and correct copies of the Compensation and Benefit Plans. There are no
outstanding unvested or unexercised awards under any FSSB benefit plans and
there are no awards available for issuance under any such plan.
(ii) Except as disclosed in FSSB Disclosure Schedule 4.1(m)(ii),
each Compensation and Benefit Plan has been operated and administered in all
material respects in accordance with its terms and with applicable law,
including, but not limited to, ERISA, the Code, the Securities Act, the Exchange
Act, the Age Discrimination in Employment Act, COBRA, the Health Insurance
Portability and Accountability Act and any regulations or rules promulgated
thereunder, and all material filings, disclosures and notices required by ERISA,
the Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act and any other applicable law have been timely made or any
interest, fines, penalties or other impositions for late filings have been paid
in full. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter from the IRS, and FSSB is not aware of any
circumstances which are reasonably likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
Knowledge of FSSB, threatened action, suit or claim relating to any of the
Compensation and Benefit Plans (other than routine claims for benefits). Neither
FSSB nor any FSSB Subsidiary has engaged in a transaction, or omitted to take
any action, with respect to any Compensation and Benefit Plan that would
reasonably be expected to subject FSSB or any FSSB Subsidiary to an unpaid tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(iii), no liability, other than PBGC premiums arising in the ordinary
course of business, has been or is expected by FSSB or any of its Subsidiaries
to be incurred with respect to any FSSB Compensation and Benefit Plan which is a
defined benefit plan subject to Title IV of ERISA ("FSSB Defined Benefit Plan"),
or with respect to any "single-employer plan" (as defined in Section 4001(a) of
ERISA) currently or formerly maintained by FSSB or any entity which is
considered one employer with FSSB under Section 4001(b)(1) of ERISA or Section
414 of the Code (an "ERISA Affiliate")
19
(such plan hereinafter referred to as an "ERISA Affiliate Plan"). To the
Knowledge of FSSB and any FSSB Subsidiary, except as set forth in FSSB
Disclosure Schedule 4.1(m)(iii), no FSSB Defined Benefit Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, as of the last day of the end of the most recent plan year ending
prior to the date hereof. Except as set forth in FSSB Disclosure Schedule
4.1(m)(iii), the fair market value of the assets of each FSSB Defined Benefit
Plan exceeds the present value of the benefits guaranteed under Section 4022 of
ERISA under such FSSB Defined Benefit Plan as of the end of the most recent plan
year with respect to the respective FSSB Defined Benefit Plan ending prior to
the date hereof, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such FSSB Defined Benefit Plan as of the
date hereof; and no notice of a "reportable event" (as defined in Section 4043
of ERISA) for which the 30-day reporting requirement has not been waived has
been required to be filed for any FSSB Defined Benefit Plan within the 12-month
period ending on the date hereof. Except as set forth in FSSB Disclosure
Schedule 4.1(m)(iii), neither FSSB nor any of its Subsidiaries has provided, or
is required to provide, security to any FSSB Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code or has taken any action, or omitted to take any action, that has resulted,
or would reasonably be expected to result in the imposition of a lien under
Section 412(n) of the Code or pursuant to ERISA. To the Knowledge of FSSB, and
except as set forth in FSSB Disclosure Schedule 4.1(m)(iii), there is no pending
investigation or enforcement action by any Bank Regulator with respect to any
Compensation and Benefit Plan or any ERISA Affiliate Plan.
(iv) With respect to any FSSB Defined Benefit Plan that is a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA, covering
employees of FSSB or any ERISA Affiliate, (i) neither FSSB nor any ERISA
Affiliate has made or suffered a "complete withdrawal" or "partial withdrawal,"
as such terms are respectively defined in Sections 4203 and 4205 of ERISA, (ii)
no event has occurred, and no circumstances exist, that alone or with the
passage of time present a material risk of a complete or partial withdrawal, and
(iii) neither FSSB or any ERISA Affiliate has any contingent liability under
Section 4204 of ERISA and no circumstances exist that present a material risk
that any such plan will go into reorganization. FSSB Disclosure Schedule
4.1(m)(iv) lists FSSB's best estimate of the amount of withdrawal liability that
would be incurred if FSSB and each ERISA Affiliate were to make a complete
withdrawal from such plan as of the Effective Time and also states the aggregate
withdrawal liability of FSSB and the ERISA Affiliates. There are no "unfunded
vested benefits" (within the meaning of Section 4211 of ERISA) as of the end of
the most recently completed plan year and as of the date of this Agreement.
(v) All material contributions required to be made under the
terms of any Compensation and Benefit Plan or ERISA Affiliate Plan or any
employee benefit arrangements to which FSSB or any FSSB Subsidiary is a party or
a sponsor have been timely made, and all anticipated contributions and funding
obligations are accrued on FSSB's consolidated financial statements to the
extent required by GAAP. FSSB or its Subsidiaries have expensed and accrued as a
liability the present value of future benefits under each applicable
Compensation and Benefit Plan for financial reporting purposes as required by
GAAP.
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(vi) Neither FSSB nor any FSSB Subsidiary has any obligations to
provide retiree health, life insurance, disability insurance, or other retiree
death benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. Except as set forth in FSSB Disclosure
Schedule 4.1(m)(vi), there has been no communication to employees by FSSB or any
FSSB Subsidiary that would reasonably be expected to promise or guarantee such
employees retiree health, life insurance, disability insurance, or other retiree
death benefits.
(vii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(vii), FSSB and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering employees who are not United States residents.
(viii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(viii), with respect to each Compensation and Benefit Plan, if applicable,
FSSB has provided or made available to IBT copies of the: (A) trust instruments
and insurance contracts, (B) two (2) most recent Forms 5500 filed with the IRS,
(C) two (2) most recent actuarial reports and financial statements; (D) most
recent summary plan description, (E) most recent determination letter issued by
the IRS; (F) any Form 5310 or Form 5330 filed with the IRS within the last two
years, and (G) most recent nondiscrimination tests performed under ERISA and the
Code (including 401(k) and 401(m) tests), if applicable.
(ix) Except as set forth in FSSB Disclosure Schedule 4.1(m)(ix),
the consummation of the Merger will not, directly or indirectly (including,
without limitation, as a result of any termination of employment or service at
any time prior to or following the Effective Time) (A) entitle any employee,
consultant or director to any payment or benefit (including severance pay,
change in control benefit, or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits under
any Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
(x) Neither FSSB nor any FSSB Subsidiary maintains any
compensation plans, programs or arrangements under which any payment is
reasonably likely to become nondeductible, in whole or in part, for tax
reporting purposes as a result of the limitations under Section 162(m) of the
Code and the regulations issued thereunder.
(xi) To the Knowledge of FSSB, the consummation of the Merger
will not, directly or indirectly (including without limitation, as a result of
any termination of employment or service at any time prior to or following the
Effective Time), entitle any current or former employee, director or independent
contractor of FSSB or any FSSB Subsidiary to any actual or deemed payment (or
benefit) which could constitute a "parachute payment" (as such term is defined
in Section 280G of the Code).
(xii) There are no stock appreciation or similar rights, earned
dividends or dividend equivalents, or shares of restricted stock, outstanding
under any of the Compensation and Benefit Plans or otherwise as of the date
hereof and none will be granted, awarded, or credited after the date hereof.
21
(n) Brokers, Finders and Financial Advisors. Except as set forth in
FSSB Disclosure Schedule 4.1(n), neither FSSB nor any FSSB Subsidiary, nor any
of their respective officers, directors, employees or agents, has employed any
broker, finder or financial advisor other than Austin Associates, LLC in
connection with the transactions contemplated by this Agreement, or incurred any
liability or commitment for any fees or commissions to any such person other
than Austin Associates, LLC in connection with the transactions contemplated by
this Agreement.
(o) Environmental Matters.
(i) Except as may be set forth in FSSB Disclosure Schedule 4.1(o)
and any Phase I Environmental Report identified therein, with respect to FSSB
and each FSSB Subsidiary:
(A) Each of FSSB and the FSSB Subsidiaries and, to FSSB's
Knowledge, the Participation Facilities and Loan Properties are, and have been,
in substantial compliance with, and are not liable under, any Environmental
Laws;
(B) FSSB has received no written notice that there is any
suit, claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FSSB's Knowledge, no such action is
threatened, before any court, governmental agency or other forum against it or
any of the FSSB Subsidiaries or any Participation Facility (x) for alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Materials of Environmental Concern, whether or not occurring
at or on a site owned, leased or operated by it or any of the FSSB Subsidiaries
or any Participation Facility;
(C) FSSB has received no notice that there is any suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending and, to FSSB's Knowledge no such action is
threatened, before any court, governmental agency or other forum relating to or
against any Loan Property (or FSSB or any of the FSSB Subsidiaries in respect of
such Loan Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y) relating to
the presence of or release into the environment of any Materials of
Environmental Concern, whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To FSSB's Knowledge, the properties currently owned or
operated by FSSB or any FSSB Subsidiary (including, without limitation, soil,
groundwater or surface water on, or under the properties, and buildings thereon)
are not contaminated with and do not otherwise contain any Materials of
Environmental Concern other than as permitted under applicable Environmental
Law;
(E) neither FSSB nor any FSSB Subsidiary has received any
written notice, demand letter, executive or administrative order, directive or
request for information from any federal, state, local or foreign governmental
entity or any third party indicating that it may be in violation of, or liable
under, any Environmental Law;
22
(F) To FSSB's Knowledge, there are no underground storage
tanks on, in or under any properties owned or operated by FSSB or any of the
FSSB Subsidiaries or any Participation Facility, and to FSSB's Knowledge, no
underground storage tanks have been closed or removed from any properties owned
or operated by FSSB or any of the FSSB Subsidiaries or any Participation
Facility; and
(G) To FSSB's Knowledge, during the period of (s) FSSB's or
any of the FSSB Subsidiaries' ownership or operation of any of their respective
current properties or (t) FSSB's or any of the FSSB Subsidiaries' participation
in the management of any Participation Facility, there has been no contamination
by or release of Materials of Environmental Concerns in, on, under or affecting
such properties that could reasonably be expected to result in material
liability under the Environmental Laws. To FSSB's Knowledge, prior to the period
of (x) FSSB's or any of the FSSB Subsidiaries' ownership or operation of any of
their respective current properties or (y) FSSB's or any of the FSSB
Subsidiaries' participation in the management of any Participation Facility,
there was no contamination by or release of Materials of Environmental Concern
in, on, under or affecting such properties that could reasonably be expected to
result in material liability under the Environmental Laws.
(ii) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property. "Participation Facility" means any facility in which
the applicable party (or a Subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property.
(p) Loan Portfolio.
(i) To FSSB's Knowledge, the allowance for loan losses reflected
in the notes to FSSB's audited consolidated statement of financial condition at
December 31, 2004 was, and the allowance for loan losses shown in the notes to
the FSSB's unaudited consolidated financial statements for periods ending after
December 31, 2004 were, or will be, adequate, as of the dates thereof, under
GAAP.
(ii) FSSB Disclosure Schedule 4.1(p)(ii) sets forth a listing, as
of the most recently available date, by account, of: (A) each borrower, customer
or other party which has notified FSSB or any FSSB Subsidiary during the past
twelve months of, or has asserted against FSSB or any FSSB Subsidiary, in each
case in writing, any "lender liability" or similar claim, and, to the Knowledge
of FSSB, each borrower, customer or other party which has given FSSB or any FSSB
Subsidiary any oral notification of, or orally asserted to or against FSSB or
any FSSB Subsidiary, any such claim; and (B) all loans, (1) that are
contractually past due 90 days or more in the payment of principal and/or
interest, (2) that are on non-accrual status, (3) that as of the date of this
Agreement are classified as "Other Loans Specifically Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Watch
list" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such loan and the identity of the obligor
thereunder, (4) where the interest rate terms have been reduced and/or the
23
maturity dates have been extended subsequent to the agreement under which the
loan was originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, or (5) where a specific reserve
allocation exists in connection therewith; and (C) all other assets classified
by FSSB or any FSSB Subsidiary as real estate acquired through foreclosure or in
lieu of foreclosure, including in-substance foreclosures, and all other assets
currently held that were acquired through foreclosure or in lieu of foreclosure.
(iii) All loans receivable (including discounts) and accrued
interest entered on the books of FSSB and the FSSB Subsidiaries arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of FSSB's or the appropriate FSSB
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be, except as set forth in FSSB Disclosure
Schedule 4.1(p)(iii). To the Knowledge of FSSB, the loans, discounts and the
accrued interest reflected on the books of FSSB and the FSSB Subsidiaries are
subject to no defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in-lending laws), except as may be
provided by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. Except as set forth in FSSB
Disclosure Schedule 4.1(p)(iii), all such loans are owned by FSSB or the
appropriate FSSB Subsidiary free and clear of any liens.
(iv) The notes and other evidences of indebtedness evidencing the
loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
(q) Related Party Transactions. Except as set forth in FSSB Disclosure
Schedule 4.1(q), neither FSSB nor any FSSB Subsidiary is a party to any
transaction (including any loan or other credit accommodation) with any
Affiliate of FSSB or any FSSB Subsidiary. All such transactions (a) were made in
the ordinary course of business, (b) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other Persons, and (c) did not involve more than
the normal risk of collectibility or present other unfavorable features. No loan
or credit accommodation to any Affiliate of FSSB or any FSSB Subsidiary is
presently in default or, during the three (3) year period prior to the date of
this Agreement, has been in default or has been restructured, modified or
extended except for rate or other modifications pursuant to FSSB's loan
modification policy that is applicable to all Persons. Neither FSSB nor any FSSB
Subsidiary has been notified that principal and interest with respect to any
such loan or other accommodation will not be paid when due or that the loan
grade classification accorded such loan or credit accommodation by FSSB is
inappropriate.
