EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
PRINCETON NATIONAL BANCORP, INC.,
SOMONAUK ACQUISITION, INC.
AND
SOMONAUK FSB BANCORP, INC.
FEBRUARY 22, 2005
TABLE OF CONTENTS
ARTICLE 1 Definitions.............................................................. 1
Section 1.1 Definitions........................................................... 1
Section 1.2 Principles of Construction............................................ 7
ARTICLE 2 The Merger............................................................... 9
Section 2.1 The Merger............................................................ 9
Section 2.2 Effective Time; Closing............................................... 9
Section 2.3 Effects of Merger..................................................... 9
Section 2.4 Certificate of Incorporation.......................................... 10
Section 2.5 Bylaws................................................................ 10
Section 2.6 Board of Directors and Officers....................................... 10
Section 2.7 Princeton's Deliveries at Closing..................................... 10
Section 2.8 SBI's Deliveries at Closing........................................... 12
Section 2.9 Bank Merger........................................................... 13
Section 2.10 Alternative Structure................................................. 13
Section 2.11 Absence of Control.................................................... 14
ARTICLE 3 Conversion of Securities in the Merger................................... 14
Section 3.1 Manner of Merger...................................................... 14
Section 3.2 Adjustment of Per Share Purchase Price................................ 14
Section 3.3 Rights as Stockholders; Stock Transfers............................... 15
Section 3.4 Fractional Shares..................................................... 15
Section 3.5 Exchange Procedures................................................... 15
Section 3.6 Anti-Dilution Provisions.............................................. 17
Section 3.7 Dissenting Shares..................................................... 17
ARTICLE 4 Representations and Warranties of SBI.................................... 18
Section 4.1 SBI Organization...................................................... 18
Section 4.2 SBI Subsidiary Organization........................................... 18
Section 4.3 Authorization; Enforceability......................................... 18
Section 4.4 No Conflict........................................................... 19
Section 4.5 SBI Capitalization.................................................... 19
Section 4.6 SBI Subsidiary Capitalization......................................... 20
Section 4.7 Financial Statements and Reports...................................... 20
Section 4.8 Books and Records..................................................... 21
Section 4.9 Title to Properties................................................... 21
Section 4.10 Condition and Sufficiency of Assets................................... 22
Section 4.11 Loans; Allowance for Loan and Lease Losses............................ 22
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Section 4.12 Undisclosed Liabilities; Adverse Changes.............................. 23
Section 4.13 Taxes................................................................. 23
Section 4.14 Compliance with ERISA................................................. 23
Section 4.15 Compliance with Legal Requirements.................................... 24
Section 4.16 Legal Proceedings; Orders............................................. 24
Section 4.17 Absence of Certain Changes and Events................................. 25
Section 4.18 Properties, Contracts and Employee Benefit Plans...................... 27
Section 4.19 No Defaults........................................................... 30
Section 4.20 Insurance............................................................. 30
Section 4.21 Compliance with Environmental Laws.................................... 30
Section 4.22 Regulatory Filings.................................................... 31
Section 4.23 Fiduciary Accounts.................................................... 31
Section 4.24 Indemnification Claims................................................ 31
Section 4.25 Insider Interests..................................................... 31
Section 4.26 Brokerage Commissions................................................. 32
Section 4.27 Approval Delays....................................................... 32
Section 4.28 Code Sections 280G and 4999........................................... 32
Section 4.29 Disclosure............................................................ 32
ARTICLE 5 Representations and Warranties of Princeton and Acquisition Company...... 32
Section 5.1 Princeton Organization................................................ 32
Section 5.2 Princeton Subsidiary Organization..................................... 33
Section 5.3 Authorization; Enforceability......................................... 33
Section 5.4 No Conflict........................................................... 33
Section 5.5 Princeton Capitalization.............................................. 34
Section 5.6 Princeton Subsidiary Capitalization................................... 34
Section 5.7 Financial Statements and Reports...................................... 35
Section 5.8 Undisclosed Liabilities; Adverse Changes.............................. 35
Section 5.9 Compliance With Legal Requirements.................................... 35
Section 5.10 Legal Proceedings; Orders............................................. 36
Section 5.11 Brokerage Commissions................................................. 36
Section 5.12 Approval Delays....................................................... 36
Section 5.13 Disclosure............................................................ 36
Section 5.14 Financial Resources................................................... 36
Section 5.15 Loans; Allowance for Loans and Lease Losses........................... 36
Section 5.16 Undisclosed Liabilities; Adverse Changes.............................. 37
Section 5.17 Taxes................................................................. 37
Section 5.18 Compliance with ERISA................................................. 37
Section 5.19 Compliance with Environmental Laws.................................... 38
ARTICLE 6 SBI's Covenants.......................................................... 38
Section 6.1 Access and Investigation.............................................. 38
Section 6.2 Operation of SBI and SBI Subsidiaries................................. 40
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Section 6.3 Negative Covenant..................................................... 41
Section 6.4 Subsequent SBI Financial Statements................................... 41
Section 6.5 Title to Real Estate.................................................. 42
Section 6.6 Surveys............................................................... 42
Section 6.7 Environmental Investigation........................................... 42
Section 6.8 Advice of Changes..................................................... 43
Section 6.9 Other Offers.......................................................... 43
Section 6.10 Voting Agreement...................................................... 44
Section 6.11 Non-Competition Agreement............................................. 44
Section 6.12 Stockholders' Meeting................................................. 44
Section 6.13 Information Provided to Princeton..................................... 44
Section 6.14 Amendment or Termination of Employee Benefit Plans.................... 45
Section 6.15 Data and Item Processing Agreements................................... 45
Section 6.16 Tax Matters........................................................... 45
Section 6.17 Employment Agreements................................................. 45
Section 6.18 Accounting and Other Adjustments...................................... 45
Section 6.19 Special Bonus......................................................... 45
ARTICLE 7 Princeton's Covenants.................................................... 46
Section 7.1 Access and Investigation.............................................. 46
Section 7.2 Subsequent Princeton Statements; Securities Reports................... 47
Section 7.3 Advice of Changes..................................................... 47
Section 7.4 Information Provided to SBI........................................... 47
Section 7.5 Indemnification; Director and Officer Insurance....................... 48
Section 7.6 Employee Benefits..................................................... 48
Section 7.7 Authorization and Reservation of Princeton Common Stock............... 48
Section 7.8 Negative Covenants.................................................... 48
Section 7.9 Board Seat............................................................ 48
ARTICLE 8 Covenants of All Parties................................................. 49
Section 8.1 Regulatory Approvals.................................................. 49
Section 8.2 SEC Registration...................................................... 49
Section 8.3 Necessary Approvals................................................... 50
Section 8.4 Customer and Employee Relationships................................... 50
Section 8.5 Publicity............................................................. 50
Section 8.6 Best Efforts; Cooperation............................................. 50
ARTICLE 9 Conditions Precedent to Obligations of Princeton......................... 51
Section 9.1 Accuracy of Representations and Warranties............................ 51
Section 9.2 SBI's Performance..................................................... 51
Section 9.3 Documents Satisfactory................................................ 51
Section 9.4 Corporate Approval.................................................... 51
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Section 9.5 No Proceedings....................................................... 51
Section 9.6 Absence of Material Adverse Changes.................................. 52
Section 9.7 Consents and Approvals............................................... 52
Section 9.8 No Prohibition....................................................... 52
Section 9.9 Registration Statement............................................... 52
Section 9.10 Dissenting Shares.................................................... 52
Section 9.11 Employment Agreements................................................ 52
Section 9.12 Allowance for Loan and Lease Losses.................................. 52
Section 9.13 SBI Capitalization................................................... 52
Section 9.14 SBI Transaction Expenses............................................. 52
ARTICLE 10 Conditions Precedent to the Obligations of SBI.......................... 53
Section 10.1 Accuracy of Representations and Warranties........................... 53
Section 10.2 Princeton's Performance.............................................. 53
Section 10.3 Documents Satisfactory............................................... 53
Section 10.4 Corporate Approval................................................... 53
Section 10.5 No Proceedings....................................................... 53
Section 10.6 Absence of Material Adverse Changes.................................. 53
Section 10.7 Consents and Approvals............................................... 54
Section 10.8 No Prohibitions...................................................... 54
Section 10.9 Registration Statement............................................... 54
Section 10.10 Fairness Opinion..................................................... 54
ARTICLE 11 Termination............................................................. 54
Section 11.1 Reasons for Termination and Abandonment.............................. 54
Section 11.2 Effect of Termination................................................ 55
Section 11.3 Expenses............................................................. 55
Section 11.4 SBI Termination Payment.............................................. 55
Section 11.5 Princeton Termination Payment........................................ 56
ARTICLE 12 Miscellaneous........................................................... 56
Section 12.1 Governing Law........................................................ 56
Section 12.2 Assignments, Successors and No Third Party Rights.................... 56
Section 12.3 Waiver............................................................... 57
Section 12.4 Notices.............................................................. 57
Section 12.5 Entire Agreement..................................................... 58
Section 12.6 Modification......................................................... 58
Section 12.7 Severability......................................................... 59
Section 12.8 Further Assurances................................................... 59
Section 12.9 Survival............................................................. 59
Section 12.10 Counterparts; Facsimiles............................................. 59
Section 12.11 Jurisdiction and Service of Process.................................. 59
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EXHIBIT INDEX
A Form of Legal Opinion of Counsel to Princeton
B Form of Legal Opinion of Counsel to SBI
C Form of Exchange Agent Agreement
D Form of Voting Agreement
E Form of Non-Competition Agreement
F-1 Form of Xxxxx Employment Agreement
F-2 Form of Xxxxxxxxxxx Employment Agreement
F-3 Form of Xxxxxxxxxxx Employment Agreement
F-4 Form of Xxx Employment Agreement
SCHEDULE INDEX
SBI SCHEDULES
4.1 SBI Organization
4.2 SBI Subsidiary Organization
4.4 No Conflict
4.5 SBI Capitalization
4.6 SBI Subsidiary Capitalization
4.7 Financial Statements and Reports
4.9 Title to Properties
4.11 Loans; Allowance for Loan and Lease Losses
4.12 Undisclosed Liabilities; Adverse Changes
4.14 Compliance with ERISA
4.15 Compliance with Legal Requirements
4.16 Legal Proceedings; Orders
4.17 Absence of Certain Changes and Events
4.18 Properties, Contracts and Employee Benefit Plans
4.19 No Defaults
4.20 Insurance
4.21 Compliance with Environmental Laws
4.25 Insider Interests
4.26 Brokerage Commissions
4.28 Code Sections 280G and 4999
PRINCETON SCHEDULES
5.4 No Conflict
5.5 Princeton Capitalization
5.8 Undisclosed Liabilities; Adverse Changes
5.9 Compliance With Legal Requirements
5.11 Brokerage Commissions
5.15 Loans; Allowance for Loan and Lease Losses
5.16 Undisclosed Liabilities; Adverse Changes
5.19 Compliance with Environmental Laws
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as of
February 22, 2005 (the "AGREEMENT DATE"), among PRINCETON NATIONAL BANCORP,
INC., a Delaware corporation ("PRINCETON"), SOMONAUK FSB BANCORP, INC., a
Delaware corporation ("SBI"), and SOMONAUK ACQUISITION, INC., a Delaware
corporation ("ACQUISITION COMPANY").
RECITALS
A. The parties to this Agreement desire to effect a reorganization whereby
Princeton desires to acquire control of SBI through the merger (the "MERGER") of
Acquisition Company with and into SBI with SBI being the surviving corporation
in the Merger (the "SURVIVING CORPORATION").
B. Pursuant to the terms of this Agreement, each outstanding share of the
common stock of SBI, $10.00 par value per share ("SBI COMMON STOCK"), shall be
converted at the effective time of the Merger into the right to receive a
combination of: (i) shares of common stock of Princeton, $5.00 par value per
share ("PRINCETON COMMON STOCK"); and (ii) cash, all in the amounts set forth in
this Agreement.
C. The parties desire to make certain representations, warranties and
agreements in connection with the Merger and also agree to certain prescribed
conditions to the Merger.
AGREEMENTS
In consideration of the foregoing premises and the following mutual
promises, covenants and agreements, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. In addition to those terms defined throughout
this Agreement, the following terms, when used herein, shall have the following
meanings.
(a) "ADJUSTED STOCKHOLDERS' EQUITY" means the consolidated tangible
stockholders' equity of SBI, calculated in accordance with GAAP and reflecting,
among other things, the accrued income and expenses of SBI for all periods
ending on or prior to the Determination Date, and the recognition of or accrual
for all expenses paid or incurred or projected to be paid or incurred by SBI or
any SBI Subsidiary in connection with this Agreement and the Contemplated
Transactions including, but not limited to, the SBI Transaction Expenses, but
adjusted to exclude:
(i) any realized gains or losses resulting from sales of
investment securities effected between December 31, 2004, and the Closing Date
(as defined below);
(ii) any adjustments made in accordance with Statement of
Financial Accounting Standard No. 115; and
(iii) any expenses incurred or accounting or other adjustments
made pursuant to Sections 2.9 or 6.18 of this Agreement.
SBI's Adjusted Stockholders' Equity shall be calculated by SBI's independent
auditors, in consultation with Princeton's independent auditors, as of the close
of business on the Determination Date using reasonable estimates of revenues and
expenses where actual amounts are not available. For purposes of this
calculation, SBI shall assume a tax rate of 34% with respect to costs which can
be expensed in 2005 for tax purposes. Such calculation shall be subject to
verification and approval prior to the Closing (as defined below) by an auditor
selected by Princeton, which approval shall not be unreasonably withheld.
(b) "AFFILIATE" means with respect to:
(i) a particular individual: (A) each other member of such
individual's Family; (B) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family; (C) any
Person in which such individual or members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and (D) any Person with
respect to which such individual or one or more members of such individual's
Family serves as a director, officer, partner, executor or trustee (or in a
similar capacity); and
(ii) a specified Person other than an individual: (A) any Person
that directly or indirectly controls, is directly or indirectly controlled by,
or is directly or indirectly under common control with such specified Person;
(B) any Person that holds a Material Interest in such specified Person; (C) each
Person that serves as a director, officer, partner, executor or trustee of such
specified Person (or in a similar capacity); (D) any Person in which such
specified Person holds a Material Interest; (E) any Person with respect to which
such specified Person serves as a general partner or a trustee (or in a similar
capacity); and (F) any Affiliate of any individual described in clause (B) or
(C) of this subsection (ii).
(c) "BANK" means Farmers State Bank of Somonauk, a state chartered
commercial bank organized and existing under the laws of the State of Illinois
with its main office located in Somonauk, Illinois, and a wholly-owned
subsidiary of SBI.
(d) "BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible, provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
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(e) "BREACH" means with respect to a representation, warranty,
covenant, obligation or other provision of this Agreement or any instrument
delivered pursuant to this Agreement: (i) any inaccuracy in or breach of, or any
failure to perform or comply with, such representation, warranty, covenant,
obligation or other provision; or (ii) any claim (by any Person) or other
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence or circumstance.
(f) "BUSINESS DAY" means any day on which the trading of stock occurs
on the over-the-counter-bulletin-board.
(g) "CALL REPORTS" means the quarterly reports of income and condition
filed by the Bank with Regulatory Authorities.
(h) "CITIZENS BANK" means Citizens First National Bank, a national
banking association organized and existing under the laws of the United States
with its main office located in Princeton, Illinois, and a wholly-owned
subsidiary of Princeton.
(i) "CODE" means the Internal Revenue Code of 1986, as amended.
(j) "CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including: (i) the Merger; (ii) the performance
by Princeton, Acquisition Company and SBI of their respective covenants and
obligations under this Agreement; (iii) Princeton's acquisition of control of
SBI and, indirectly, the Bank; (iv) Princeton's issuance of registered shares of
Princeton Common Stock and payment of cash in exchange for shares of SBI Common
Stock; and (v) the Bank Merger (as hereinafter defined), if applicable.
(k) "CONTRACT" means any agreement, contract, obligation, promise or
understanding (whether written or oral and whether express or implied) that is
legally binding: (i) under which a Person has or may acquire any rights; (ii)
under which such Person has or may become subject to any obligation or
liability; or (iii) by which such Person or any of the assets owned or used by
such Person is or may become bound.
(l) "CRA" means the Community Reinvestment Act, as amended.
(m) "DETERMINATION DATE" means the close of business on the last
Business Day preceding the Closing Date.
(n) "DFPR" means the Illinois Department of Financial and Professional
Regulation.
(o) "DGCL" means the Delaware General Corporation Law, as amended.
(p) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
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(q) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(r) "FAMILY" means with respect to an individual: (i) the individual;
(ii) the individual's spouse and former spouses; (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree; and (iv) any other natural person who resides with such individual.
(s) "FDIC" means the Federal Deposit Insurance Corporation.
(t) "FEDERAL RESERVE" means the Board of Governors of the Federal
Reserve System.
(u) "GAAP" means generally accepted accounting principles in the
United States consistent with those used in the preparation of the most recent
audited consolidated financial statements of Princeton or SBI, as the case may
be.
(v) "KNOWLEDGE" with respect to:
(i) an individual means that such person will be deemed to have
"Knowledge" of a particular fact or other matter if: (A) such individual is
actually aware of such fact or other matter; or (B) a prudent individual could
be expected to discover or otherwise become aware of such fact or other matter
in the course of conducting a reasonably comprehensive investigation concerning
the existence of such fact or other matter; and
(ii) a Person (other than an individual) means that such Person
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has served in the past twelve (12) months as a
director, outside advisor, officer, manager, partner, executor or trustee of
such Person (or in any similar capacity) has Knowledge of such fact or other
matter.
(w) "LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other Order, constitution, law,
ordinance, regulation, rule, policy statement, directive, statute or treaty.
(x) "MATERIAL ADVERSE EFFECT" with respect to a Person (other than an
individual) means, a material adverse effect (whether or not required to be
accrued or disclosed under Statement of Financial Accounting Standards No. 5):
(i) on the condition (financial or otherwise), properties, assets, liabilities,
businesses or results of operations of such Person; or (ii) on the ability of
such Person to perform its obligations under this Agreement on a timely basis,
but not including the effect of any change of any Legal Requirement or economic
event affecting financial institutions generally.
(y) "MATERIAL INTEREST" means the direct or indirect beneficial
ownership (as currently defined in Rule 13d-3 under the Exchange Act) of voting
securities or other voting interests representing at least ten percent (10%) of
the outstanding voting power of a
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Person or equity securities or other equity interests representing at least ten
percent (10%) of the outstanding equity securities or equity interests in a
Person.