(r) Deposits. Except as disclosed in FSSB Disclosure Schedule 4.1(f),
none of the deposits of FSSB is a "brokered deposit" as defined in 12 C.F.R.
Section 337.6(a)(2).
24
(s) Required Vote. The affirmative vote of not less than 2/3rds of the
issued and outstanding shares of FSSB Common Stock is required to approve this
Agreement and the Merger under FSSB's Articles of Incorporation and Michigan
law.
(t) Intellectual Property. FSSB and each Significant Subsidiary of
FSSB owns or, to FSSB's Knowledge, possesses valid and binding licenses and
other rights to use all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in their business, each without payment, and
neither FSSB nor any Significant Subsidiary of FSSB has received any notice of
conflict with respect thereto that asserts the rights of others. FSSB and each
Significant Subsidiary of FSSB have performed all the obligations required to be
performed, and are not in default in any respect, under any contract, agreement,
arrangement or commitment relating to any of the foregoing.
(u) Administration of Trust Accounts. FSSB and each FSSB Subsidiary
has properly administered in all material respects and which could reasonably be
excepted to be material to the financial condition of FSSB and the FSSB
Subsidiaries taken as a whole, all accounts for which it acts as a fiduciary,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable state and
federal law and regulations and common law. To the Knowledge of FSSB, neither
FSSB, any FSSB Subsidiary, nor any director, officer or employee of FSSB or any
FSSB Subsidiary has committed any breach of trust with respect to any such
fiduciary account which is material to or could reasonably be expected to be
material to the financial condition of FSSB and the FSSB Subsidiaries taken as a
whole, and the accountings for each such fiduciary account are true and correct
in all material respects and accurately reflect the assets of such fiduciary
account.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF IBT
5.1. Representations and Warranties of IBT. IBT represents and warrants to
FSSB that the statements contained in this Article V are correct as of the date
of this Agreement, except as set forth in the IBT Disclosure Schedule delivered
by IBT to FSSB on the date hereof. IBT has made a good faith effort to ensure
that the disclosure on each schedule of the IBT Disclosure Schedule corresponds
to the section referenced herein. However, for purposes of the IBT Disclosure
Schedule, any item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules under which such item may be relevant as
and to the extent that it is reasonably apparent that such item applies to such
other schedule.
(a) Organization, Standing and Power.
(i) IBT is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, and is duly registered as
a financial services holding company under the Bank Holding Company Act of 1956,
as amended. IBT has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification.
25
(ii) Xxxxxxxx Bank and Trust is a state chartered bank duly
organized, validly existing and in good standing under the laws of the State of
Michigan. The deposits of Xxxxxxxx Bank and Trust are insured by the FDIC to the
fullest extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid when due.
(iii) Farmers State Bank of Breckenridge is a state chartered
bank duly organized, validly existing and in good standing under the laws of the
State of Michigan. The deposits of Farmers State Bank of Breckenridge are
insured by the FDIC to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when due.
(iv) IBT Disclosure Schedule 5.1(a)(iv) sets forth each IBT
Subsidiary. Each IBT Subsidiary (other than Xxxxxxxx Bank and Trust and Farmers
State Bank of Breckenridge) is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization.
(b) Capital Structure.
(i) The authorized capital stock of IBT consists of 10,000,000
shares of IBT Common Stock, of which 4,949,515 shares are outstanding, validly
issued, fully paid and nonassessable and free of preemptive rights. Neither IBT
nor any IBT Subsidiary has or is bound by any Rights of any character relating
to the purchase, sale or issuance or voting of, or right to receive dividends or
other distributions on any shares of IBT Common Stock, or any other security of
IBT or any securities representing the right to vote, purchase or otherwise
receive any shares of IBT Common Stock or any other security of IBT, other than
shares issuable under the IBT Stock Benefit Plans.
(ii) IBT owns all of the common stock of Xxxxxxxx Bank and Trust
and Farmers State Bank of Breckenridge. Either IBT, Xxxxxxxx Bank and Trust or
Farmers State Bank of Breckenridge owns all of the outstanding shares of capital
stock or equity interest of each IBT Subsidiary.
(iii) Except as set forth in IBT Disclosure Schedule 5.1(b)(iii),
or as is set forth in the IBT proxy statement, to the Knowledge of IBT, no
Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act)
of 5% or more of the outstanding shares of IBT Common Stock.
(iv) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which IBT's shareholders may vote has been
issued by IBT and are outstanding.
(c) Authority.
(i) IBT has full corporate power and authority to execute and
deliver this Agreement and, subject to receipt of the required Regulatory
Approvals, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by IBT and the
26
completion by IBT of the transactions contemplated hereby, up to and including
the Merger, have been duly and validly approved by the Board of Directors of
IBT, and no other corporate proceedings on the part of IBT are necessary to
complete the transactions contemplated hereby, up to and including the Merger.
This Agreement has been duly and validly executed and delivered by IBT, and
subject to the receipt of the Regulatory Approvals described in Section 8.3
hereof constitutes the valid and binding obligations of IBT enforceable against
IBT in accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity.
(ii) (A) The execution and delivery of this Agreement by IBT, (B)
subject to receipt of the Regulatory Approvals, and FSSB's and IBT's compliance
with any conditions contained therein, and subject to the receipt of the
approval of the shareholders of FSSB, the consummation of the transactions
contemplated hereby, and (C) compliance by IBT with any of the terms or
provisions hereof will not (i) conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of IBT or any IBT
Subsidiary; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to IBT or any IBT
Subsidiary or any of their respective properties or assets; or (iii) violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default), under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration or the creation
of any lien, security interest, charge or other encumbrance upon any of the
properties or assets of IBT or any IBT Subsidiary under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other investment or obligation to which any of them
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except for such violations, conflicts, breaches or
defaults under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on IBT and the IBT
Subsidiaries taken as a whole.
(d) Consents. Except for the Regulatory Approvals referred to in
Section 8.3 hereof and compliance with any conditions contained therein, and the
approval of this Agreement by the requisite vote of the shareholders of FSSB, no
consents, waivers or approvals of, or filings or registrations with, any
Governmental Entity or Bank Regulator are necessary, and, to the Knowledge of
IBT, no consents, waivers or approvals of, or filings or registrations with, any
other third parties are necessary, in connection with the execution and delivery
of this Agreement by IBT and the completion by IBT of the Merger. To IBT's
knowledge, (i) it has not received notice as of the date hereof that any Bank
Regulator intends to disapprove or object to the completion of the transactions
contemplated by this Agreement, and (ii) there is no reason to expect that all
Regulatory Approvals required for the consummation of the transactions
contemplated by this Agreement will not be received.
(e) Financial Statements.
(i) IBT has previously made available to FSSB the IBT Financial
Statements. The IBT Financial Statements have been prepared in accordance with
GAAP, and (including the related notes where applicable) fairly present in each
case in all material respects
27
(subject in the case of the unaudited interim statements to normal year-end
adjustments) the consolidated financial position, results of operations and cash
flows of IBT and the IBT Subsidiaries on a consolidated basis as of and for the
respective periods ending on the dates thereof, in accordance with GAAP during
the periods involved, except as indicated in the notes thereto, or in the case
of unaudited statements, as permitted by Form 10-Q.
(ii) At the date of each balance sheet included in the IBT
Financial Statements, IBT did not have any liability, obligation or loss
contingency of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such IBT Financial Statements or in the
footnotes thereto which were not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which were not material individually or in the aggregate or
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
(f) Taxes. IBT and the IBT Subsidiaries that are at least 80 percent
owned by IBT are members of the same affiliated group within the meaning of Code
Section 1504(a). IBT has duly filed all federal, state and material local tax
returns required to be filed by or with respect to IBT and each Significant
Subsidiary of IBT on or prior to the Closing Date, taking into account any
extensions (all such returns, to the Knowledge of IBT, being accurate and
correct in all material respects) and has duly paid or made provisions for the
payment of all material federal, state and local taxes which have been incurred
by or are due or claimed to be due from IBT and any Significant Subsidiary of
IBT by any taxing authority or pursuant to any written tax sharing agreement on
or prior to the Closing Date other than taxes or other charges which (i) are not
delinquent, (ii) are being contested in good faith, or (iii) have not yet been
fully determined. As of the date of this Agreement, IBT has received no notice
of, and to the Knowledge of IBT, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
IBT or any of its Significant Subsidiaries, and no claim has been made by any
authority in a jurisdiction where IBT or any of its Significant Subsidiaries do
not file tax returns that IBT or any such Significant Subsidiary is subject to
taxation in that jurisdiction. Except as set forth in IBT Disclosure Schedule
5.1(f), IBT and its Significant Subsidiaries have not executed an extension or
waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. IBT and each of its Significant
Subsidiaries has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party, and IBT and each of its
Significant Subsidiaries, to the Knowledge of IBT, has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements.
(g) No Material Adverse Effect. Except as disclosed in IBT's
Securities Documents filed on or prior to the date hereof, IBT and the IBT
Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect
since December 31, 2004 and to IBT's
28
Knowledge, no event has occurred or circumstance arisen since that date which,
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect on IBT and the IBT Subsidiaries, taken as a whole.
(h) Ownership of Property; Insurance Coverage.
(i) IBT and each IBT Subsidiary has good and, as to real
property, marketable title to all material assets and properties owned by IBT or
each IBT Subsidiary in the conduct of its businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and
property reflected in the balance sheet contained in the most recent IBT
Financial Statements or acquired subsequent thereto (except to the extent that
such assets and properties have been disposed of in the ordinary course of
business, since the date of such balance sheet), subject to no material
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items which secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to FHLB, inter-bank credit
facilities or any transaction by IBT acting in a fiduciary capacity, and (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith. IBT and the IBT Subsidiaries, as lessee, have the right under valid
and existing leases of real and personal properties used by IBT and the IBT
Subsidiaries in the conduct of their businesses to occupy or use all such
properties as presently occupied and used by each of them. Such existing leases
and commitments to lease constitute or will constitute operating leases for both
tax and financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in all material respects in the notes to the IBT Financial Statements.
(ii) IBT and each Significant Subsidiary of IBT currently
maintain insurance considered by each of them to be reasonable for their
respective operations. Neither IBT nor any Significant Subsidiary of IBT has
received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no material claims pending under such policies of
insurance and no notices of material claims have been given by IBT or any
Significant Subsidiary of IBT under such policies. All such insurance is valid
and enforceable and in full force and effect, and within the last three (3)
years IBT and each Significant Subsidiary of IBT has received each type of
insurance coverage for which it has applied and during such periods has not been
denied indemnification for any material claims submitted under any of its
insurance policies. IBT Disclosure Schedule 5.1(h) (ii) identifies all policies
of insurance maintained by IBT and each Significant Subsidiary of IBT.
(i) Legal Proceedings. Except as disclosed in IBT Disclosure Schedule
5.1(i), neither IBT nor any IBT Subsidiary is a party to any, and there are no
pending or, to IBT's Knowledge, threatened legal, administrative, arbitration or
other proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any nature (i) against IBT or any
IBT Subsidiary, (ii) to which IBT or any IBT Subsidiary's assets are or may be
subject, (iii) challenging the validity or propriety of any of the transactions
contemplated by this Agreement, or (iv) which could adversely affect the ability
of IBT to perform under this Agreement, except for any proceeding, claim,
action, investigation or inquiry referred to in
29
clauses (i) and (ii) which, individually or in the aggregate, would not be
reasonably expected to have a Material Adverse Effect.
(j) Compliance with Applicable Law.
(i) To the Knowledge of IBT, each of IBT and each IBT Subsidiary
is in compliance in all material respects with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its employees,
including, without limitation, the USA Patriot Act, the Bank Secrecy Act, the
Equal Credit Opportunity Act, the Fair Housing Act, the CRA, the Home Mortgage
Disclosure Act, and all other applicable fair lending laws and other laws
relating to discriminatory business practices and neither IBT nor any IBT
Subsidiary has received any written notice to the contrary.
(ii) Each of IBT and each IBT Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Knowledge of IBT, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.3.
(iii) For the period beginning January 1, 2003, neither IBT nor
any IBT Subsidiary has received any written notification or, to the Knowledge of
IBT, any other communication from any Bank Regulator (i) asserting that IBT or
any IBT Subsidiary is not in material compliance with any of the statutes,
regulations or ordinances which such Bank Regulator enforces; (ii) threatening
to revoke any license, franchise, permit or governmental authorization which is
material to IBT or any IBT Subsidiary; (iii) requiring or threatening to require
IBT or any IBT Subsidiary, or indicating that IBT or any IBT Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of IBT
or any IBT Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing, restricting or limiting, or purporting
to direct, restrict or limit, in any manner the operations of IBT or any IBT
Subsidiary, including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement or order
described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither IBT nor any IBT Subsidiary has consented to or entered into
any currently effective Regulatory Agreement. The most recent regulatory ratings
given to Xxxxxxxx Bank and Trust and Farmers State Bank of Breckenridge as to
compliance with the CRA is satisfactory or better.
(k) IBT Common Stock. The shares of IBT Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be
30
duly authorized, validly issued, fully paid and non-assessable and subject to no
preemptive rights.
(l) Material Contracts; Leases, Defaults. Neither IBT nor any IBT
Subsidiary is a party to or subject to: (i) any collective bargaining agreement
with any labor union relating to employees of IBT or any IBT Subsidiary; nor
(ii) any agreement which by its terms limits the payment of dividends by IBT or
any IBT Subsidiary.