(z) "NBA" means National Bank Act.
(aa) "OCC" means the Office of the Comptroller of the Currency.
(bb) "OLD CERTIFICATES" means certificates formerly representing
shares of SBI Common Stock.
(cc) "ORDER" means any award, decision, injunction, judgment, order,
ruling, extraordinary supervisory letter, policy statement, memorandum of
understanding, resolution, agreement, directive, subpoena or verdict entered,
issued, made, rendered or required by any court, administrative or other
governmental agency, including any Regulatory Authority, or by any arbitrator.
(dd) "ORDINARY COURSE OF BUSINESS" means any action taken by a Person
only if such action:
(i) is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(ii) is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority), other than loan approvals for customers of a financial institution;
and
(iii) is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), other than loan approvals for
customers of a financial institution, in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
(ee) "PER SHARE CASH CONSIDERATION" means Seven Hundred Eighty-Two
Dollars and Seventy-Six Cents ($782.76), subject, however, to possible
adjustment as provided in Section 3.2 of this Agreement.
(ff) "PER SHARE STOCK CONSIDERATION" means 6.6923 shares of Princeton
Common Stock.
(gg) "PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or Regulatory Authority.
(hh) "PRINCETON SEC DOCUMENTS" means the annual, quarterly and other
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) filed by Princeton with the SEC.
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(ii) "PRINCETON SUBSIDIARY" means any Subsidiary of Princeton.
(jj) "PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any judicial or governmental authority, including a
Regulatory Authority, or arbitrator.
(kk) "PROXY STATEMENT" means the proxy statement-prospectus to be used
by SBI in connection with the solicitation by its board of directors of proxies
for use at the meeting of its stockholders to be convened for the purpose of
voting on this Agreement and the Merger, pursuant to Section 6.12 of this
Agreement.
(ll) "REGULATORY AUTHORITY" means any federal, state or local
governmental body, agency, court or authority that, under applicable Legal
Requirements: (i) has supervisory, judicial, administrative, police,
enforcement, taxing or other power or authority over SBI, Princeton or any of
their respective Subsidiaries; (ii) is required to approve, or give its consent
to the Contemplated Transactions; or (iii) with which a filing must be made in
connection therewith, including, in any case, the Federal Reserve and the OCC.
(mm) "REPRESENTATIVE" means with respect to a particular Person, any
director, officer, manager, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, accountants and
financial advisors.
(nn) "SBI STOCKHOLDER" means a holder of record of SBI Common Stock.
(oo) "SBI SUBSIDIARY" means any Subsidiary of SBI.
(pp) "SBI TRANSACTION EXPENSES" means: (i) all transaction costs of
SBI necessary to consummate the Contemplated Transactions; (ii) the aggregate
fees and expenses of attorneys, accountants, consultants, financial advisors and
other professional advisors incurred by SBI in connection with this Agreement
and the Contemplated Transactions; (iii) the costs of preparing, printing and
mailing the Proxy Statement to SBI Stockholders and obtaining the approval of
SBI Stockholders of the Contemplated Transactions; (iv) all amounts paid or
payable to any director, officer or employee of SBI or any SBI Subsidiary under
any Contract or plan as a result of the Contemplated Transactions; (iv) any
Remediation Costs (as defined in Section 6.7 of this Agreement), (v) the amount
of the Sick Leave Accrual (as defined in Section 6.2(1) of this Agreement), (vi)
the cost of Special Bonus; and (vii) all other non-payroll related costs and
expenses in each case incurred or to be incurred by SBI or any SBI Subsidiary
through the Effective Time in connection with this Agreement and the
Contemplated Transactions.
(qq) "SEC" means the Securities and Exchange Commission.
(rr) "SECURITIES ACT" means the Securities Act of 1933, as amended.
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(ss) "SPECIAL BONUS" shall have the meaning given such term in Section
6.19 of this Agreement.
(tt) "SUBSIDIARY" means with respect to any Person (the "OWNER"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
(uu) "TAX" means any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency or other fee,
and any related charge or amount (including any fine, penalty, interest or
addition to tax), imposed, assessed or collected by or under the authority of
any Regulatory Authority or payable pursuant to any tax sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency or fee.
(vv) "TAX RETURN" means any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Regulatory Authority in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
(ww) "THREATENED" means a claim, Proceeding, dispute, action or other
matter for which any demand or statement has been made (orally or in writing) or
any notice has been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action or other matter is
likely to be asserted, commenced, taken or otherwise pursued in the future.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
(a) In this Agreement, unless otherwise stated or the context
otherwise requires, the following uses apply:
(i) actions permitted under this Agreement may be taken at any
time and from time to time in the actor's reasonable discretion;
(ii) references to a statute shall refer to the statute and any
successor statute, and to all regulations promulgated under or implementing the
statute or its successor, as in effect at the relevant time;
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(iii) in computing periods from a specified date to a later
specified date, the words "FROM" and "COMMENCING ON" (and the like) mean "FROM
AND INCLUDING," and the words "TO," "UNTIL" and "ENDING ON" (and the like) mean
"TO, BUT EXCLUDING";
(iv) references to a governmental or quasi-governmental agency,
authority or instrumentality shall also refer to a regulatory body that succeeds
to the functions of the agency, authority or instrumentality;
(v) indications of time of day mean Princeton, Illinois time;
(vi) "INCLUDING" means "INCLUDING, BUT NOT LIMITED TO";
(vii) all references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise
specified;
(viii) all words used in this Agreement will be construed to be
of such gender or number as the circumstances and context require;
(ix) the captions and headings of articles, sections, schedules
and exhibits appearing in or attached to this Agreement have been inserted
solely for convenience of reference and shall not be considered a part of this
Agreement nor shall any of them affect the meaning or interpretation of this
Agreement or any of its provisions; and
(x) any reference to a document or set of documents in this
Agreement, and the rights and obligations of the parties under any such
documents, shall mean such document or documents as amended from time to time,
and any and all modifications, extensions, renewals, substitutions or
replacements thereof.
(b) The schedules of each of SBI and Princeton referred to in this
Agreement (the "SBI SCHEDULES" and the "PRINCETON SCHEDULES," respectively, and
collectively the "SCHEDULES") shall consist of the agreements and other
documentation described and referred to in this Agreement with respect to such
party, which Schedules were delivered by each of SBI and Princeton to the other
before the date of this Agreement. Any item or matter disclosed on any Schedule
shall be deemed to be disclosed for all purposes on all other Schedules, to the
extent that it should have been disclosed on such other Schedule, to the extent
that sufficient details are set forth so that the purpose for which disclosure
is made is reasonably clear. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Schedules (other than
an exception expressly set forth as such in the Schedules), the statements in
the body of this Agreement will control.
(c) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(d) With regard to each and every term and condition of this Agreement
and any and all agreements and instruments subject to the terms hereof, the
parties hereto understand and agree that the same have or has been mutually
negotiated, prepared and
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drafted, and that if at any time the parties hereto desire or are required to
interpret or construe any such term or condition or any agreement or instrument
subject hereto, no consideration shall be given to the issue of which party
hereto actually prepared, drafted or requested any term or condition of this
Agreement or any agreement or instrument subject hereto.
ARTICLE 2
THE MERGER
SECTION 2.1 THE MERGER. Provided that this Agreement shall not have been
terminated in accordance with its express terms, upon the terms and subject to
the conditions of this Agreement and in accordance with the applicable
provisions of the DGCL at the Effective Time (as defined below), Acquisition
Company shall be merged with and into SBI pursuant to the provisions of, and
with the effects provided in, the DGCL, the separate corporate existence of
Acquisition Company shall cease and SBI will be the Surviving Corporation. As a
result of the Merger, each share of SBI Common Stock issued and outstanding
immediately prior to the Effective Time, other than Dissenting Shares (as
defined below), will be converted into the right to receive the Merger
Consideration as provided in Article 3 of this Agreement.
SECTION 2.2 EFFECTIVE TIME; CLOSING.
(a) Provided that this Agreement shall not have been terminated in
accordance with its express terms, the closing of the Merger (the "CLOSING")
shall occur through the mail or at a place that is mutually acceptable to
Princeton and SBI, or if they fail to agree, at the offices of Xxxxxx & Xxxxxx
Attorneys, P.C., located at Xxx Xxxxxxxxxx Xxxxx, Xxxxx 000, 000 Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx 00000, at 10:00 a.m. on July 31, 2005, or, if the following
conditions have not then been satisfied, on such later date which is ten (10)
Business Days after the end of the calendar month in which all of the following
conditions are satisfied: (i) the receipt of the last required regulatory
approval of the Merger and the expiration of the last requisite waiting period;
and (ii) the satisfaction or waiver in writing of all of the conditions provided
for in Articles 9 and 10 of this Agreement; whichever is later, or at such other
time as SBI and Princeton may agree in writing (the "CLOSING DATE"). Subject to
the provisions of Article 11 of this Agreement, failure to consummate the Merger
on the date and time and at the place determined pursuant to this Section will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
(b) The parties hereto agree to file appropriate certificate of
merger, as contemplated by the DGCL, with the Secretary of State of the State of
Delaware. The Merger shall be effective on the Closing Date and at the time
stated in the certificate of merger filed with the Secretary of State of the
State of Delaware (the "EFFECTIVE TIME").
SECTION 2.3 EFFECTS OF MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the DGCL. Without limiting the generality of the
foregoing, at the Effective Time, all the property, rights, privileges, powers
and franchises of Acquisition Company and SBI shall be vested in the Surviving
Corporation, and all debts, liabilities and duties of
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Acquisition Company and SBI shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.4 CERTIFICATE OF INCORPORATION. At the Effective Time, the
certificate of incorporation of SBI, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law.
SECTION 2.5 BYLAWS. At the Effective Time, the bylaws of SBI, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
SECTION 2.6 BOARD OF DIRECTORS AND OFFICERS. From and after the Effective
Time, until duly changed in compliance with applicable law and the articles of
incorporation and bylaws of the Surviving Corporation, the board of directors
and officers of the Surviving Corporation shall be the board of directors and
officers of Acquisition Company in place immediately prior to the Effective
Time.
SECTION 2.7 PRINCETON'S DELIVERIES AT CLOSING. At the Closing, Princeton
shall deliver or cause to be delivered the following items to or on behalf of
SBI:
(a) a good standing certificate for Princeton issued by each of the
Secretary of State of the State of Delaware and the Secretary of State of the
State of Illinois and dated in each case not more than fifteen (15) Business
Days prior to the Closing Date;
(b) a copy of the certificate of incorporation of Princeton certified
not more than fifteen (15) Business Days prior to the Closing Date by the
Secretary of State of the State of Delaware;
(c) a certificate of the Secretary or any Assistant Secretary of
Princeton dated the Closing Date certifying a copy of the bylaws of Princeton;
(d) copies of resolutions of the board of directors of Princeton
approving this Agreement and the consummation of the Contemplated Transactions,
certified as of the Closing Date by the Secretary or any Assistant Secretary of
Princeton;
(e) copies of resolutions of the board of directors and the sole
stockholder of Acquisition Company approving this Agreement and the consummation
of the Contemplated Transactions, certified as of the Closing Date by the
Secretary or any Assistant Secretary of Acquisition Company;
(f) a good standing certificate for Acquisition Company issued by the
Secretary of State of the State of Delaware, and dated not more than fifteen
(15) Business Days prior to the Closing Date;
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(g) a copy of the certificate of incorporation of Acquisition Company
certified not more than fifteen (15) Business Days prior to the Closing Date by
the Secretary of State of the State of Delaware;
(h) a certificate of the Secretary or any Assistant Secretary of
Acquisition Company dated the Closing Date certifying a copy of the bylaws of
Acquisition Company;
(i) a certificate executed by the President or any Vice President of
Acquisition Company, dated the Closing Date, stating that: (i) all of the
representations and warranties of Acquisition Company set forth in this
Agreement, as the same may have been updated pursuant to Section 7.3 of this
Agreement, are true and correct in all material respects with the same force and
effect as if all of such representations and warranties were made at the Closing
Date, provided, however, that to the extent such representations and warranties
expressly relate to an earlier date, such representations shall be true and
correct in all material respects on and as of such earlier date, and provided
further, that to the extent that representations and warranties are made in this
Agreement subject to a standard of materiality or Knowledge, such
representations and warranties shall be true and correct in all respects; and
(ii) Acquisition Company has performed or complied in all material respects with
all of the covenants and obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date, provided,
however, that to the extent performance and compliance with such covenants and
obligations are subject in this Agreement to a standard of materiality,
Acquisition Company shall have performed and complied in all respects with such
covenants and obligations;
(j) a certificate executed by the Chief Executive Officer or Senior
Vice President, and by the Secretary or any Assistant Secretary of Princeton,
dated the Closing Date, stating that: (i) all of the representations and
warranties of Princeton set forth in this Agreement, as the same may have been
updated pursuant to Section 7.3 of this Agreement, are true and correct in all
material respects with the same force and effect as if all of such
representations and warranties were made at the Closing Date, provided, however,
that to the extent such representations and warranties expressly relate to an
earlier date, such representations shall be true and correct in all material
respects on and as of such earlier date, and provided further, that to the
extent that representations and warranties are made in this Agreement subject to
a standard of materiality or Knowledge, such representations and warranties
shall be true and correct in all respects; and (ii) Princeton has performed or
complied in all material respects with all of the covenants and obligations to
be performed or complied with by it under the terms of this Agreement on or
prior to the Closing Date, provided, however, that to the extent performance and
compliance with such covenants and obligations are subject in this Agreement to
a standard of materiality, Princeton shall have performed and complied in all
respects with such covenants and obligations;
(k) a legal opinion of Princeton's counsel dated the Closing Date in
the form attached as EXHIBIT A; and
(l) such other documents as SBI may reasonably request.
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All of such items shall be reasonably satisfactory in form and substance to SBI
and its counsel.
SECTION 2.8 SBI'S DELIVERIES AT CLOSING. At the Closing, SBI shall deliver
or cause to be delivered the following items to Princeton:
(a) a good standing certificate for SBI issued by each of the
Secretary of State of the State of Delaware and the Secretary of State of the
State of Illinois dated not more than fifteen (15) Business Days prior to the
Closing Date;
(b) a copy of the certificate of incorporation of SBI certified not
more than fifteen (15) Business Days prior to the Closing Date by the Secretary
of State of the State of Delaware;
(c) a certificate of the Secretary or any Assistant Secretary of SBI
dated the Closing Date certifying a copy of the bylaws of SBI;
(d) copies of resolutions of the board of directors and SBI
Stockholders authorizing and approving this Agreement and the consummation of
the Contemplated Transactions certified as of the Closing Date by the Secretary
or any Assistant Secretary of SBI;
(e) a good standing certificate for the Bank issued by the DFPR and
dated not more than fifteen (15) Business Days prior to the Closing Date;
(f) a copy of the charter of the Bank certified by the DFPR and dated
not more than fifteen (15) Business Days prior to the Closing Date;
(g) a certificate of the Secretary of the Bank dated the Closing Date
certifying a copy of the bylaws of the Bank and stating that there have been no
further amendments to the charter of the Bank delivered pursuant to the
immediately preceding paragraph of this Section;
(h) a certificate executed by the Chief Executive Officer or Executive
Vice President, and by the Secretary or any Assistant Secretary of SBI, dated
the Closing Date, stating that: (i) all of the representations and warranties of
SBI set forth in this Agreement, as the same may have been updated pursuant to
Section 6.8 of this Agreement, are true and correct in all material respects
with the same force and effect as if all of such representations and warranties
were made at the Closing Date, provided, however, that to the extent such
representations and warranties expressly relate to an earlier date, such
representations shall be true and correct in all material respects on and as of
such earlier date, and provided further, that to the extent that representations
and warranties are made in this Agreement subject to a standard of materiality
or Knowledge, such representations and warranties shall be true and correct in
all respects; and (ii) SBI has performed or complied in all material respects
with all of the covenants and obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date, provided,
however, that to the extent performance and compliance with such covenants and
obligations are subject in this Agreement to a standard
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of materiality, SBI shall have performed and complied in all respects with such
covenants and obligations;
(i) a list of all SBI Stockholders as of the Determination Date,
certified by the Secretary or any Assistant Secretary of SBI;
(j) owner's title insurance policies issued by Chicago Title Insurance
Company or such other title insurance company as is reasonably acceptable to
Princeton in accordance with the title commitments delivered by SBI to Princeton
in accordance with Section 6.5 of this Agreement, and in each case, in policy
amounts at least equal to the book value of the property covered by such
policies, as shown on the books and records of SBI or the Bank;
(k) a legal opinion of SBI's counsel dated the Closing Date in the
form attached as EXHIBIT B;
(l) a certificate of each of SBI's legal counsel, accountants and
financial advisor or investment banker, if any, representing that all of their
respective fees and expenses relating to the Contemplated Transactions incurred
by SBI prior to and including the Effective Time have been paid in full;
(m) evidence that the Special Bonus, if any, has been paid as
contemplated by Section 6.19 of this Agreement;
(n) a resignation from each of the directors and executive officers of
SBI from such individual's position as a director and/or an officer of SBI; and
(o) such other documents as Princeton may reasonably request.
All of such items shall be reasonably satisfactory in form and substance to
Princeton and its counsel.
SECTION 2.9 BANK MERGER. The parties contemplate, without making it
mandatory, that after the Merger has become effective, but on the same day when
the Merger becomes effective, the Bank will be merged with and into Citizens
Bank, with Citizens Bank being the surviving association (such merger of the
Bank into Citizens Bank being hereinafter called the "Bank Merger"). Princeton
and SBI agree to cooperate and to take such steps as may be necessary to obtain
all requisite regulatory, corporate and other approvals to effect the Bank
Merger, subject and subsequent to the consummation of, and to be effective
concurrently with, the Merger or at such time thereafter, all as determined by
Princeton in its sole discretion.