(m) Securities Documents. IBT has made available to FSSB copies of its
(i) annual reports on Form 10-K for the years ended December 31, 2004, 2003 and
2002, (ii) quarterly reports on Form 10-Q for the quarters ended March 31, 2005,
June 30 2005 and September 30, 2005, and (iii) proxy materials used or for use
in connection with its meetings of shareholders held in 2005, 2004 and 2003.
Such reports and proxy materials complied, at the time filed with the SEC, in
all material respects, with the Securities Laws.
(n) Reorganization. IBT has no knowledge of any reason why the Merger
would fail to qualify as a reorganization under Section 368(a) of the Code.
(o) Information Supplied. None of the information supplied or to be
supplied by IBT or any IBT Subsidiary for inclusion or incorporation by
reference in (i) the S-4 will, at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement and any amendment
or supplement thereto will, at the date of mailing to FSSB shareholders and at
the time of the meeting of shareholders of FSSB to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. The Proxy Statement (except for such portions
thereof that relate only to FSSB) will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder, and the
S-4 (except for such portions thereof that relate only to FSSB) will comply in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
(p) Required Vote. No vote of the stockholders of IBT is required by
law, by IBT's Articles of Incorporation or Bylaws, or otherwise to approve this
Agreement and the Merger.
(q) Merger Consideration. As of the Closing Date and subject to
Article IX, IBT will have cash and authorized shares of IBT Common Stock in the
aggregate amount of the Merger Consideration available for deposit with the
Exchange Agent.
(r) Pro Forma Capital Requirements. IBT is, and on a pro forma basis
giving effect for the transactions contemplated by this Agreement and any
financing or capital injection contemplated by IBT, will be "adequately
capitalized" as defined for purposes of the Federal Deposit Insurance Act and
applicable regulations.
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(s) Brokers, Finders and Financial Advisors. Neither IBT nor any IBT
Subsidiary, nor any of their respective officers, directors, employees or
agents, has employed any broker, finder or financial advisor other than Austin
Associates, LLC in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person other than Austin Associates, LLC in connection with the
transactions contemplated by this Agreement.
(t) Employee Benefit Plans.
(i) Except as disclosed in IBT Disclosure Schedule 5.1(t)(i),
each bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare benefit plans, fringe benefit plans, employment, severance
and change in control agreements and all other material benefit practices,
policies and arrangements maintained by IBT or any IBT Subsidiary (the "IBT
Plans") has been operated and administered in all material respects in
accordance with its terms and with applicable law, including, but not limited
to, ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act, COBRA, the Health Insurance Portability and
Accountability Act and any regulations or rules promulgated thereunder, and all
material filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act and
any other applicable law have been timely made or any interest, fines, penalties
or other impositions for late filings have been paid in full. Each IBT Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and IBT is not aware of any circumstances which are reasonably likely to result
in revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of IBT, threatened action, suit or claim relating
to any of the Compensation and Benefit Plans (other than routine claims for
benefits). Neither IBT nor any IBT Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit Plan
that would reasonably be expected to subject IBT or any IBT Subsidiary to an
unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502
of ERISA.
(ii) Except as set forth in IBT Disclosure Schedule 5.1(t)(ii),
no liability, other than PBGC premiums arising in the ordinary course of
business, has been or is expected by IBT or any of its Subsidiaries to be
incurred with respect to any IBT Plan which is a defined benefit plan subject to
Title IV of ERISA ("IBT Defined Benefit Plan"), or with respect to any
"singleemployer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by IBT or any entity which is considered one employer with
IBT under Section 4001(b)(1) of ERISA or Section 414 of the Code (an "IBT ERISA
Affiliate") (such plan hereinafter referred to as an "IBT ERISA Affiliate
Plan"). To the Knowledge of IBT and any IBT Subsidiary, except as set forth in
IBT Disclosure Schedule 5.1(t)(ii), no IBT Defined Benefit Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, as of the last day of the end of the most recent plan year ending
prior to the date hereof. Except as set forth in IBT Disclosure Schedule
5.1(t)(ii), the fair market value of the assets of each IBT Defined Benefit Plan
32
exceeds the present value of the benefits guaranteed under Section 4022 of ERISA
under such IBT Defined Benefit Plan as of the end of the most recent plan year
with respect to the respective IBT Defined Benefit Plan ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such IBT Defined Benefit Plan as of the date
hereof; and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived has been
required to be filed for any IBT Defined Benefit Plan within the 12-month period
ending on the date hereof. Except as set forth in IBT Disclosure Schedule
5.1(t)(ii), neither IBT nor any of its Subsidiaries has provided, or is required
to provide, security to any IBT Defined Benefit Plan or to any single-employer
plan of an IBT ERISA Affiliate pursuant to Section 401(a)(29) of the Code or has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA. To the Knowledge of IBT, and except as
set forth in IBT Disclosure Schedule 5.1(t)(ii), there is no pending
investigation or enforcement action by any Bank Regulator with respect to any
IBT Plan or any IBT ERISA Affiliate Plan.
(iii) With respect to any IBT Defined Benefit Plan that is a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA, covering
employees of IBT or any IBT ERISA Affiliate, (i) neither IBT nor any IBT ERISA
Affiliate has made or suffered a "complete withdrawal" or "partial withdrawal,"
as such terms are respectively defined in Sections 4203 and 4205 of ERISA, (ii)
no event has occurred, and no circumstances exist, that alone or with the
passage of time present a material risk of a complete or partial withdrawal, and
(iii) neither IBT or any IBT ERISA Affiliate has any contingent liability under
Section 4204 of ERISA and no circumstances exist that present a material risk
that any such plan will go into reorganization. IBT Disclosure Schedule
5.1(t)(iii) lists IBT's best estimate of the amount of withdrawal liability that
would be incurred if IBT and each IBT ERISA Affiliate were to make a complete
withdrawal from such plan as of the Effective Time and also states the aggregate
withdrawal liability of IBT and the IBT ERISA Affiliates. There are no "unfunded
vested benefits" (within the meaning of Section 4211 of ERISA) as of the end of
the most recently completed plan year and as of the date of this Agreement.
(iv) All material contributions required to be made under the
terms of any IBT Plan or IBT ERISA Affiliate Plan or any employee benefit
arrangements to which IBT or any IBT Subsidiary is a party or a sponsor have
been timely made, and all anticipated contributions and funding obligations are
accrued on IBT's consolidated financial statements to the extent required by
GAAP. IBT or its Subsidiaries have expensed and accrued as a liability the
present value of future benefits under each applicable IBT Plan for financial
reporting purposes as required by GAAP.
(v) Neither IBT nor any IBT Subsidiary has any obligations to
provide retiree health, life insurance, disability insurance, or other retiree
death benefits under any IBT Plan, other than benefits mandated by Section 4980B
of the Code.
(u) Loan Portfolio.
(i) To IBT's Knowledge, the allowance for loan losses reflected
in the notes to IBT's audited consolidated statement of financial condition at
December 31, 2004 was, and
33
the allowance for loan losses shown in the notes to the IBT's unaudited
consolidated financial statements for periods ending after December 31, 2004
were, or will be, adequate, as of the dates thereof, under GAAP.
(ii) IBT Disclosure Schedule 5.1(u) sets forth a listing, as of
the most recently available date, by account, of all loans having a principal
balance in excess of $750,000 (1) that are contractually past due 90 days or
more in the payment of principal and/or interest, (2) that are on non-accrual
status, (3) that as of the date of this Agreement are classified as "Other Loans
Specifically Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Watch list" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such loan
and the identity of the obligor thereunder, (4) where the interest rate terms
have been reduced and/or the maturity dates have been extended subsequent to the
agreement under which the loan was originally created due to concerns regarding
the borrower's ability to pay in accordance with such initial terms, or (5)
where a specific reserve allocation exists in connection therewith.
(iii) All loans receivable (including discounts) and accrued
interest entered on the books of IBT and the IBT Subsidiaries arose out of bona
fide arm's-length transactions, were made for good and valuable consideration in
the ordinary course of IBT's or the appropriate IBT Subsidiary's respective
business, and the notes or other evidences of indebtedness with respect to such
loans (including discounts) are true and genuine and are what they purport to
be, other than loans as to which the failure to satisfy the foregoing standards
would not have a Material Adverse Effect on IBT or any IBT Subsidiaries.
ARTICLE VI- COVENANTS OF FSSB
6.1. Conduct of Business.
(a) Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of IBT, which
consent will not be unreasonably withheld, conditioned or delayed, FSSB will,
and will cause each FSSB Subsidiary to: operate its business only in the usual,
regular and ordinary course of business; use reasonable efforts to preserve
intact its business organization and assets and maintain its rights and
franchises; and voluntarily take no action which would: (i) adversely affect the
ability of the parties to obtain the Regulatory Approvals or materially increase
the period of time necessary to obtain such approvals, or (ii) adversely affect
its ability to perform its covenants and agreements under this Agreement.
(b) Negative Covenants. FSSB agrees that from the date of this
Agreement to the Effective Time, except as otherwise specifically permitted or
required by this Agreement, set forth in FSSB Disclosure Schedule 6.1(b), or
consented to by IBT in writing (which consent shall not be unreasonably
withheld, conditioned or delayed), it will not, and it will cause each of the
FSSB Subsidiaries not to:
(i) change or waive any provision of its Articles of
Incorporation, Charter or Bylaws, except as required by law;
34
(ii) change the number of authorized or issued shares of its
capital stock, issue any shares of FSSB Common Stock that are held as "treasury
shares" as of the date of this Agreement, or issue or grant any Right or
agreement of any character relating to its authorized or issued capital stock or
any securities convertible into shares of such stock, make any grant or award
under any FSSB Stock Benefit Plan, or split, combine or reclassify any shares of
capital stock, or declare, set aside or pay any dividend or other distribution
in respect of capital stock other than dividends issued consistent with the past
practice of FSSB, or redeem or otherwise acquire any shares of capital stock;
(iii) enter into, amend in any material respect or terminate any
material contract or agreement (including without limitation any settlement
agreement with respect to litigation) except in the ordinary course of business;
(iv) make application for the opening or closing of any, or open
or close any, branch or automated banking facility, except as required by any
Bank Regulator;
(v) except as agreed to or incurred prior to the date of this
Merger Agreement, grant or agree to pay any bonus, severance or termination to,
or enter into, renew or amend any employment agreement, severance agreement
and/or supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or employees
except that FSSB may (A) authorize compensation increases including bonuses to
officers in the ordinary course of business not to exceed $10,000 in the
aggregate, after the execution of this Agreement through December 31, 2005, and
(B) hire at-will, non-officer employees to fill vacancies that may from time to
time arise in the ordinary course of business;
(vi) enter into or, except as may be required by law, materially
modify any pension, retirement, stock option, stock purchase, stock appreciation
right, stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution or defined benefit plan other
than regularly scheduled contributions consistent with past practice, without
the prior consent of IBT;
(vii) merge or consolidate FSSB or any FSSB Subsidiary with any
other corporation; sell or lease all or any substantial portion of the assets or
business of FSSB or any FSSB Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other Person other than in
connection with foreclosures, settlements in lieu of foreclosure, troubled loan
or debt restructuring, or the collection of any loan or credit arrangement
between FSSB, or any FSSB Subsidiary, and any other Person; enter into a
purchase and assumption transaction with respect to deposits and liabilities;
permit the revocation or surrender by any FSSB Subsidiary of its certificate of
authority to maintain, or file an application for the relocation of, any
existing branch office, or file an application for a certificate of authority to
establish a new branch office;
(viii) sell or otherwise dispose of the capital stock of FSSB or
sell or otherwise dispose of any asset of FSSB or of any FSSB Subsidiary other
than in the ordinary course
35
of business consistent with past practice; except for transactions with the
FHLB, subject any asset of FSSB or of any FSSB Subsidiary to a lien, pledge,
security interest or other encumbrance (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "federal
funds" and the satisfaction of legal requirements in the exercise of trust
powers) other than in the ordinary course of business consistent with past
practice; incur any indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money), except in the ordinary course of business
consistent with past practice;
(ix) take any action which would result in any of the
representations and warranties of FSSB set forth in this Agreement becoming
untrue as of any date after the date hereof or in any of the conditions set
forth in Article IX hereof not being satisfied, except in each case as may be
required by applicable law;
(x) change any method, practice or principle of accounting,
except as may be required from time to time by GAAP (without regard to any
optional early adoption date) or any Bank Regulator responsible for regulating
FSSB;
(xi) waive, release, grant or transfer any material rights of
value or modify or change in any material respect any existing material
agreement or indebtedness to which FSSB or any FSSB Subsidiary is a party, other
than in the ordinary course of business, consistent with past practice;
(xii) purchase any equity securities, or purchase any security
for its investment portfolio inconsistent with FSSB's or any FSSB Subsidiary's
current investment policy;
(xiii) except for commitments issued prior to the date of this
Agreement which have not yet expired and which have been disclosed on the FSSB
Disclosure Schedule 6.1(b)(xiii), and the renewal of existing lines of credit,
make any new loan or other credit facility commitment (including without
limitation, lines of credit and letters of credit) in an amount in excess of
$500,000 for a commercial real estate loan, $250,000 for a construction loan,
$250,000 for a commercial business loan, or in excess of $500,000 for a
residential loan, except that if IBT does not object within 24 hours after
confirmation of receipt of notification from FSSB of an intent to originate a
loan in excess of the amounts set forth in this paragraph, consent shall be
deemed to have been given by IBT. Notwithstanding Section 12.4, notice under
this Section 6.1(b)(xiii) may also be provided by facsimile or electronic mail;
(xiv) except as set forth on the FSSB Disclosure Schedule
6.1(b)(xiv), enter into, renew, extend or modify any other transaction (other
than a deposit transaction) with any Affiliate other than pursuant to FSSB's
existing insider loan policy;
(xv) enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other agreement or
take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest except in the ordinary course of business consistent with past
practice;
36
(xvi) except for the execution of this Agreement, and actions
taken or which will be taken in accordance with this Agreement and performance
thereunder, take any action that would give rise to a right of payment to any
individual under any employment agreement;
(xvii) make any change in policies in existence on the date of
this Agreement with regard to: the extension of credit, or the establishment of
reserves with respect to the possible loss thereon or the charge off of losses
incurred thereon; investments; asset/liability management; or other material
banking policies in any material respect except as may be required by changes in
applicable law or regulations, by a Bank Regulator, or in the discretion of the
FSSB board of directors, consistent with prudent banking practice, in which case
FSSB shall give prior notice to IBT;
(xviii) except for the execution of this Agreement, and the
transactions contemplated herein, take any action that would give rise to an
acceleration of the right to payment to any individual under any FSSB
Compensation and Benefit Plan;
(xix) except as set forth in FSSB Disclosure Schedule
6.1(b)(xix), make any capital expenditures in excess of $25,000 individually and
in the aggregate, other than pursuant to binding commitments existing on the
date hereof and other than expenditures necessary to maintain existing assets in
good repair;
(xx) except as set forth in FSSB Disclosure Schedule 6.1(b)(xx),
purchase or otherwise acquire, or sell or otherwise dispose of, any assets or
incur any liabilities other than in the ordinary course of business consistent
with past practices and policies and other than the sale or disposal or worn,
surplus or replaced equipment;
(xxi) sell any participation interest in any loan (other than
sales of loans secured by one- to four-family real estate that are consistent
with past practice) unless IBT has been given prior written notice of any loan
participation being sold;
(xxii) undertake or enter into any lease, contract or other
commitment for its account, other than in the normal course of banking business;
(xxiii) pay, discharge, settle or compromise any claim, action,
litigation, arbitration or proceeding in an amount exceeding $10,000; or
(xxiv) agree to do any of the foregoing..