SECTION 2.10 ALTERNATIVE STRUCTURE. Notwithstanding anything contained
herein to the contrary, upon receipt of SBI's prior written consent (which
consent shall not be unreasonably withheld), Princeton may specify, for any
reasonable business, tax or regulatory purpose, that, before the special meeting
of stockholders of SBI held pursuant to Section 6.12 of this Agreement,
Princeton and SBI shall enter into transactions other than those described in
13
this Agreement to effect the purposes of this Agreement, including the merger of
SBI with any Affiliate of Princeton, and the parties to this Agreement shall
take all action necessary and appropriate to effect, or cause to be effected,
such transactions; provided, however, that no such proposed change on the
structure of the transactions contemplated in this Agreement shall delay the
Closing Date (if such a date has already been firmly established) by more than
thirty (30) Business Days or adversely affect the economic benefits, the form of
consideration or the tax effect of the Merger at the Effective Time to the
holders of SBI Common Stock.
SECTION 2.11 ABSENCE OF CONTROL. Subject to any specific provisions of
this Agreement, it is the intent of the parties to this Agreement that neither
Princeton nor SBI by reason of this Agreement shall be deemed (until
consummation of the Contemplated Transactions) to control, directly or
indirectly, the other party or any of its respective Subsidiaries and shall not
exercise, or be deemed to exercise, directly or indirectly, a controlling
influence over the management or policies of such other party or any of its
respective Subsidiaries.
ARTICLE 3
CONVERSION OF SECURITIES IN THE MERGER
SECTION 3.1 MANNER OF MERGER. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Merger and without any
action on the part of any Person:
(a) Each share of Acquisition Company common stock issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation; and
(b) Each share of SBI Common Stock (other than shares held by SBI or
any SBI Subsidiary, except for shares held by any of them in a fiduciary
capacity, and Dissenting Shares) shall be converted into the right to receive
the Per Share Cash Consideration and the Per Share Stock Consideration. The Per
Share Cash Consideration that may be paid, on an aggregate basis, to SBI
Stockholders is referred to herein as the "CASH CONSIDERATION," and the Per
Share Stock Consideration that may be paid, on an aggregate basis, to SBI
Stockholders is referred to herein as the "STOCK CONSIDERATION." The Cash
Consideration and the Stock Consideration are referred to herein collectively as
the "MERGER CONSIDERATION"; and
(c) Each share of SBI Common Stock held as treasury stock immediately
prior to the Effective Time shall be cancelled and retired at the Effective Time
and no consideration shall be issued in exchange therefor.
SECTION 3.2 ADJUSTMENT OF PER SHARE PURCHASE PRICE. Notwithstanding
anything contained herein to the contrary, the Per Share Cash Consideration
shall be adjusted upward or downward to equal:
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(a) $39,606,000 less,
(b) the difference between $23,800,000 and the Adjusted Stockholders'
Equity divided by,
(c) 50,598
or graphically represented as follows:
$39,606,000 - ($23,800,000 - Adjusted Stockholders' Equity)
-----------------------------------------------------------
50,598
provided, however, in no event shall the Per Share Cash Consideration be
adjusted upward to exceed Seven Hundred Ninety Dollars and Fifty-Four Cents
($790.54).
SECTION 3.3 RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective
Time, holders of SBI Common Stock shall cease to be, and shall have no rights
as, stockholders of SBI, other than to receive the Merger Consideration. After
the Effective Time, there shall be no transfers on the stock transfer books of
SBI or the Surviving Corporation of shares of SBI Common Stock.
SECTION 3.4 FRACTIONAL SHARES. Notwithstanding any other provision hereof,
no fractional shares of Princeton Common Stock and no certificates or scrip
therefore, or other evidence of ownership thereof, will be issued in the Merger;
instead, Princeton shall pay to each holder of SBI Common Stock who would
otherwise be entitled to a fractional share of Princeton Common Stock (after
taking into account all Old Certificates registered in the name of such holder)
an amount in cash (without interest) determined by multiplying such fraction by
Twenty-Nine Dollars and Fifty-Three Cents ($29.53).
SECTION 3.5 EXCHANGE PROCEDURES.
(a) As soon as is reasonably practicable, but in no event later than
five (5) Business Days after the Closing Date, Citizens Bank, in its capacity as
exchange agent for the parties to this Agreement (the "EXCHANGE AGENT"), the
Exchange Agent shall mail to each holder of record of SBI Common Stock,
instructions for use in effecting the surrender of the certificates representing
such SBI Common Stock (the "OLD CERTIFICATES") in exchange for the Merger
Consideration (the "TRANSMITTAL LETTER"). Upon proper surrender to the Exchange
Agent of an Old Certificate for exchange and cancellation, together with such
properly completed and duly executed Transmittal Letter, the holder of such Old
Certificates shall be entitled to receive in exchange therefor: (i) a new
certificate representing that number of whole shares of Princeton Common Stock
that such holder has the right to receive pursuant to this Article; (ii) a check
representing the amount of Cash Consideration that such holder is entitled to
receive pursuant to this Article; and (iii) a check representing the amount of
any cash in lieu of fractional shares that such holder has the right to receive
in respect of the Old Certificates surrendered pursuant to the provisions of
this Article, and the Old Certificates so surrendered shall forthwith be
cancelled.
15
(b) Princeton shall deposit with the Exchange Agent for the benefit of
holders of Old Certificates: (i) cash or immediately available funds equal to
the aggregate Cash Consideration; and (ii) certificates representing the shares
of Princeton Common Stock to be issued as Stock Consideration (the "EXCHANGE
FUND"). The Exchange Fund shall be held by the Exchange Agent for the benefit of
SBI Stockholders pursuant to the terms of an Exchange Agent Agreement in the
form of EXHIBIT C. After the Closing Date, Princeton shall make additional
deposits to the Exchange Fund, and the Exchange Agent may return certificates or
funds held by the Exchange Agent, as may be necessary for the completion of the
exchange of Old Certificates for the Merger Consideration in accordance with
this Article. All fees, costs and expenses of the Exchange Agent shall be borne
solely by Princeton.
(c) Neither the Exchange Agent nor any party hereto shall be liable to
any former SBI Stockholder for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(d) No dividends or other distributions with respect to Princeton
Common Stock with a record date occurring after the Effective Time shall be paid
to the holder of any unsurrendered Old Certificate representing shares of SBI
Common Stock converted in the Merger into the right to receive shares of
Princeton Common Stock until the holder of such unsurrendered Old Certificate
shall be entitled to receive a new certificate representing shares of Princeton
Common Stock in exchange therefor in accordance with the procedures set forth in
this Section. After becoming so entitled in accordance with this Section, the
record holder thereof also shall be entitled to receive any such dividends or
other distributions by the Exchange Agent, without any interest thereon, which
theretofore had become payable with respect to shares of Princeton Common Stock
such holder had the right to receive upon surrender of the Old Certificates.
(e) Any portion of the Merger Consideration that remains unclaimed by
the SBI Stockholders on the six (6) month anniversary of the Effective Time
shall be paid to Princeton to be held for the benefit of holders of
unsurrendered Old Certificates. Any SBI Stockholders who have not theretofore
complied with this Article shall thereafter look only to Princeton for payment
of the Merger Consideration, cash in lieu of any fractional shares and unpaid
dividends and distributions on Princeton Common Stock deliverable in respect of
each share of SBI Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case without any interest thereon.
(f) If a certificate representing shares of Princeton Common Stock or
a check representing Cash Consideration is to be issued in a name other than
that in which the Old Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Old
Certificate so surrendered shall be properly endorsed, accompanied by all
documents required to evidence and effect such transfer and otherwise in proper
form for transfer and that the Person requesting such exchange shall pay to
Princeton any transfer or other taxes required by reason of the issuance of a
certificate representing shares of Princeton Common Stock or a check
representing Cash Consideration in any name other than that of the registered
holder of the Old Certificate surrendered, or otherwise
16
required, or shall establish to the satisfaction of Princeton that such tax has
been paid or is not payable.
SECTION 3.6 ANTI-DILUTION PROVISIONS.
(a) If Princeton issues additional shares of Princeton Common Stock
(other than as provided below) or declares a stock dividend, stock split,
reverse split or other general distribution, reclassification or
recapitalization of Princeton Common Stock and the record date for such stock
dividend, stock split, distribution, reclassification or recapitalization occurs
at any time after the Agreement Date and prior to the Effective Time, then the
number of shares of Princeton Common Stock distributable to SBI Stockholders
shall be equitably adjusted as necessary to give effect to the change in
Princeton capitalization. Notwithstanding the foregoing, no adjustment shall be
made in such number of shares of Princeton Common Stock distributable: (x) in
the event of the issuance of additional shares of Princeton Common Stock
pursuant to the grant or sale of shares to, or for the account of, employees of
Princeton pursuant to Princeton's stock option, qualified and non-qualified
retirement and dividend reinvestment plans; or (y) in the event of the issuance
of additional shares of Princeton Common Stock or other securities pursuant to a
public offering, private placement or an acquisition of one or more banks,
corporations or business assets for consideration which the board of directors,
or a duly authorized committee of the board of directors, of Princeton in its
reasonable business judgment determines to be fair and reasonable.
(b) Subject only to making any adjustments and related computations
prescribed by this Section, nothing contained in this Agreement is intended to
preclude Princeton from amending its certificate of incorporation to change its
capital structure or from issuing additional shares of Princeton Common Stock,
preferred stock, shares of other capital stock or securities that are
convertible into shares of capital stock.