6.2. Current Information.
(a) Subject to Section 12.1 hereof, during the period from the date of
this Agreement to the Effective Time, FSSB will cause one or more of its
representatives to confer with representatives of IBT and report the general
status of its ongoing operations at such times as IBT may reasonably request.
FSSB will promptly notify IBT of any material change in the normal course of its
business or in the operation of its properties and, to the extent permitted by
applicable law, of any governmental complaints, investigations or hearings (or
communications
37
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving FSSB or any FSSB Subsidiary.
(b) Subject to Section 12.1 hereof, FSSB shall provide IBT, within
thirty (30) days after the end of each month, a written list of (i)
nonperforming assets (the term "nonperforming assets" for purposes of this
subsection, means loans that are "troubled debt restructuring" as defined in
Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructuring,"), (ii) loans on nonaccrual, (iii)
real estate owned, (iv) all loans ninety (90) days or more past due as of the
end of such month, and (v) impaired loans. On a monthly basis, FSSB shall
provide IBT with a schedule of all loan approvals, which schedule shall indicate
the loan amount, loan type and other material features of the loan.
(c) FSSB shall promptly inform IBT upon receiving notice of any legal,
administrative, arbitration or other proceedings, demands, notices, audits or
investigations (by any federal, state or local commission, agency or board)
relating to the alleged liability of FSSB or any FSSB Subsidiary under any labor
or employment law.
6.3. Access to Properties and Records. Subject to Section 12.1 hereof, FSSB
shall permit IBT access upon reasonable notice to its properties and those of
the FSSB Subsidiaries, and shall disclose and make available to IBT to the
extent permitted by applicable law during normal business hours all of its
books, papers and records relating to the assets, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' (other
than minutes that discuss any of the transactions contemplated by this Agreement
or any other subject matter FSSB reasonably determines should be treated as
confidential or privileged) and shareholders' meetings, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, litigation files (to the extent not resulting in waiver of
attorney-client privilege), plans affecting employees, and any other business
activities or prospects in which IBT may have a reasonable interest. FSSB shall
provide and shall request its auditors to provide IBT with such historical
financial information regarding it (and related audit reports and consents) as
IBT may request for securities disclosure purposes. FSSB and each FSSB
Subsidiary shall permit, upon reasonable notice, IBT at its own expense to cause
a "phase I environmental audit" and a "phase II environmental audit" to be
performed at any physical location owned or occupied by FSSB or any FSSB
Subsidiary. IBT shall indemnify and hold harmless FSSB for any claim, suit,
liability, cost, expense or damages whatsoever arising out of or related to such
environmental audits or any other inspection or due diligence activity conducted
on FSSB's premises.
6.4. Financial and Other Statements.
(a) Promptly upon receipt thereof, FSSB will furnish to IBT copies of
each annual, interim or special audit of the books of FSSB and the FSSB
Subsidiaries made by its independent accountants and copies of all internal
control reports submitted to FSSB by such
38
accountants in connection with each annual, interim or special audit of the
books of FSSB and the FSSB Subsidiaries made by such accountants.
(b) Promptly after FSSB's board meeting but no later than thirty (30)
days after the end of each month, FSSB will deliver to IBT a consolidated
balance sheet and a consolidated statement of operations, without related notes,
for such month prepared in accordance with current financial reporting
practices.
(c) FSSB will advise IBT promptly of the receipt of any examination
report of any Bank Regulator with respect to the condition or activities of FSSB
or any of the FSSB Subsidiaries.
(d) With reasonable promptness, FSSB will furnish to IBT such
additional financial data that FSSB possesses and as IBT may reasonably request,
including without limitation, detailed monthly financial statements and loan
reports.
6.5. Maintenance of Insurance. FSSB shall maintain and cause the FSSB
Subsidiaries to maintain, insurance in such amounts as are reasonable to cover
such risks as are customary in relation to the character and location of its
properties and the nature of its business.
6.6. Disclosure Supplements. From time to time prior to the Effective Time,
FSSB will promptly supplement or amend the FSSB Disclosure Schedule delivered in
connection herewith with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such FSSB Disclosure Schedule or which
is necessary to correct any information in such FSSB Disclosure Schedule which
has been rendered materially inaccurate thereby.
6.7. Consents and Approvals of Third Parties. FSSB shall use all
commercially reasonable efforts, and shall cause each FSSB Subsidiary to use all
commercially reasonable efforts to obtain as soon as practicable all consents
and approvals of any other Persons necessary or desirable for the consummation
of the transactions contemplated by this Agreement.
6.8. All Reasonable Efforts. Subject to the terms and conditions herein
provided, FSSB agrees to use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
except to the extent that such action, in the good faith determination of the
board of directors of FSSB after consultation with legal counsel, may result in
a breach of fiduciary duty by the FSSB board of directors.
6.9. Failure to Fulfill Conditions. In the event that FSSB determines that
a condition to its obligation to complete the Merger cannot be fulfilled and
that it will not waive that condition, it will promptly notify IBT.
6.10. No Solicitation. From and after the date hereof until the termination
of this Agreement, neither FSSB, nor any FSSB Subsidiary, nor any of their
respective officers,
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directors, employees, representatives, agents and affiliates (including, without
limitation, any investment banker, attorney or accountant retained by FSSB or
any of the FSSB Subsidiaries), will, directly or indirectly, initiate, solicit
or knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any Person
in furtherance of such inquiries or to obtain an Acquisition Proposal or agree
to or endorse any Acquisition Proposal, or authorize or permit any of its
officers, directors, or employees or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative retained
by any of its Subsidiaries to take any such action, and FSSB shall notify IBT
orally (within one business day) and in writing (as promptly as practicable) of
all of the relevant details relating to all inquiries and proposals which it or
any of its Subsidiaries or any such officer, director or employee, or, to FSSB's
Knowledge, investment banker, financial advisor, attorney, accountant or other
representative of FSSB may receive relating to any of such matters, provided,
however, that nothing contained in this Section 6.10 shall prohibit the Board of
Directors of FSSB from (i) complying with its disclosure obligations under
federal or state law; or (ii) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal, if, and only to the extent that, (A) the Board of
Directors of FSSB determines in good faith (after consultation with its
financial and legal advisors), taking into account all legal, financial and
regulatory aspects of the proposal and the Person making the proposal, that such
proposal, if consummated, is reasonably likely to result in a transaction more
favorable to FSSB's shareholders from a financial point of view than the Merger;
(B) the Board of Directors of FSSB determines in good faith (after consultation
with its financial and legal advisors) that the failure to furnish information
to or enter into discussions with such Person would likely cause the Board of
Directors to breach its fiduciary duties to shareholders under applicable law
(such proposal that satisfies clause (A) and (B) being referred to herein as a
"Superior Proposal"); and (C) FSSB promptly notifies IBT of such inquiries,
proposals or offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with FSSB
or any of its representatives indicating, in connection with such notice, the
name of such Person and the material terms and conditions of any inquiries,
proposals or offers, and receives from such Person an executed confidentiality
agreement in form and substance identical in all material respects to the
confidentiality agreements that FSSB and IBT entered into. For purposes of this
Agreement, "Acquisition Proposal" shall mean any proposal or offer as to any of
the following (other than the transactions contemplated hereunder) involving
FSSB or any of its Subsidiaries: (i) any merger, consolidation, share exchange,
business combination, or other similar transactions; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 25% or more of the
assets of FSSB and the FSSB Subsidiaries, taken as a whole, in a single
transaction or series of transactions; (iii) any sale or tender offer or
exchange offer for 25% or more of the outstanding shares of capital stock of
FSSB or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
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6.11. Xxxxxxxx-Xxxxx Certification of Financial Statements. The Chief
Executive Officer and the Chief Financial Officer of FSSB shall certify the FSSB
Financial Statements to IBT in the form attached as Exhibit A.
6.12. FSSB Audit for 2005. FSSB's external audit for the year ending
December 31, 2005 shall be conducted by an auditor that is independent from FSSB
in accordance with Section 201 of the Xxxxxxxx-Xxxxx Act of 2002 and the
regulations promulgated thereunder.
ARTICLE VII - COVENANTS OF IBT
7.1. Conduct of Business. During the period from the date of this Agreement
to the Effective Time, except with the written consent of FSSB, which consent
will not be unreasonably withheld, conditioned or delayed, IBT will, and it will
cause each IBT Subsidiary to: conduct its business only in the usual, regular
and ordinary course consistent with past practices; use reasonable efforts to
preserve intact its business organization and assets and maintain its rights and
franchises; and voluntarily take no action that would: (i) adversely affect the
ability of the parties to obtain the Regulatory Approvals or materially increase
the period of time necessary to obtain such approvals; (ii) adversely affect its
ability to perform its covenants and agreements under this Agreement; (iii)
result in the representations and warranties contained in Article V of this
Agreement not being true and correct on the date of this Agreement or at any
future date on or prior to the Closing Date or in any of the conditions set
forth in Article IX hereof not being satisfied; (iv) change or waive any
provision of its Articles of Incorporation, except as required by law; or (v)
change any method, practice or principle of accounting, except as may be
required from time to time by GAAP (without regard to any optional early
adoption date) or any Bank Regulator responsible for regulating IBT, Xxxxxxxx
Bank and Trust or Farmers State Bank of Breckenridge. Additionally, IBT will not
declare an extraordinary dividend or distribution on shares of IBT Common Stock.
7.2. Disclosure Supplements. From time to time prior to the Effective Time,
IBT will promptly supplement or amend the IBT Disclosure Schedule delivered in
connection herewith with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such IBT Disclosure Schedule or which
is necessary to correct any information in such IBT Disclosure Schedule which
has been rendered inaccurate thereby.
7.3. Consents and Approvals of Third Parties. IBT shall use all
commercially reasonable efforts to obtain as soon as practicable all consents
and approvals of any other Persons necessary or desirable for the consummation
of the transactions contemplated by this Agreement.
7.4. All Reasonable Efforts. Subject to the terms and conditions herein
provided, IBT agrees to use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
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7.5. Failure to Fulfill Conditions. In the event that IBT determines that a
condition to its obligation to complete the Merger cannot be fulfilled and that
it will not waive that condition, it will notify FSSB.
7.6. Employee Benefits. IBT shall cause the employee pension benefit plans
of IBT (as defined under ERISA) to be adopted by FSSB for its employees on
January 1, 2008 or as required by ERISA. All FSSB employees who become
participants in an IBT employee pension benefit plan covered under ERISA shall,
for purposes of determining eligibility for and for any applicable vesting
periods of such employee benefits only (and not for benefit accrual purposes) be
given credit for meeting eligibility and vesting requirements in such plans for
service as an employee of FSSB or any predecessor thereto prior to the Effective
Time. This Agreement shall not be construed to limit the ability of IBT to
terminate the employment of any employee or to review employee pension benefits
programs from time to time and to make such changes as it may deem appropriate.
IBT shall, from and after the Effective Time, continue in effect any material
welfare benefit plan, life insurance, group health plan or disability plan in
which the employees of FSSB participated immediately prior to the Effective Time
(or an arrangement providing substantially similar benefits). IBT shall not take
any action which would adversely affect the employees of FSSB participation in
or materially reduce any benefits under any such plan or arrangement. Nothing
contained in this subsection shall limit IBT's right to amend or terminate any
plan or arrangement to conform such plan or arrangement to statutory or
regulatory requirements applicable to such plan or arrangement.