SECTION 3.7 DISSENTING SHARES. Notwithstanding anything to the contrary
contained in this Agreement, to the extent appraisal rights are available to
stockholders of SBI pursuant to the provisions of any applicable Legal
Requirements, including the DGCL, any shares of SBI Common Stock held by a
Person who objects to the Merger, whose shares were not voted in favor of the
Merger and who complies with and satisfies all of the provisions of the
applicable Legal Requirements concerning the rights of such Person to dissent
from the Merger and to require appraisal of such Person's shares and who has not
withdrawn such objection or waived such rights prior to the Effective Time
(collectively with respect to all such SBI stockholders, the "DISSENTING
SHARES"), shall not be converted pursuant to the provisions of this Article, but
shall become the right to receive such consideration as may be determined to be
due to the holder of such Dissenting Shares pursuant to the applicable Legal
Requirements, including, if applicable, any costs determined to be payable by
SBI to the holders of Dissenting Shares pursuant to an order of any court
pursuant to any applicable Legal Requirements; provided, however, that each
Dissenting Share held by a Person at the Effective Time who shall, after the
Effective Time, withdraw the demand for appraisal or lose the right of
appraisal, in either case pursuant to applicable Legal Requirements shall be
deemed to have been converted, as of the
17
Effective Time, into the right to receive the Merger Consideration as is
determined in accordance with this Article.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SBI
SBI hereby represents and warrants to Princeton that the following are true
and correct as of the Agreement Date, and will be true and correct as of the
Effective Time:
SECTION 4.1 SBI ORGANIZATION. SBI: (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is also qualified to do business and is in good standing in the State of
Illinois and in each other jurisdiction in which the nature of the business
conducted or the properties or assets owned or leased by it makes such
qualification necessary; (b) is registered with the Federal Reserve as a bank
holding company under the federal Bank Holding Company Act of 1956, as amended
(the "BHCA"); and (c) has full power and authority, corporate and otherwise, to
operate as a bank holding company and to own, operate and lease its properties
as presently owned, operated and leased, and to carry on its business as it is
now being conducted. Copies of the certificate of incorporation and bylaws of
SBI and all amendments thereto are set forth in SCHEDULE 4.1 and are complete
and correct. SBI has no Subsidiaries other than the Bank and as set forth in
SCHEDULE 4.1.
SECTION 4.2 SBI SUBSIDIARY ORGANIZATION. The Bank is an Illinois chartered
commercial bank duly organized, validly existing and in good standing under the
laws of the State of Illinois. Each other SBI Subsidiary is duly organized,
validly existing and in good standing in its state or jurisdiction of
organization. Each SBI Subsidiary has full power and authority, corporate and
otherwise, to own, operate and lease its properties as presently owned, operated
and leased, and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted or the properties or assets owned or
leased by it makes such qualification necessary. Copies of the charter and
bylaws (or similar organizational documents) of each SBI Subsidiary and all
amendments thereto are set forth in SCHEDULE 4.2 and are complete and correct.
SECTION 4.3 AUTHORIZATION; ENFORCEABILITY.
(a) SBI has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by SBI, and the consummation by it of its
obligations under this Agreement, have been authorized by all necessary
corporate action, subject to stockholder approval, and this Agreement
constitutes a legal, valid and binding obligation of SBI enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and subject to general principles of equity.
18
(b) Except for ordinary corporate requirements, no "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation or any provisions contained in the certificate or articles of
incorporation or bylaws or similar organizational documents of SBI or any SBI
Subsidiary: (i) prohibits or restricts SBI's ability to perform its obligations
under this Agreement, or its ability to consummate the Contemplated
Transactions; (ii) would have the effect of invalidating or voiding this
Agreement, or any provision hereof; or (iii) would subject Princeton to any
material impediment or condition in connection with the exercise of any of its
rights under this Agreement. The board of directors of SBI has unanimously
approved the execution of, and performance by SBI of its obligations under, this
Agreement.
SECTION 4.4 NO CONFLICT. Except as set forth in SCHEDULE 4.4, neither the
execution nor delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time): (a) contravene, conflict with or result in a
violation of any provision of the certificate or articles of incorporation or
bylaws (or similar organizational documents), each as in effect on the Agreement
Date, or any currently effective resolution adopted by the board of directors or
stockholders of SBI or any SBI Subsidiary; (b) contravene, conflict with or
result in a violation of, or give any Regulatory Authority or other Person the
valid and enforceable right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which SBI or any SBI Subsidiary, or any of their respective assets that
are owned or used by them, may be subject, except for any contravention,
conflict or violation that is permissible by virtue of obtaining the regulatory
approvals necessitated by the Contemplated Transactions, including any such
approvals under the BHCA, the Federal Deposit Insurance Act, as amended (the
"FDIA"), the Securities Act, the Exchange Act, the DGCL and the Illinois Banking
Act (the "IBA"); (c) contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify any material Contract to which SBI or any SBI
Subsidiary is a party or by which any of their respective assets is bound; or
(d) result in the creation of any lien, charge or encumbrance upon or with
respect to any of the assets owned or used by SBI or any SBI Subsidiary. Except
for the approvals referred to in Section 8.1 and the requisite approval of its
stockholders, neither SBI nor any SBI Subsidiary is or will be required to give
any notice to or obtain any consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
SECTION 4.5 SBI CAPITALIZATION.
(a) The authorized capital stock of SBI consists, and immediately
prior to the Effective Time will consist, exclusively of 150,000 shares of SBI
Common Stock, $10.00 par value per share, of which 50,598 shares are, and
immediately prior to the Effective Time will be, duly authorized, validly issued
and outstanding and fully paid and non-assessable, and 13,402 shares are held by
SBI as treasury shares. SBI acknowledges that the Merger Consideration was
determined based upon the accuracy of the representations and warranties made in
this Section with respect to the number of outstanding shares of SBI Common
Stock
19
and the absence of any options or other rights to purchase additional shares of
SBI Common Stock, and acknowledges that any Breach of such representations and
warranties shall be deemed to have a Material Adverse Effect on SBI for purposes
of this Agreement.
(b) None of the shares of SBI Common Stock have been issued in
violation of any federal or state securities laws or any other Legal
Requirement. Since December 31, 2003, except as disclosed in SCHEDULE 4.5, no
shares of SBI capital stock have been purchased, redeemed or otherwise acquired,
directly or indirectly, by SBI or any SBI Subsidiary and no dividends or other
distributions payable in any equity securities of SBI or any SBI Subsidiary have
been declared, set aside, made or paid to the SBI Stockholders. To the Knowledge
of SBI, none of the shares of authorized capital stock of SBI are, nor on the
Closing Date will they be, subject to any claim of right inconsistent with this
Agreement. There are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls or other rights obligating SBI or any SBI
Subsidiary to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of SBI or any SBI Subsidiary, SBI
is not a party to any Contract relating to the issuance, purchase, sale or
transfer of any equity securities or other securities of SBI. Except for the
Bank Shares, as hereinafter defined, SBI does not own or have any Contract to
acquire any equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business.
SECTION 4.6 SBI SUBSIDIARY CAPITALIZATION. The authorized capital stock of
the Bank consists, and immediately prior to the Effective Time will consist
exclusively of 8,000 shares of common stock, $100.00 par value per share (the
"BANK SHARES"), all of which shares are, and immediately prior to the Effective
Time will be, duly authorized, validly issued and outstanding, fully paid and
nonassessable. SBI is, and will be on the Closing Date, the record and
beneficial owner of one hundred percent (100%) of the Bank Shares and all of the
issued and outstanding shares of capital stock of each other SBI Subsidiary,
free and clear of any lien or encumbrance whatsoever. The Bank Shares are, and
will be on the Closing Date, freely transferable and are, and will be on the
Closing Date, subject to no claim except pursuant to this Agreement. There are
no unexpired or pending preemptive rights with respect to any shares of capital
stock of any SBI Subsidiary. There are no outstanding securities of any SBI
Subsidiary that are convertible into or exchangeable for any shares of such SBI
Subsidiary's capital stock and no SBI Subsidiary is a party to any Contract
relating to the issuance, sale or transfer of any equity securities or other
securities of such SBI Subsidiary. Neither SBI nor any SBI Subsidiary owns or
has any Contract to acquire, any equity securities or other securities of any
Person or any direct or indirect equity or ownership interest in any other
business, except as set forth in SCHEDULE 4.6.
SECTION 4.7 FINANCIAL STATEMENTS AND REPORTS. True, correct and complete
copies of the following financial statements are included in SCHEDULE 4.7:
(a) audited Consolidated Balance Sheets for SBI as of December 31,
2001, 2002 and 2003, and the related audited Consolidated Statements of
20
Cash Flows and Consolidated Statements of Changes in Stockholders' Equity of SBI
for the years ended December 31, 2001, 2002 and 2003;
(b) unaudited Consolidated Balance Sheet for SBI as of September 30,
2004, and the related unaudited Consolidated Statement of Operations and
Statement of Cash Flows; and
(c) Call Reports for the Bank as of the close of business on December
31, 2002, 2003 and 2004.