7.7. Access to Properties and Records. Subject to Section 12.1 hereof, IBT
shall permit FSSB access upon reasonable notice to its properties, and shall
disclose and make available to IBT to the extent permitted by applicable law
during normal business hours all of its books, papers and records relating to
the assets, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of directors' (other than minutes that discuss any of the
transactions contemplated by this Agreement or any other subject matter IBT
reasonably determines should be treated as confidential or privileged) and
shareholders' meetings, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, litigation files (to the
extent not resulting in waiver of attorney-client privilege), plans affecting
employees, and any other business activities or prospects in which FSSB may have
a reasonable interest. IBT shall provide and shall request its auditors to
provide FSSB with such historical financial information regarding it (and
related audit reports and consents) as FSSB may request.
7.8. Financial and Other Statements.
(a) Promptly upon receipt thereof, IBT will furnish to FSSB copies of
each annual, interim or special audit of the books of IBT made by its
independent accountants and copies of all internal control reports submitted to
IBT by such accountants in connection with each annual, interim or special audit
of the books of IBT made by such accountants.
(b) Promptly after IBT's board meeting but no later than thirty (30)
days after the end of each month, IBT will deliver to FSSB a consolidated
balance sheet and a consolidated
42
statement of operations, without related notes, for such month prepared in
accordance with current financial reporting practices.
(c) IBT will advise FSSB promptly of the receipt of any examination
report of any Bank Regulator with respect to the condition or activities of IBT
or any IBT Subsidiaries.
(d) With reasonable promptness, IBT will furnish to FSSB such
additional financial data that IBT possesses and as FSSB may reasonably request,
including without limitation, detailed monthly financial statements and loan
reports.
7.9. Directors and Officers Indemnification; Insurance.
(a) From and after the Effective Time through the fifth anniversary of
the Effective Time, IBT and the IBT Subsidiaries (collectively the "Indemnifying
Party") shall indemnify and hold harmless each present and former director,
officer and employee of FSSB, determined as of the Effective Time (the
"Indemnified Parties") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, arising in whole
or in part out of or pertaining to the fact that he or she was a director,
officer, employee, fiduciary or agent of FSSB or any FSSB Subsidiary or is or
was serving at the request of FSSB or any FSSB Subsidiary as a director,
officer, employee, fiduciary or agent of another corporation, partnership, joint
venture, trust or other enterprise, including without limitation matters related
to the negotiation, execution and performance of this Agreement or the
consummation of the Merger, to the fullest extent which indemnification is
permitted under the applicable provisions of the Michigan Banking Code, MCL
487.13904 through 487.13907, as in effect on the date hereof or in the event any
subsequent amendment thereto expands the permissible scope of indemnification,
then as amended.
(b) Any Indemnified Party wishing to claim indemnification under this
Section 7.9 hereof, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not actually prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefore are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction), (ii)
the
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Indemnified Parties will cooperate in the defense of any such matter, (iii) the
Indemnifying Party shall not be liable for any settlement effected without its
prior written consent, and (iv) the Indemnifying Party shall have no obligation
hereunder in the event that a federal or state banking agency or a court of
competent jurisdiction shall determine that indemnification of an Indemnified
Party in the manner contemplated hereby is prohibited by applicable laws and
regulations.
(c) Prior to the Effective Time, IBT shall cause the persons serving
as directors and officers of FSSB and any FSSB Subsidiaries immediately prior to
the Effective Time to be covered by the directors' and officers' liability
insurance policy maintained by FSSB for a period of five years after the
Effective Time (provided that IBT may substitute therefore policies of at least
the same coverage and amounts containing terms and conditions which are not
materially less advantageous than such policy or single premium tail coverage
with policy limits equal to FSSB's existing coverage limits) with respect to
acts or omissions occurring prior to the Effective Time which were committed by
such directors and officers in their capacities as such.
(d) If IBT or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any other entity, then and in each case, proper provisions
shall be made so that the successors and assigns of IBT or the surviving company
shall assume the obligations set forth in this Section 7.9 hereof prior to or
simultaneously with the consummation of such transaction.
ARTICLE VIII - REGULATORY AND OTHER MATTERS
8.1. Meetings of Shareholders. FSSB will (i) as promptly as practicable
after the Merger Registration Statement is declared effective by the SEC, take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its shareholders for the purpose of considering this Agreement and the Merger,
and for such other purposes as may be, in FSSB's reasonable judgment, necessary
or desirable (the "FSSB Shareholders Meeting"), (ii) in connection with the
solicitation of proxies with respect to the FSSB Shareholders Meeting, have its
Board of Directors recommend approval of this Agreement to the FSSB Shareholders
unless the Board of Directors shall have determined that such recommendation
would violate its fiduciary duties under applicable law; and (iii) cooperate and
consult with IBT with respect to each of the foregoing matters.
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8.2. Proxy Statement--Prospectus; Merger Registration Statement.
(a) For the purposes (x) of registering IBT Common Stock to be offered
to holders of FSSB Common Stock in connection with the Merger with the SEC under
the Securities Act and (y) of holding the FSSB Shareholders Meeting, IBT shall
draft and prepare, and FSSB shall cooperate in the preparation of, the Merger
Registration Statement, including a proxy statement and prospectus satisfying
all applicable requirements of applicable state securities and banking laws, and
of the Securities Act and the Exchange Act, and the rules and regulations
thereunder (such proxy statement/prospectus in the form mailed by FSSB to the
FSSB shareholders, together with any and all amendments or supplements thereto,
being herein referred to as the "Proxy Statement-Prospectus"). IBT shall provide
FSSB and its counsel with appropriate opportunity to review and comment on the
Proxy Statement-Prospectus prior to the time it is initially filed with the SEC
or any amendments are filed with the SEC. IBT shall file the Merger Registration
Statement, including the Proxy Statement-Prospectus, with the SEC. Each of IBT
and FSSB shall use their best efforts to have the Merger Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing, and FSSB shall thereafter promptly mail the Proxy
Statement-Prospectus to its shareholders. IBT shall also use its best efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement, and FSSB
shall furnish all information concerning FSSB and the holders of FSSB Common
Stock as may be reasonably requested in connection with any such action.
(b) Each party acknowledges that time is of the essence in connection
with the preparation and filing of the Merger Registration Statement. IBT will
advise FSSB promptly after IBT receives notice of the time when the Merger
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension of the
qualifications of the shares of IBT Common Stock issuable pursuant to the Merger
Registration Statement, or the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Merger Registration Statement, or for additional information, and IBT will
provide FSSB with as many copies of such Merger Registration Statement and all
amendments thereto promptly upon the filing thereof as FSSB may reasonably
request.
(c) FSSB and IBT shall promptly notify the other party if at any time
it becomes aware that the Proxy Statement-Prospectus or the Merger Registration
Statement contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. In such event, FSSB shall cooperate with IBT in the preparation of a
supplement or amendment to such Proxy Statement-Prospectus that corrects such
misstatement or omission, and IBT shall file an amended Merger Registration
Statement with the SEC, and each of FSSB and IBT shall mail an amended Proxy
Statement-Prospectus to FSSB's shareholders.
8.3. Regulatory Approvals. Each of FSSB and IBT will cooperate with the
other and use all reasonable efforts to promptly prepare and, within 30 days
after the date hereof or as soon
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thereafter as practicable, file all necessary documentation to obtain all
necessary permits, consents, waivers, approvals and authorizations of the FRB,
FDIC and the Bureau and any other third parties and governmental bodies
necessary to consummate the transactions contemplated by this Agreement. FSSB
and IBT shall furnish each other and each other's counsel with all information
concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be necessary or advisable in connection with any
application, petition or other statement made by or on behalf of FSSB or IBT to
any Bank Regulator or governmental body in connection with the Merger and the
other transactions contemplated by this Agreement. Each party acknowledges that
time is of the essence in connection with the preparation and filing of the
documentation referred to above. FSSB shall have the right to review in advance
all characterizations of the information relating to FSSB and any of its
Subsidiaries which appear in any filing made in connection with the transactions
contemplated by this Agreement with any governmental body.
8.4. Affiliates. FSSB shall use all reasonable efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of FSSB to deliver to IBT, as soon as
practicable after the date of this Agreement, and at least thirty (30) days
prior to the date of the FSSB Shareholders Meeting, a written agreement, in the
form of Exhibit B hereto, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of IBT Common Stock to be received
by such "affiliate" as a result of the Merger otherwise than in compliance with
the applicable provisions of the Securities Act and the rules and regulations
thereunder.
8.5. Employment Agreement. As of the Closing Date, FSSB shall enter into a
two year employment agreement with its current President in the form attached
hereto as Exhibit C.
8.6. Post-Closing Operations. At and after the Closing Date, IBT and FSSB
agree that:
(a) FSSB shall remain a state-chartered commercial bank.
(b) The names of IBT, FSSB, Farmers State Bank of Breckenridge and
Xxxxxxxx Bank and Trust shall not change as a result of the Merger. In the
future, the Board of Directors of IBT may consider the possibility of a name
change which is less geographically restrictive, or adding the corporate logo on
signage with wording indicating the relationship with IBT.
(c) All banking offices of FSSB will remain open.
(d) There will be no layoffs at FSSB as a result of the Merger.
(e) The deferred compensation plan for directors of FSSB shall be
continued.
(f) The executive supplemental income plan for officers of FSSB shall
be continued.
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ARTICLE IX - CLOSING CONDITIONS
9.1. Conditions to Each Party's Obligations Under This Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions,
none of which may be waived:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite vote of the
shareholders of FSSB.
(b) Injunctions. None of the parties hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction, and
no statute, rule or regulation shall have been enacted, entered, promulgated,
interpreted, applied or enforced by any Governmental Entity or Bank Regulator,
that enjoins or prohibits the consummation of the transactions contemplated by
this Agreement.
(c) Regulatory Approvals. All required Regulatory Approvals shall have
been obtained and shall remain in full force and effect and all waiting periods
relating thereto shall have expired; and no such Regulatory Approval shall
include any condition or requirement, excluding standard conditions that are
normally imposed by the regulatory authorities in bank merger transactions, that
would, in the good faith reasonable judgment of the Board of Directors of IBT,
materially and adversely affect the business, operations, financial condition,
property or assets of the combined enterprise of FSSB and IBT or otherwise
materially impair the value of FSSB to IBT.
(d) Effectiveness of Merger Registration Statement. The Merger
Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Merger Registration Statement
shall have been issued, and no proceedings for that purpose shall have been
initiated or threatened by the SEC and, if the offer and sale of IBT Common
Stock in the Merger is subject to the blue sky laws of any state, shall not be
subject to a stop order of any state securities commissioner.
(e) Fairness Opinion. FSSB and IBT shall have received an opinion from
Austin Associates, LLC, reasonably acceptable to them, dated as of the date of
this Agreement and renewed as of a date approximately the date of the Proxy
Statement-Prospectus to the effect that the terms of the Merger are fair to
FSSB's shareholders and IBT's shareholders from a financial point of view as of
that date and such opinion shall not have been subsequently withdrawn.
(f) Federal Tax Opinion. FSSB and IBT shall have received an opinion
of Foster, Swift, Xxxxxxx & Xxxxx, X.X. counsel to IBT ("IBT's Counsel"), in
form and substance reasonably satisfactory to both FSSB and IBT, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, IBT's Counsel
may
47
require and rely upon representations and covenants, including those contained
in certificates of officers of FSSB, IBT, and others reasonably satisfactory to
such counsel.
(g) No Burdensome Condition. None of the Regulatory Approvals shall
impose any term, condition or restriction upon FSSB, IBT or any of their
respective Subsidiaries that FSSB or IBT, in good faith, reasonably determines
would so materially adversely affect the economic or business benefits of the
transactions contemplated by this Agreement to FSSB or IBT as to render
inadvisable in the reasonable good faith judgment of FSSB or IBT, the
consummation of the Merger.
9.2. Conditions to the Obligations of IBT under this Agreement. The
obligations of IBT under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Sections 9.2(a) through 9.2(e) at or
prior to the Closing Date, which shall be waiveable by IBT:
(a) Representations and Warranties. Each of the representations and
warranties of FSSB set forth in this Agreement shall be true and correct as of
the date of this Agreement and upon the Closing Date with the same effect as
though all such representations and warranties had been made at the Closing Date
(except to the extent such representations and warranties speak as of an earlier
date); and FSSB shall have delivered to IBT a certificate to such effect signed
by the Chief Executive Officer and the Chief Financial Officer of FSSB as of the
Closing.
(b) Agreements and Covenants. FSSB shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and IBT shall have received a certificate signed on behalf
of FSSB by the Chief Executive Officer and Chief Financial Officer of FSSB to
such effect dated as of the Effective Time.
(c) Permits, Authorizations, Etc. FSSB and the FSSB Subsidiaries shall
have obtained any and all material permits, authorizations, consents, waivers,
clearances or approvals required to be obtained by it for the lawful
consummation of the Merger.
(d) Dissenters' Rights. The holders of no more than 10% of the FSSB
Common Stock shall have indicated their intention to seek dissenters' rights of
appraisal.
(e) Legal Opinion. IBT shall have received the opinion of Xxxxxx LLP,
counsel to FSSB, dated the Closing Date, in substantially the form shown on
Exhibit D.
FSSB will furnish IBT with such certificates of its officers or others and
such other documents to evidence fulfillment of the conditions set forth in this
Section 9.2 as IBT may reasonably request.
9.3. Conditions to the Obligations of FSSB under this Agreement. The
obligations of FSSB under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Sections 9.3(a) through 9.3(f) at or
prior to the Closing Date, which shall be waiveable by FSSB:
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(a) Representations and Warranties. Each of the representations and
warranties of IBT set forth in this Agreement shall be true and correct as of
the date of this Agreement and upon the Closing Date with the same effect as
though all such representations and warranties had been made at the Closing Date
(except to the extent such representations and warranties speak as of an earlier
date); and IBT shall have delivered to FSSB a certificate to such effect signed
by the Chief Executive Officer and the Chief Financial Officer of IBT as of the
Closing.