The financial statements described in clause (a) have been prepared in
conformity with GAAP and comply in all material respects with all applicable
Legal Requirements. The financial statements described in clauses (b) and (c)
above have been prepared on a basis consistent with past accounting practices
and as required by applicable Legal Requirements and fairly present the
consolidated financial condition and results of operations at the dates and for
the periods presented. Taken together, the financial statements described in
clauses (a), (b) and (c) above (collectively, and including the notes thereto,
the "SBI FINANCIAL Statements") are complete and correct in all material
respects and fairly and accurately present the respective financial position,
assets, liabilities and results of operations of SBI and the Bank as at the
respective dates of, and for the periods referred to in, the SBI Financial
Statements, subject to normal year-end non-material audit adjustments in amounts
consistent with past practice in the case of the unaudited SBI Financial
Statements. The SBI Financial Statements do not include any material assets or
omit to state any material liabilities, absolute or contingent, or other facts,
which inclusion or omission would render the SBI Financial Statements misleading
in any material respect as of the respective dates and for the periods referred
to in the respective SBI Financial Statements.
SECTION 4.8 BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of SBI and each SBI Subsidiary are complete and
correct in all material respects and have been maintained in accordance with
SBI's business practices and all applicable Legal Requirements, including the
maintenance of any adequate system of internal controls required by Legal
Requirements. The minute books of SBI and each SBI Subsidiary contain accurate
and complete records in all material respects of all meetings held of, and
corporate action taken by, its respective stockholders, board of directors and
committees of the board of directors. At the Closing, all of those books and
records will be in the possession of SBI and the SBI Subsidiaries.
SECTION 4.9 TITLE TO PROPERTIES. SBI and each SBI Subsidiary has good and
marketable title to all assets and properties, whether real or personal,
tangible or intangible, that it purports to own, subject to no valid liens,
mortgages, security interests, encumbrances or charges of any kind except: (a)
as noted in the most recent SBI Financial Statement or in SCHEDULE 4.9; (b)
statutory liens for Taxes not yet delinquent or being contested in good faith by
appropriate Proceedings and for which appropriate reserves have been established
and reflected on the SBI Financial Statements; (c) pledges or liens required to
be granted in connection with the acceptance of government deposits, granted in
connection with repurchase
21
or reverse repurchase agreements, pursuant to borrowings from Federal Home Loan
Banks or similar borrowings, or otherwise incurred in the Ordinary Course of
Business; and (d) minor defects and irregularities in title and encumbrances
that do not materially impair the use thereof for the purposes for which they
are held (all of such exceptions in clauses (a) through (d) are collectively
referred to as "PERMITTED EXCEPTIONS"). Except as set forth in SCHEDULE 4.9, SBI
and each SBI Subsidiary as lessee has the right under valid and existing leases
to occupy, use, possess and control any and all of the respective property
leased by it. Except where any failure would not reasonably be expected to have
a Material Adverse Effect on SBI on a consolidated basis, all buildings and
structures owned by SBI and each SBI Subsidiary lie wholly within the boundaries
of the real property owned or validly leased by it, and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.
SECTION 4.10 CONDITION AND SUFFICIENCY OF ASSETS. The buildings,
structures and equipment of SBI and each SBI Subsidiary are structurally sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, structures or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in the aggregate in nature or in cost. Except
where any failure would not reasonably be expected to have a Material Adverse
Effect on SBI on a consolidated basis, the real property, buildings, structures
and equipment owned or leased by SBI and each SBI Subsidiary are in compliance
with the Americans with Disabilities Act of 1990, as amended, and the
regulations promulgated thereunder, and all other building and development codes
and other restrictions, including subdivision regulations, building and
construction regulations, drainage codes, health, fire and safety laws and
regulations, utility tariffs and regulations, conservation laws and zoning laws
and ordinances. The assets and properties, whether real or personal, tangible or
intangible, that SBI or any SBI Subsidiary purport to own are sufficient for the
continued conduct of the business of SBI and each SBI Subsidiary after the
Closing in substantially the same manner as conducted prior to the Closing.
SECTION 4.11 LOANS; ALLOWANCE FOR LOAN AND LEASE LOSSES. Except as set
forth in SCHEDULE 4.11, all loans and loan commitments extended by any SBI
Subsidiary and any extensions, renewals or continuations of such loans and loan
commitments (the "SBI LOANS") were made and have been maintained materially in
accordance with the lending policies of such SBI Subsidiary in the Ordinary
Course of Business. The SBI Loans are evidenced by appropriate and sufficient
documentation and constitute valid and binding obligations to such SBI
Subsidiary enforceable in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and subject to general principles of equity. All
such SBI Loans are, and at the Closing will be, free and clear of any
encumbrance or other charge (except for liens, if any, set forth in SCHEDULE
4.9) and each SBI Subsidiary has complied, and at the Closing will have complied
with all Legal Requirements relating to such SBI Loans, except where any such
failure to comply would not reasonably be expected to have a Material Adverse
Effect on SBI on a consolidated basis. The allowance for loan and lease losses
of each SBI Subsidiary is and will be on the Closing Date adequate in all
material respects to provide for possible or specific
22
losses, net of recoveries relating to loans previously charged off, and contains
and will contain an additional amount of unallocated reserves for probable
future losses at an adequate level. To the Knowledge of SBI: (i) none of the SBI
Loans is subject to any material offset or claim of offset; and (ii) the
aggregate loan balances in excess of the Bank's allowance for loan and lease
losses are, based on past loan loss experience, collectible in accordance with
their terms (except as limited above) and all uncollectible loans have been
charged off.
SECTION 4.12 UNDISCLOSED LIABILITIES; ADVERSE CHANGES. Except as set forth
in SCHEDULE 4.12, neither SBI nor any SBI Subsidiary has any material
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise), except for liabilities or obligations reflected or reserved
against in the SBI Financial Statements and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof. Except as set
forth in SCHEDULE 4.12, since the date of the latest SBI Financial Statement,
there has not been any change in the business, operations, properties,
prospects, assets or condition of SBI or any SBI Subsidiary, and, to SBI's
Knowledge, no event has occurred or circumstance exists, that has had or would
reasonably be expected to have a Material Adverse Effect on SBI on a
consolidated basis.
SECTION 4.13 TAXES. SBI and each SBI Subsidiary has duly filed all
material Tax Returns required to be filed by it, and each such Tax Return is
complete and accurate in all material respects. SBI and each SBI Subsidiary has
paid, or made adequate provision for the payment of, all Taxes (whether or not
reflected in Tax Returns as filed or to be filed) due and payable by SBI or any
SBI Subsidiary, or claimed to be due and payable by any Regulatory Authority,
and is not delinquent in the payment of any Tax, except such Taxes as are being
contested in good faith and as to which adequate reserves have been provided.
There is no claim or assessment pending or, to the Knowledge of SBI, Threatened
against SBI or any SBI Subsidiary for any Taxes owed by any of them. No audit,
examination or investigation related to Taxes paid or payable by SBI or any SBI
Subsidiary is presently being conducted or, to the Knowledge of SBI, Threatened
by any Regulatory Authority. SBI has delivered or made available to Princeton
true, correct and complete copies of all Tax Returns filed with respect to the
last three fiscal years by SBI and each SBI Subsidiary and any tax examination
reports and statements of deficiencies assessed or agreed to for any of SBI or
any SBI Subsidiary for any such time period.
SECTION 4.14 COMPLIANCE WITH ERISA. Except as set forth in SCHEDULE 4.14,
all employee benefit plans (as defined in Section 3(3) of ERISA) and all SBI
Employee Benefit Plans, as hereinafter defined, established or maintained by SBI
or any SBI Subsidiary or to which SBI or any SBI Subsidiary contributes, are in
compliance with all applicable requirements of ERISA, and are in compliance with
all applicable requirements (including qualification and non-discrimination
requirements in effect as of the Closing) of the Code for obtaining the tax
benefits the Code thereupon permits with respect to such employee benefit plans.
No such employee benefit plan has any amount of unfunded benefit liabilities (as
defined in Section 4001(a)(18) of ERISA) for which SBI or any SBI Subsidiary
would be liable to any Person under Title IV of ERISA if any such employee
benefit plan were terminated as of the Closing. Such employee benefit plans are
funded in accordance with Section 412 of the Code
23
(if applicable). There would be no obligations of SBI or any SBI Subsidiary
under Title IV of ERISA relating to any such employee benefit plan that is a
multi-employer plan if any such plan were terminated or if SBI or such SBI
Subsidiary withdrew from any such plan as of the Closing. All contributions and
premium payments that are due under any such benefit plans have been made.
SECTION 4.15 COMPLIANCE WITH LEGAL REQUIREMENTS. SBI and each SBI
Subsidiary holds all licenses, certificates, permits, franchises and rights from
all appropriate Regulatory Authorities necessary for the conduct of its
respective business. Except as set forth in SCHEDULE 4.15, each of SBI and each
SBI Subsidiary is, and at all times since January 1, 2002, has been, in
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its respective businesses or the ownership or use of any
of its respective assets, except where the failure to comply would not
reasonably be expected to have a Material Adverse Effect on SBI on a
consolidated basis. No event has occurred or circumstance exists that (with or
without notice or lapse of time): (a) may constitute or result in a violation by
SBI or any SBI Subsidiary of, or a failure on the part of SBI or any SBI
Subsidiary to comply with, any Legal Requirement; or (b) may give rise to any
obligation on the part of SBI or any SBI Subsidiary to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature in connection
with a failure to comply with any Legal Requirement; except, in either case,
where the failure to comply or the violation would not reasonably be expected to
have a Material Adverse Effect on SBI on a consolidated basis. Except as set
forth in SCHEDULE 4.15, neither SBI nor any SBI Subsidiary has received, at any
time since January 1, 2002, any notice or other communication (whether oral or
written) from any Regulatory Authority or any other Person, nor does SBI have
any Knowledge regarding: (x) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement; or (y) any
actual, alleged, possible or potential obligation on the part of SBI or any SBI
Subsidiary to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
Legal Requirement, except where any such violation, failure or obligation would
not reasonably be expected to have a Material Adverse Effect on SBI on a
consolidated basis.