(b) Agreements and Covenants. IBT shall have performed in all material
respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it at or prior to
the Effective Time, and FSSB shall have received a certificate signed on behalf
of IBT by the Chief Executive Officer and Chief Financial Officer of IBT to such
effect dated as of the Effective Time.
(c) Permits, Authorizations, Etc. IBT and its Subsidiaries shall have
obtained any and all material permits, authorizations, consents, waivers,
clearances or approvals required to be obtained by it for the lawful
consummation of the Merger.
(d) Payment of Merger Consideration. IBT shall have delivered the
Exchange Fund to the Exchange Agent on or before the Closing Date.
(e) Legal Opinion. FSSB shall have received the opinion of Foster,
Swift, Xxxxxxx & Xxxxx, X.X., counsel to IBT, dated the Closing Date, in
substantially the form shown on Exhibit E.
(f) Fairness Opinion. FSSB shall have received an opinion from a firm
to be determined by FSSB, reasonably acceptable to it, dated as of the date
approximately the date of the Proxy Statement-Prospectus to the effect that the
terms of the Merger are fair to FSSB's shareholders from a financial point of
view as of that date and such opinion shall not have been subsequently
withdrawn.
IBT will furnish FSSB with such certificates of its officers or others and such
other documents to evidence fulfillment of the conditions set forth in this
Section 9.3 as FSSB may reasonably request.
ARTICLE X - THE CLOSING
10.1. Time and Place. Subject to the provisions of Articles IX and XI
hereof, the Closing of the transactions contemplated hereby shall take place at
the offices of IBT, 000 Xxxx Xxxxxxxx, Xx. Xxxxxxxx, Xxxxxxxx, at 10 a.m., or at
such other place or time upon which IBT and FSSB mutually agree.
10.2. Deliveries at the Closing. At Closing there shall be delivered
to IBT and FSSB the certificates and other documents and instruments required to
be delivered at the Closing under Article IX hereof. At or prior to the Closing,
IBT shall deliver the Merger Consideration as set forth under Section 9.3(d)
hereof.
49
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER
11.1. Termination. This Agreement may be terminated at any time prior to
the Closing Date, whether before or after approval of the Merger by the
shareholders of FSSB:
(a) At any time by the mutual written agreement of IBT and FSSB;
(b) By either party (provided, that the terminating party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the part of the
other party, which breach by its nature cannot be cured prior to the Termination
Date or shall not have been cured within 30 days after written notice of such
breach by the terminating party to the other party;
(c) By either party (provided, that the terminating party is not then
in material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material failure to perform or
comply with any of the covenants or agreements set forth in this Agreement on
the part of the other party, which failure by its nature cannot be cured prior
to the Termination Date or shall not have been cured within 30 days after
written notice of such failure by the terminating party to the other party;
(d) At the election of either party, if the Closing shall not have
occurred by the Termination Date, or such later date as shall have been agreed
to in writing by IBT and FSSB; provided, that no party may terminate this
Agreement pursuant to this Section 11.1(d) if the failure of the Closing to have
occurred on or before said date was due to such party's material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement;
(e) By either party, if the shareholders of FSSB shall have voted at
the FSSB Shareholders Meeting on the transactions contemplated by this Agreement
and such vote shall not have been sufficient to approve such transactions;
(f) By either party if (i) final action has been taken by a Bank
Regulator whose approval is required in connection with this Agreement and the
transactions contemplated hereby, which final action (x) has become unappealable
and (y) does not approve this Agreement or the transactions contemplated hereby,
(ii) any Bank Regulator whose approval or non-objection is required in
connection with this Agreement and the transactions contemplated hereby has
stated in writing that it will not issue the required approval or nonobjection,
or (iii) any court of competent jurisdiction or other governmental authority
shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and unappealable;
(g) By the Board of Directors of either party (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) in the event that any of
the conditions precedent to the obligations of such
50
party to consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 11.1(d) of this Agreement;
(h) By the Board of Directors of IBT if FSSB has received a Superior
Proposal and the Board of Directors of FSSB has entered into an acquisition
agreement with respect to the Superior Proposal, terminated this Agreement,
withdrawn its recommendation of this Agreement, has failed to make such
recommendation or has modified or qualified its recommendation in a manner
adverse to IBT;
(i) By the Board of Directors of FSSB if FSSB has received a Superior
Proposal and the Board of Directors of FSSB has made a determination to accept
such Superior Proposal; provided that FSSB shall not terminate this Agreement
pursuant to this Section 11.1(i) and enter into a definitive agreement with
respect to the Superior Proposal until the expiration of five (5) business days
following IBT's receipt of written notice advising IBT that FSSB has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal (and including a copy thereof with all accompanying documentation, if
in writing) identifying the person making the Superior Proposal and stating
whether FSSB intends to enter into a definitive agreement with respect to the
Superior Proposal. After providing such notice, FSSB shall provide a reasonable
opportunity to IBT during the five business-day period to make such adjustments
in the terms and conditions of this Agreement as would enable FSSB to proceed
with the Merger on such adjusted terms.
11.2. Effect of Termination.
(a) In the event of termination of this Agreement pursuant to any
provision of Section 11.1, this Agreement shall forthwith become void and have
no further force, except that (i) the provisions of Sections 11.2, 12.1, 12.2,
12.6, 12.9, 12.10, and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect.
(b) If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:
(i) Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
(ii) In the event of a termination of this Agreement because of a
willful breach of any representation, warranty, covenant or agreement contained
in this Agreement, the breaching party shall remain liable for any and all
damages, costs and expenses, including all reasonable attorneys' fees, sustained
or incurred by the non-breaching party as a result thereof or in connection
therewith or with respect to the enforcement of its rights hereunder.
11.3. Amendment, Extension and Waiver. Subject to applicable law, at any
time prior to the Effective Time (whether before or after approval thereof by
the shareholders of FSSB), the parties hereto by action of their respective
Boards of Directors, may (a) amend this Agreement,
51
(b) extend the time for the performance of any of the obligations or other acts
of any other party hereto, (c) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (d)
waive compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of this Agreement and the
transactions contemplated hereby by the shareholders of FSSB, there may not be,
without further approval of such shareholders, any amendment of this Agreement
which reduces the amount or value, or changes the form of, the Merger
Consideration to be delivered to FSSB's shareholders pursuant to this Agreement.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Any termination of this Agreement pursuant to
Article XI may only be effected upon a vote of a majority of the entire Board of
Directors of the terminating party.
ARTICLE XII - MISCELLANEOUS
12.1. Confidentiality. Except as provided below, IBT and FSSB each agree:
(a) Treatment; Restricted Access. All information furnished to
the other party pursuant to this Agreement shall be treated as strictly
confidential and shall not be disclosed to any other person, natural or
corporate, except for its employees, attorneys, accountants, regulators, and
financial advisers who are reasonably believed to have a need for such
information in connection with the Merger.
(b) No Other Use. No party shall make any use, other than related
to the Merger, of any information it may come to know as a direct result of a
disclosure by the other party, its subsidiaries, directors, officers, employees,
attorneys, accountants, or advisers or that may come into its possession from
any other confidential source during the course of its investigation.
(c) Excepted Information. The provisions of this section shall
not preclude the parties or their respective subsidiaries, from using or
disclosing information that is readily ascertainable from public information or
trade sources, known by it before the commencement of discussions between the
parties or subsequently developed by it or its subsidiaries independent of any
investigation under this Agreement, received from any other person who is not
affiliated with a party and who is not under any obligation to keep such
information confidential, or reasonably required to be included in any filing or
application required by any governmental or regulatory agency.
(d) Prohibit Xxxxxxx Xxxxxxx. The parties shall each take
reasonable steps to assure that any person who receives nonpublic information
concerning the Merger or the other party will treat the information
confidentially as provided in this section and not directly or indirectly buy or
sell, or advise or encourage other persons to buy or sell, FSSB Common Stock or
IBT Common Stock until such information is properly disclosed to the public.
52
12.2. Public Announcements. FSSB and IBT shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures with respect to this Agreement, and except as may be otherwise
required by law, neither FSSB nor IBT shall issue any news release, or other
public announcement or communication with respect to this Agreement unless such
news release or other public announcement or communication has been mutually
agreed upon by the parties hereto.
12.3. Survival. All representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant hereto shall expire and be
terminated and extinguished at the Effective Time, except for those covenants
and agreements contained herein which by their terms apply in whole or in part
after the Effective Time.
12.4. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered by receipted hand delivery or
mailed by prepaid registered or certified mail (return receipt requested) or by
recognized overnight courier addressed as follows:
If to FSSB, to: Xxxxxx Xxxxxxxxx
The Xxxxxxx State Savings Bank
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, XX 00000
With required copies to: Xxxxxx LLP
Attn: Xxxxx X. Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
If to IBT, to: Xxxxxx X. Xxxxxx
Chief Executive Officer and President
000 Xxxx Xxxxxxxx
Xx. Xxxxxxxx, XX 00000
With required copies to: Foster, Swift, Xxxxxxx & Xxxxx, X.X.
c/o Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned
53
by any party hereto without the prior written consent of the other party, and
that (except as provided in Article III of this Agreement) nothing in this
Agreement is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement.
12.6. Complete Agreement. This Agreement, including the Exhibits and
Disclosure Schedules hereto and the documents and other writings referred to
herein or therein or delivered pursuant hereto, and the Confidentiality
Agreements referred to in Section 12.1, contains the entire agreement and
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings
between the parties other than those expressly set forth herein or therein. This
Agreement supersedes all prior agreements and understandings (other than the
Confidentiality Agreements referred to in Section 12.1 hereof) between the
parties, both written and oral, with respect to its subject matter.
12.7. Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
12.8. Severability. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, by any court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement and the
parties shall use their reasonable efforts to substitute a valid, legal and
enforceable provision which, insofar as practical, implements the purposes and
intents of this Agreement.
12.9. Governing Law. This Agreement shall be governed by the laws of
Michigan, without giving effect to its principles of conflicts of laws.
12.10. Interpretation. When a reference is made in this Agreement to
sections or exhibits, such reference shall be to a section of or exhibit to this
Agreement unless otherwise indicated. The recitals hereto constitute an integral
part of this Agreement. References to sections include subsections, which are
part of the related section. The table of contents, index and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The phrases "the date
of this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to the date set forth in
the Recitals to this Agreement.
12.11. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
54
IN WITNESS WHEREOF, IBT and FSSB have caused this Agreement to be executed
by their duly authorized officers as of the date first set forth above.
IBT Bancorp, Inc.
Dated: December 22, 2005 By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer and
President
The Xxxxxxx State Savings Bank
Dated: December 22, 2005 By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman of the Board
55
EXHIBIT A
FSSB Certification of Financial Information
56
EXHIBIT A
Xxxxxx X. Xxxxxxxxx, President and Chief Executive Officer of The Xxxxxxx State
Savings Bank and Xxxx X. Xxxxxxx, Senior Vice President and Cashier of The
Xxxxxxx State Savings Bank, certify that to the best of their knowledge the
information contained in the FSSB Financial Statements (as defined in the
Agreement and Plan of Merger dated as of August _____, 2005, by and between IBT
Bancorp, Inc. and The Xxxxxxx State Savings Bank) fairly present, in all
material respects, the financial condition and results of operations of The
Xxxxxxx State Savings Bank.
Date:
----------------------------------------
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
----------------------------------------
Xxxx X. Xxxxxxx
Senior Vice President and Cashier
57
EXHIBIT B
Affiliate Letter
58
EXHIBIT B
IBT Bancorp, Inc.
000 X. Xxxxxxxx
Xx. Xxxxxxxx XX 00000
Attn: Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act") of The Xxxxxxx
State Savings Bank, a Michigan chartered commercial bank ("FSSB").
Pursuant to an Agreement and Plan of Merger, dated as of _______________, 2005
(the "Merger Agreement") between FSSB and IBT Bancorp, Inc., a Michigan
corporation ("IBT"), it is contemplated that FSSB will merge with and into a to
be formed wholly-owned subsidiary of IBT (the "Merger") and as a result, I will
receive in exchange for each share of common stock, _____ par value, of FSSB
("FSSB Common Stock") owned by me immediately prior to the Effective Time of the
Merger (as defined in the Merger Agreement), a number of shares of common stock,
no par value, of IBT ("IBT Common Stock") and cash, as more specifically set
forth in the Merger Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the shares of
IBT Common Stock issued to me pursuant to the Merger (the "Stock") except (a) in
compliance with the applicable provisions of Rule 145, (b) in a transaction that
is otherwise exempt from the registration requirements of the Securities Act, or
(c) in an offering registered under the Securities Act.
I consent to the endorsement of the Stock issued to me pursuant to the Merger
with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 promulgated under the Securities Act of 1933, as amended (the
"Act"), applies, and may be sold or otherwise transferred only in compliance
with the limitations of such Rule 145, or upon receipt by IBT Bancorp, Inc. of
an opinion of counsel reasonably satisfactory to it that some other exemption
from registration under the Act is available, or pursuant to a registration
statement under the Act."
59
IBT's transfer agent shall be given an appropriate stop transfer order and shall
not be required to register any attempted transfer of the shares of the Stock,
unless the transfer has been effected in compliance with the terms of this
letter agreement.
It is understood and agreed that this letter agreement shall terminate and be of
no further force and effect and the restrictive legend set forth above shall be
removed by delivery of substitute certificates without such legend, and the
related stop transfer restrictions shall be lifted forthwith, if (i) any such
shares of Stock shall have been registered under the Securities Act for sale,
transfer or other disposition by me or on my behalf and are sold, transferred or
otherwise disposed of, or (ii) any such shares of Stock are sold in accordance
with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144 promulgated
under the Securities Act, or (iii) I am not at the time of such disposition an
affiliate of IBT and have been the beneficial owner of the Stock for at least
one year (or such other period as may be prescribed thereunder) and IBT has
filed with the Commission all of the reports it is required to file under the
Securities Exchange Act of 1934, as amended, during the preceding twelve months,
or (iv) I am not and have not been for at least three months an affiliate of IBT
and have been the beneficial owner of the Stock for at least two years (or such
other period as may be prescribed by the Securities Act, and the rules and
regulations promulgated thereunder), or (v) IBT shall have received an opinion
of counsel acceptable to IBT to the effect that the stock transfer restrictions
and the legend are not required.
I have carefully read this letter agreement and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability to
offer to sell, transfer or otherwise dispose of shares of Stock to the extent I
felt necessary, with my counsel or counsel for FSSB.
Sincerely,
-------------------------------------
60
EXHIBIT C
Employment Agreement
61
EXHIBIT C
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of ___________,
2005 by and between ____________________________ ("Executive") and The Xxxxxxx
State Savings Bank ("Bank").
WHEREAS, Executive is currently employed by Bank as President; and
WHEREAS, Bank and IBT Bancorp, Inc. ("IBT") have signed an Agreement and
Plan of Merger dated ___________, 2005 whereby Bank will be merged with a to be
formed wholly owned subsidiary of IBT (the "Acquisition") and thereby the Bank
will become a wholly owned subsidiary of IBT; and
WHEREAS, Executive has substantial knowledge and skill regarding the
marketing, products, customers and goodwill of Bank as a result of his service
as President; and
WHEREAS, Executive and Bank desire to enter into an agreement defining the
terms and conditions of Executive's employment following the Acquisition.
NOW, THEREFORE, Executive and Bank agree as follows:
1. Effective Date and Term. The Effective Date of this Agreement shall be
the day immediately following the closing date of the Acquisition. The Term of
this Agreement shall be the period beginning the Effective Date and ending on
the second anniversary of the Effective Date.
2. Services and Compensation.
(a) Services. Executive agrees that upon the Effective Date he shall
continue his employment as an employee and officer of Bank in the position of
President. During the Term of this Agreement, Executive shall have the normal
duties, responsibilities and authority of a Bank President. Executive further
agrees that he shall use his skills and experiences in the best interests of
Bank in providing services.
(b) Compensation.
(i) Salary. In exchange for these services, Bank shall pay to
Executive an annual salary of _____________________ ($__________), minus taxes
and withholding. These payments shall be made at regular payroll periods until
this Agreement is terminated.
62
(ii) Increases. Executive's salary shall be reviewed annually and
salary increases shall be effective as of the anniversary date of the Effective
Date of this Agreement, unless made earlier or more frequently.
(iii) Benefits. Executive shall receive all insurance (health,
life, long-term and short-term disability coverages, etc.) which are provided to
all employees who are officers of the Bank. Executive shall also be provided
with an automobile for his full-time use, including expenses related to the
upkeep of the automobile. The Bank shall provide weeks of paid vacation for each
twelve month period of the Agreement. All other leave time, such as sick time,
bereavement leave, personal leave and so forth, shall be provided under the
general policies of the Bank applicable to officers.
(iv) Termination. In the event that Executive's employment is
terminated pursuant to paragraph 4(a)(ii)(B) or (C), Executive agrees that he
shall not be eligible for any unpaid payments described in this paragraph but
specifically agrees that the terms of the Non-Compete described in paragraph 3
shall be applicable.
(c) Director's Services and Compensation. Executive may serve as a
director of Bank if elected by the shareholder of the Bank, and may be
compensated for such service as other directors are compensated for similar
service.
3. Restrictive Covenants.
(a) Non-Compete. In consideration for this Agreement, and to protect
the business and goodwill purchased by IBT, Executive agrees that for a period
of two years after this Agreement is terminated ("Restrictive Covenant Period")
even if this Agreement is terminated pursuant to paragraph 4(a)(ii)(B) or (C)
prior to the second anniversary of the Effective Date, he will NOT (other than
on behalf of the Bank or IBT), directly or indirectly own, manage, operate,
join, or control, or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, or consultant with
or otherwise carry on any business similar to that carried on by the Bank, its
affiliates or IBT within the following counties in the State of Michigan:
Gratiot, Clinton, Ionia, Xxxxxxxx, Xxxxxxxx, Midland, Bay, Saginaw, Mecosta,
Osceola, Clare, Gladwin, Shiawassee, Missaukee, Roscommon, and Wexford.
(b) Non-Solicitation of Employees. During the Restrictive Covenant
Period, Executive will not (other than on behalf of the Bank) directly or
indirectly, offer employment to or employ any person for an entity other than
the Bank or IBT, who is or was employed by the Bank or IBT at any time during
the Restrictive Covenant Period. Nothing in this Agreement, however, will
prevent Executive from providing to a third party an oral or written
recommendation for or an evaluation of an employee of the Bank or IBT following
the termination of that employee's employment with the Bank or IBT.
63
(c) Non-Disclosure of Confidential Information. Executive
acknowledges, by reason of his past and future services to the Bank and IBT, he
has had and he will have access to certain confidential information of the Bank
and IBT regarding customer, potential customers, trade secrets, business
operations and plans, business strategies, financial data, costs, prices and
other business marketing information. Executive agrees that during his
employment with the Bank and during the Restrictive Covenant Period, he will not
disclose at any time any such confidential information to any third party,
except to the extent required by his duties to the Bank or IBT or as may be
required by law.
(d) Relief. Executive agrees that if he violates any of the provisions
set forth above in 3.(a), (b) or (c), the Bank or IBT may seek injunctive
relief. Executive further agrees that the Bank and/or IBT would be entitled to
preliminary and permanent injunctive relief if he would violate any of the
restrictive covenants set forth above in 3.(a), (b) or (c) and the Bank's and
IBT's rights would be in addition to any other rights or remedies to which they
may be entitled. Executive further agrees that in the event of any such
violation of the restrictive covenants set forth above, the Bank and/or IBT
would be entitled to commence an action for preliminary and permanent injunctive
relief and other equitable relief in any court of competent jurisdiction.
4. Termination.
(a) This Agreement shall terminate on the earlier of:
(i) The second anniversary of the Effective Date;
(ii) Prior to the end of the Term set forth above, upon:
(A) Executive's death, or disability which causes Executive
to be unable to discharge the essential functions of
his job for a period of more than 180 consecutive
calendar days; or
(B) Receipt by Executive of notice of termination from Bank
arising from gross negligence by Executive, or the
commissions of a fraudulent act or a significant and
substantial dishonest act by Executive which is
job-related, or upon Executive's significant and
substantial violation of written policies or procedures
of Bank or IBT; or
(C) Executive's voluntary resignation.
(b) Payment. Executive shall be paid all amounts and provided all
benefits described in paragraphs 2. (b) and (c), above, unless his employment is
terminated pursuant to paragraph 4(a)(ii)(B) or (C).
64
(c) Business Records. Executive acknowledges and agrees that all
files, records, lists, books, products, customer leads, and other materials,
whether owned at the time of employment or developed during the course of
employment, used in connection with the conduct of the business of Bank, or IBT
("Business"), shall at all times remain the property of Bank or IBT. Upon the
termination of this Agreement, Executive shall forthwith return all records,
documents, and other written, printed, photographic, electronic or physical
materials of any type that pertain to the Business, including without limitation
computer print-outs, data, software, lists or documents pertaining to any
current or prospective customer, calculations, proposals, business and financial
information, and all other documents relating to Bank, IBT or the Business, then
in Executive's possession or control, and Executive shall not make or retain any
copies of extracts, including handwritten summations, of any such documents.
5. Confidentiality. The parties thereto agree to keep the terms of this
Agreement confidential; except that Bank and IBT shall disclose the terms herein
only as necessary to perform its duties hereunder or as required by law.
Executive shall not disclose any terms herein except to his tax and legal
advisors or as required by law.
6. Waiver. No waiver of any term, condition or provision shall be effective
for any purpose whatsoever unless such waiver is in writing and signed by the
parties.
7. Governing Law and Enforceability. This Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan. In the event
that a court of competent jurisdiction shall determine that any provision set
forth herein is void, invalid, or unenforceable, such void, invalid, or
unenforceable provision shall be deemed to be severable from and shall be
severed from this Agreement, and this Agreement shall be construed and enforced
as if such severed provision has never been a part hereof; except that in the
event the court determines the duration or geographic scope of the Non-Compete
agreement is overly-broad, such provision shall be reformed by the court in such
a way as to be enforceable, and the Non-Compete shall not be severed from this
Agreement and shall be enforced as reformed by the Court.
8. Amendment and Assignment. The parties may not modify or amend this
Agreement unless such amendment is in writing and is signed by the parties. This
Agreement is personal in nature as to Executive and may not be assigned by him,
but will be binding on and inure to the benefit of his heirs and personal
representatives. The terms of this Agreement shall be binding upon and shall
inure to the benefit of Bank, IBT, their successors and assigns.
9. Merger. This Agreement constitutes the entire agreement between
Executive and Bank regarding the subject matter hereof and any and all prior
oral or written agreements between Executive and Bank.
65
10. Survival. The remedy provisions of paragraph 3 shall survive the Term
of this Agreement.
11. Notice. Any notice permitted or required under this Agreement shall be
in writing and deemed to be given in the case of: (i) hand delivery or facsimile
transmission, upon receipt;
(ii) overnight delivery service on the business day after timely delivery, of a
properly addressed notice with appropriate fees paid, to a recognized overnight
delivery service that guarantees overnight delivery; and (ii) U.S. mail, upon
the third business day after proper deposit with the U.S. Mail of a properly
addressed notice with appropriate postage paid. Facsimile numbers and addresses
for purposes of notice shall be as stated below, unless changed by written
notice duly provided:
If to Executive:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
If to Bank: IBT Bancorp, Inc.
000 Xxxx Xxxxxxxx
Xx. Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
IN WITNESS WHEREOF, the undersigned have set their hands as of the date
first written above.
Individually THE XXXXXXX STATE SAVINGS BANK
"Bank"
By:
------------------------------------- ------------------------------------
Its:
------------------------------------
IBT BANCORP, INC.
"IBT"
By:
------------------------------------
Its:
------------------------------------
66
EXHIBIT D
FSSB Counsel Opinion
67
EXHIBIT D
_______________, 2005
**Draft**
PERSONAL AND CONFIDENTIAL
Board of Directors
IBT Bancorp, Inc.
000 Xxxx Xxxxxxxx
Xx. Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
We are rendering this opinion to you as counsel for The Xxxxxxx State Savings
Bank ("FSSB"), in connection with the closing today of the merger ("Merger")
whereby FSSB will merge with and into ______________________________ ("Merger
Subsidiary"), a wholly-owned subsidiary of IBT Bancorp, Inc. ("IBT") pursuant to
the Agreement and Plan of Merger, dated _______________, 2005 ("Agreement").
This opinion is rendered pursuant to Section 9.2(e) of the Agreement. All terms
used herein without definition have the meaning specified in the Agreement.
In rendering this opinion, except as otherwise specifically indicated herein, we
have relied, as to factual matters, entirely upon the representations of FSSB in
the Agreement, the Officers' Certificate given pursuant to Section 9.2(a)
thereof and the Officers' Certificate, dated ________, 2005 in support of this
opinion, provided to us by certain officers of FSSB, and have made no
independent review or investigation thereof. In addition, for purposes of this
opinion, we have examined copies of the following documents:
(a) Agreement dated _______________, 2005 and all Exhibits and Schedules
thereto;
(b) The form of FIS 1113 to be filed with the Bureau;
(c) Articles of Incorporation and Bylaws of FSSB, as amended;
(d) The Prospectus declared effective by the Securities and Exchange
Commission ("SEC") on _______________, 2005;
(e) The Registration Statement on Form S-4 (including exhibits) and
Amendment No. 1 thereto filed with the SEC on _______________, 2005 and
_______________, 2005, respectively;
(f) Certificate of the Bureau confirming that FSSB is a duly organized
state bank in good standing with the Bureau; and
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(g) Certificate of the Secretary of FSSB dated _______________, 2005
regarding (i) FSSB's Articles and Bylaws; (ii) the incumbency of the officers of
FSSB; and (iii) all resolutions adopted by the Board of Directors and
shareholders of FSSB in connection with the Merger and the Agreement.
We have not, except as specifically mentioned above made any independent review
or investigation of the organization, existence, good standing, assets, business
or affairs of FSSB or of any other matters. In our examination of the aforesaid
books, records, documents and other materials, we have assumed the genuineness
of all signatures; the authenticity of all documents submitted to us as
originals, the conformity with the original documents of all documents submitted
to us as certified, telecopied, photostatic or reproduced copies. We have
assumed the authenticity and accuracy of certifications (of public officials,
government agencies and departments, corporate officers and individuals) and
statements of fact on which we are relying. We have assumed the due execution,
delivery and performance of the Agreement and all obligations thereunder by IBT.
Whenever the phrase "to our knowledge" appears in this opinion, it means that in
the course of the inquiries and investigations described herein, we became aware
of no facts which indicate that the opinion expressed is incorrect, and that
except as otherwise expressly stated in this letter, we have not examined any
public records (including without limitation, the plaintiff or defendant indices
of state and federal courts), or the books and records of FSSB generally
(including but not limited to instruments, contracts, notes and agreements of
all kinds), whether or not examination or investigation might otherwise be
reasonable or prudent, and that we have not undertaken any independent
investigation to determine the existence or non-existence of any facts.
In rendering this opinion, we advise that our firm only requires lawyers to be
qualified to practice law in the State of Michigan and, in rendering the
following opinions, we express no opinion with respect to any laws other than
Michigan and Federal laws. Moreover, we express no opinion as to Federal or
State choice of law or antitrust law matters.
Based upon the foregoing, and in reliance thereon, it is our opinion, subject to
the assumptions, exceptions, and qualifications and limitations set forth herein
that:
(a) FSSB is a state chartered bank, duly organized and validly existing and
in good standing under the laws of the State of Michigan. FSSB has the corporate
power and authority to own or lease all of its properties and assets and to
carry on businesses as it is now being conducted.
(b) FSSB has full corporate power and authority to execute and deliver the
Agreement and to consummate the Merger and to carry out its obligations
thereunder. The execution and delivery of the Agreement and the consummation of
the Merger and the other transactions contemplated thereby, have been duly
authorized by the Board of Directors and shareholders of FSSB and the Agreement
constitutes a valid and binding obligation of FSSB
69
enforceable in accordance with its terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and
limitations on the availability on specific performance and other equitable
remedies.
(c) None of the execution and delivery of the Agreement by FSSB nor
consummation by FSSB of the transactions contemplated thereby, nor compliance by
FSSB with any of the terms or provisions thereof, will result in any violation
pursuant to, any provision of the Articles of Incorporation or Bylaws of FSSB,
or, subject to obtaining the Regulatory Approvals referred to in Section 8.3 of
the Agreement, to our knowledge be or result in any violation pursuant to any
loan or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, permit, franchise, license, judgment, order, statute,
law, rule or regulation applicable to FSSB or its properties or assets which
violations would in the aggregate have a Material Adverse Effect on FSSB.
(d) Except as disclosed in Schedule 4.1(k) of the FSSB Disclosure Schedule,
to our knowledge there are no actions, suits, proceedings, claims, arbitrations,
or investigations pending or threatened by any person, including without
limitation any governmental or regulatory agency, against FSSB or the assets or
business of FSSB, any of which has had or may have a Material Adverse Effect on
FSSB.
(e) During the course of the preparation and review of the Agreement, we
have participated in conferences with representatives of FSSB in which the
contents of the Agreement and related matters were discussed. While we did not
make any independent investigation or verification of factual information
relating to the representations and warranties of FSSB set forth in Section 4.1
of the Agreement, during the course of our representation of FSSB, nothing has
come to our attention which would give us reason to believe that such
representations and warranties, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading.
(f) During the course of the preparation of the S-4, we have participated
in conferences with representatives of FSSB and its accountants in which the
contents of the S-4 and the Proxy Statement-Prospectus and related matters were
discussed. While we did not make any independent investigation or verification
of factual information relating to FSSB set forth in the S-4 and the Proxy
Statement-Prospectus during the course of our representation of FSSB, nothing
has come to our attention which would give us reason to believe that (i) such
S-4 or Proxy Statement-Prospectus as of the date the S-4 became effective under
the Securities Act insofar as they contained information relating to FSSB,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
not misleading and (ii) the Proxy Statement-Prospectus and any amendment or
supplement thereto, will, at the date of mailing to shareholders and at the time
of the meeting of shareholders of FSSB to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading (provided that we do not opine as to any financial
statements or other financial or statistical data included in or
70
incorporated by reference in such S-4 or Proxy Statement-Prospectus or as to any
information provided by or relating to IBT for inclusion in such S-4, or Proxy
Statement-Prospectus).
(g) To our knowledge, no consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any Governmental Entity, are
required by or with respect to FSSB in connection with (i) the execution and
delivery by FSSB of the Agreement; and (ii) the consummation by FSSB of the
Merger and the other transactions contemplated by the Agreement, the failure of
which to obtain or make would in the aggregate have a Material Adverse Effect on
FSSB or its ability to perform its obligations under the Agreement, other than
those which have been obtained or completed.
This opinion has been prepared solely for your use in connection with the
Closing under the Agreement, it should not be quoted in whole or in part or
otherwise be referred to, nor be filed with or furnished to any governmental
agency or other person or entity, without the prior written consent of this
firm.
Yours very truly,
-------------------------------------
71
EXHIBIT E
IBT Counsel Opinion
72
EXHIBIT E
Writer's Direct Dial (000) 000-0000
_______________, 2005
**Draft**
PERSONAL AND CONFIDENTIAL
Board of Directors
The Xxxxxxx State Savings Bank
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
We are rendering this opinion to you as counsel for IBT Bancorp, Inc.("IBT"), in
connection with the closing today of the merger ("Merger") whereby The Xxxxxxx
State Savings Bank ("FSSB") will merge with and into ____________________, a
wholly-owned subsidiary of IBT ("Merger Subsidiary") pursuant to the Agreement
and Plan of Merger, dated _______________, 2005 ("Agreement"). This opinion is
rendered pursuant to Section 9.3(e) of the Agreement. All terms used herein
without definition have the meaning specified in the Agreement.
In rendering this opinion, except as otherwise specifically indicated herein, we
have relied, as to factual matters, entirely upon the representations of IBT in
the Agreement, the Officers' Certificate given pursuant to Section 9.3(a)
thereof and the Officers' Certificate, dated ________, 2005 in support of this
opinion, provided to us by certain officers of IBT, and have made no independent
review or investigation thereof. In addition, for purposes of this opinion, we
have examined copies of the following documents:
(a) Agreement dated _______________, 2005 and all Exhibits and Schedules
thereto;
(b) The form of FIS 1113 to be filed with the Bureau;
(c) Articles of Incorporation and Bylaws of IBT, as amended;
(d) Articles of Incorporation and Bylaws of Xxxxxxxx Bank and Trust, as
amended;
(e) Articles of Incorporation and Bylaws of Farmers State Bank of
Breckenridge, as amended;
(f) Articles of Incorporation and Bylaws of the Merger Subsidiary;
(g) Articles of Incorporation and Bylaws of IBT's non-bank Subsidiaries;
73
(h) The Prospectus declared effective by the Securities and Exchange
Commission ("SEC") on _______________, 2005;
(i) Form Y-_____ and all amendments thereto;
(j) The Registration Statement on Form S-4 (including exhibits) and
Amendment No. 1 thereto filed with the SEC on _______________, 2005 and
_______________, 2005, respectively;
(k) The Order of the SEC dated _______________, 2005 declaring the
Prospectus effective;
(l) Certificate of Good Standing of IBT from the State of Michigan dated
_______________, 2005;
(m) Certificates of the Bureau confirming that Xxxxxxxx Bank and Trust and
Farmers State Bank of Breckenridge are each a duly organized state bank in good
standing with the Bureau;
(n) Certificate of the Bureau confirming that the Merger Subsidiary is a
duly organized interim state bank in good standing with the Bureau;
(o) Certificates of Good Standing from the State of Michigan regarding each
of IBT's non-bank Subsidiaries; and
(p) Certificate of the Secretary of IBT dated _______________, 2005
regarding (i) IBT's Articles and Bylaws; (ii) the incumbency of the officers of
IBT; and (iii) all resolutions adopted by the Board of Directors of IBT in
connection with the Merger and the Agreement.
We have not, except as specifically mentioned above made any independent review
or investigation of the organization, existence, good standing, assets, business
or affairs of IBT or of any other matters. In our examination of the aforesaid
books, records, documents and other materials, we have assumed the genuineness
of all signatures; the authenticity of all documents submitted to us as
originals, the conformity with the original documents of all documents submitted
to us as certified, telecopied, photostatic or reproduced copies. We have
assumed the authenticity and accuracy of certifications (of public officials,
government agencies and departments, corporate officers and individuals) and
statements of fact on which we are relying. We have assumed the due execution,
delivery and performance of the Agreement and all obligations thereunder by
FSSB.
Whenever the phrase "to our knowledge" appears in this opinion, it means that in
the course of the inquiries and investigations described herein, we became aware
of no facts which indicate that the opinion expressed is incorrect, and that
except as otherwise expressly stated in this letter, we have not examined any
public records (including without limitation, the plaintiff or defendant indices
of state and federal courts), or the books and records of IBT or any IBT
Subsidiary
74
generally (including but not limited to instruments, contracts, notes and
agreements of all kinds), whether or not examination or investigation might
otherwise be reasonable or prudent, and that we have not undertaken any
independent investigation to determine the existence or nonexistence of any
facts.
In rendering this opinion, we advise that our firm only requires lawyers to be
qualified to practice law in the State of Michigan and, in rendering the
following opinions, we express no opinion with respect to any laws other than
Michigan and Federal laws. Moreover, we express no opinion as to Federal or
State choice of law or antitrust law matters.
Based upon the foregoing, and in reliance thereon, it is our opinion, subject to
the assumptions, exceptions, and qualifications and limitations set forth herein
that:
(a) IBT is duly organized, validly existing and in good standing under the
laws of the State of Michigan. IBT has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted.
(b) Xxxxxxxx Bank and Trust is a state chartered bank, duly organized and
validly existing and in good standing under the laws of the State of Michigan.
Xxxxxxxx Bank and Trust has the corporate power and authority to own or lease
all of its properties and assets and to carry on businesses as it is now being
conducted.
(c) Farmers State Bank of Breckenridge is a state chartered bank, duly
organized and validly existing and in good standing under the laws of the State
of Michigan. Farmers State Bank of Breckenridge has the corporate power and
authority to own or lease all of its properties and assets and to carry on
businesses as it is now being conducted.
(d) The Merger Subsidiary is a state chartered interim bank, duly organized
and validly existing and in good standing under the laws of the State of
Michigan.
(e) Each of IBT's non-bank Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Michigan.
Each of IBT's non-bank Subsidiaries has the corporate power and authority to own
or lease all of its respective properties and assets and to carry on its
respective business as it is now being conducted.
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(f) IBT has full corporate power and authority to execute and deliver the
Agreement and to consummate the Merger and to carry out its obligations
thereunder. The execution and delivery of the Agreement and the consummation of
the Merger and the other transactions contemplated thereby, have been duly
authorized by the Board of Directors of IBT and the Agreement constitutes a
valid and binding obligation of IBT enforceable in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and limitations on the availability
on specific performance and other equitable remedies.
(g) None of the execution and delivery of the Agreement by IBT nor
consummation by IBT of the transactions contemplated thereby, nor compliance by
IBT with any of the terms or provisions thereof, will result in any violation
pursuant to, any provision of the Articles of Incorporation or Bylaws of IBT, or
the articles of incorporation, bylaws or other governing documents of the IBT
Subsidiaries or, subject to obtaining the Regulatory Approvals referred to in
Section 8.3 of the Agreement, to our knowledge be or result in any violation
pursuant to any loan or credit agreement, note, mortgage, indenture, lease, or
other agreement, obligation, instrument, permit, franchise, license, judgment,
order, statute, law, rule or regulation applicable to IBT or any IBT Subsidiary
or their respective properties or assets which violations would in the aggregate
have a Material Adverse Effect on IBT.
(h) Except as disclosed in Schedule 5.1(i) of the IBT Disclosure Schedule,
to our knowledge there are no actions, suits, proceedings, claims, arbitrations,
or investigations pending or threatened by any person, including without
limitation any governmental or regulatory agency, against IBT or any of IBT's
Subsidiaries or the assets or business of IBT or any of IBT's Subsidiaries, any
of which has had or may have a Material Adverse Effect on IBT.
(i) During the course of the preparation and review of the Agreement, we
have participated in conferences with representatives of IBT in which the
contents of the Agreement and related matters were discussed. While we did not
make any independent investigation or verification of factual information
relating to the representations and warranties of IBT set forth in Section 5.1
of the Agreement, during the course of our representation of IBT, nothing has
come to our attention which would give us reason to believe that such
representations and warranties, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading.
(j) During the course of the preparation of the S-4, we have participated
in conferences with representatives of IBT and its accountants in which the
contents of the S-4 and the Proxy Statement-Prospectus and related matters were
discussed. While we did not make any independent investigation or verification
of factual information relating to IBT set forth in the S4 and the Proxy
Statement-Prospectus during the course of our representation of IBT, nothing has
come to our attention which would give us reason to believe that (i) such S-4 or
Proxy Statement-Prospectus as of the date the S-4 became effective under the
Securities Act insofar as they contained information relating to IBT or any IBT
Subsidiary, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
76
necessary to make the statements therein, not misleading and (ii) the Proxy
Statement-Prospectus and any amendment or supplement thereto, will, at the date
of mailing to shareholders and at the time of the meeting of shareholders of
FSSB to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading (provided
that we do not opine as to any financial statements or other financial or
statistical data included in or incorporated by reference in such S-4 or Proxy
Statement-Prospectus or as to any information provided by or relating to FSSB
for inclusion in such S-4, or Proxy Statement-Prospectus).
(k) To our knowledge, no consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any Governmental Entity, are
required by or with respect to IBT or any IBT Subsidiary in connection with (i)
the execution and delivery by IBT of the Agreement; and (ii) the consummation by
IBT of the Merger and the other transactions contemplated by the Agreement, the
failure of which to obtain or make would in the aggregate have a Material
Adverse Effect on IBT or its ability to perform its obligations under the
Agreement, other than those which have been obtained or completed.
This opinion has been prepared solely for your use in connection with the
Closing under the Agreement, it should not be quoted in whole or in part or
otherwise be referred to, nor be filed with or furnished to any governmental
agency or other person or entity, without the prior written consent of this
firm.
Yours very truly,
FOSTER, SWIFT, XXXXXXX & XXXXX, X.X.
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