SECTION 4.16 LEGAL PROCEEDINGS; ORDERS.
(a) SCHEDULE 4.16 is a true and correct list of all Proceedings and
Orders pending, entered into or, to the Knowledge of SBI, Threatened against,
affecting or involving SBI or any SBI Subsidiary or any of their respective
assets or businesses, or the Contemplated Transactions, since January 1, 2002,
that has not been fully satisfied and terminated and that would reasonably be
expected to have, a Material Adverse Effect on SBI on a consolidated basis, and
there is no fact to SBI's Knowledge that would provide a basis for any other
Proceeding or Order. To the Knowledge of SBI, no officer, director, agent or
employee of SBI or any SBI Subsidiary is subject to any Order that prohibits
such officer, director, agent or employee from engaging in or continuing any
conduct, activity or practice relating to the businesses of SBI or any SBI
Subsidiary as currently conducted.
24
(b) Neither SBI nor any SBI Subsidiary: (i) is subject to any cease
and desist or other Order or enforcement action issued by, or (ii) is a party to
any written agreement, consent agreement or memorandum of understanding with, or
(iii) is a party to any commitment letter or similar undertaking to, or (iv) is
subject to any order or directive by, or (v) is subject to any supervisory
letter from, or (vi) has been ordered to pay any civil money penalty, which has
not been paid, by, or (vii) has adopted any policies, procedures or board
resolutions at the request of, any Regulatory Authority that currently (w)
restricts in any material respect the conduct of its business or (x) that in any
material manner relates to its capital adequacy, or (y) restricts its ability to
pay dividends, or (z) limits in any material manner its credit or risk
management policies, its management or its business; nor has SBI or any SBI
Subsidiary been advised by any Regulatory Authority that it is considering
issuing, initiating, ordering or requesting any of the foregoing.
SECTION 4.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 4.17, since December 31, 2003, SBI and each SBI Subsidiary have
conducted their respective businesses only in the Ordinary Course of Business.
Without limiting the foregoing, except as set forth in SCHEDULE 4.17, with
respect to each, since December 31, 2003, there has not been any and, except as
permitted by Section 6.3 hereof, prior to the Effective Time there will not be
any:
(a) (i) change in its authorized or issued capital stock; (ii) grant
of any stock option or right to purchase shares of its capital stock; (iii)
issuance of any security convertible into such capital stock or evidences of
indebtedness (except in connection with customer deposits); (iv) grant of any
registration rights; (v) purchase, redemption, retirement or other acquisition
by it of any shares of any such capital stock; or (vi) declaration or payment of
any dividend or other distribution or payment in respect of shares of its
capital stock;
(b) amendment to its certificate or articles of incorporation, charter
or bylaws or adoption of any resolutions by its board of directors or
stockholders with respect to the same;
(c) payment or increase of any bonus, salary or other compensation to
any of its stockholders, directors, officers or employees, except for normal
increases in the Ordinary Course of Business or in accordance with any then
existing SBI Employee Benefit Plan disclosed in the SBI Schedules, or entry by
it into any employment, consulting, non-competition, change in control,
severance or similar Contract with any stockholder, director, officer or
employee;
(d) adoption, amendment (except for any amendment necessary to comply
with any Legal Requirement) or termination of, or increase in the payments to or
benefits under, any SBI Employee Benefit Plan;
(e) damage to or destruction or loss of any of its assets or property,
whether or not covered by insurance and where the resulting diminution in value
individually or in the aggregate is greater than $25,000;
25
(f) entry into, termination or extension of, or receipt of notice of
termination of any joint venture or similar agreement pursuant to any Contract
or any similar transaction;
(g) except for this Agreement, entry into any new, or modification,
amendment, renewal or extension (through action or inaction) of the terms of any
existing, lease, Contract or license that has a term of more than one year or
that involves the payment by SBI or any SBI Subsidiary of more than $25,000
annually or $100,000 in the aggregate;
(h) SBI Loan or commitment to make any SBI Loan other than in the
Ordinary Course of Business;
(i) SBI Loan or commitment to make, renew, extend the term or increase
the amount of any SBI Loan to any Person if such SBI Loan or any other SBI Loans
to such Person or an Affiliate of such Person is on the "watch list" or similar
internal report of SBI or any SBI Subsidiary, or has been classified by SBI or
any SBI Subsidiary or Regulatory Authority as "substandard," "doubtful," "loss,"
or "other loans specially mentioned" or listed as a "potential problem loan";
provided, however, that nothing in this Agreement shall prohibit SBI or any SBI
Subsidiary from honoring any contractual obligation in existence on the
Agreement Date;
(j) incurrence by it of any obligation or liability (fixed or
contingent) other than in the Ordinary Course of Business;
(k) sale (other than any sale in the Ordinary Course of Business),
lease or other disposition of any of its assets or properties, or mortgage,
pledge or imposition of any lien or other encumbrance upon any of its material
assets or properties, except for tax and other liens that arise by operation of
law and with respect to which payment is not past due, and except for pledges or
liens: (i) required to be granted in connection with the acceptance by any SBI
Subsidiary of government deposits; (ii) granted in connection with repurchase or
reverse repurchase agreements; or (iii) otherwise incurred in the Ordinary
Course of Business;
(l) cancellation or waiver by it of any claims or rights with a value
in excess of $25,000 or, if made in the Ordinary Course of Business, in excess
of $100,000;
(m) any investment by it of a capital nature exceeding $25,000 or
aggregate investments of a capital nature exceeding $50,000;
(n) except for the Contemplated Transactions, merger or consolidation
with or into any other Person, or acquisition of any stock, equity interest or
business of any other Person;
(o) transaction for the borrowing or loaning of monies, or any
increase in any outstanding indebtedness, other than in the Ordinary Course of
Business;
26
(p) material change in any policies and practices with respect to
liquidity management and cash flow planning, marketing, deposit origination,
lending, budgeting, profit and tax planning, accounting or any other material
aspect of its business or operations, except for such changes as may be required
in the opinion of the management of SBI to respond to then current market or
economic conditions or as may be required by any Regulatory Authorities;
(q) filing of any applications for additional branches, opening of any
new office or branch, closing of any current office or branch, or relocation of
operations from existing locations;
(r) discharge or satisfaction of any material lien or encumbrance on
its assets or repayment of any material indebtedness for borrowed money, except
for obligations incurred and repaid in the Ordinary Course of Business;
(s) entry into any Contract or agreement to buy, sell, exchange or
otherwise deal in any assets or series of assets in a single transaction in
excess of $25,000 in aggregate value or, if made in the Ordinary Course of
Business, in excess of $100,000 in aggregate value, except for sales of SBI
"other real estate owned" and other repossessed properties or the acceptance of
a deed in lieu of foreclosure;
(t) purchase or other acquisition of any investments, direct or
indirect, in any derivative securities, financial futures or commodities or
entry into any interest rate swap, floors and option agreements, or other
similar interest rate management agreements;
(u) hiring of any employee with an annual salary in excess of $25,000,
except for employees at will who are hired to replace employees who have
resigned or whose employment has otherwise been terminated; or
(v) agreement, whether oral or written, by it to do any of the
foregoing.
SECTION 4.18 PROPERTIES, CONTRACTS AND EMPLOYEE BENEFIT PLANS. Except for
Contracts evidencing SBI Loans made by the Bank in the Ordinary Course of
Business, SCHEDULE 4.18 lists or describes the following with respect to SBI and
each SBI Subsidiary:
(a) all real property owned by SBI and each SBI Subsidiary and the
principal buildings and structures located thereon, together with the address of
such real estate, and each lease of real property to which SBI and each SBI
Subsidiary is a party, identifying the parties thereto, the annual rental
payable, the expiration date thereof and a brief description of the property
covered, and in each case of either owned or leased real property, the proper
identification, if applicable, of each such property as a branch or main office
or other office of SBI or such SBI Subsidiary;
(b) all loan and credit agreements, conditional sales contracts or
other title retention agreements or security agreements relating to money
borrowed by SBI or any SBI Subsidiary, exclusive of deposit agreements with
customers of any SBI Subsidiary entered into
27
in the Ordinary Course of Business, agreements for the purchase of federal funds
and repurchase agreements;
(c) each Contract that involves performance of services or delivery of
goods or materials by SBI or any SBI Subsidiary of an amount or value in excess
of $10,000;
(d) each Contract that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts of SBI or any SBI Subsidiary
in excess of $10,000;
(e) each Contract not referred to elsewhere in this Section that:
(i) relates to the future purchase of goods or services that
materially exceeds the requirements of its respective business at current levels
or for normal operating purposes; or
(ii) materially affects the business or financial condition of
SBI or any SBI Subsidiary;
(f) each lease, rental, license, installment and conditional sale
agreement and other Contract affecting the ownership of, leasing of, title to or
use of, any personal property (except personal property leases and installment
and conditional sales agreements having a value per item or aggregate payments
of less than $10,000 or with terms of less than one year);
(g) each licensing agreement or other Contract with respect to
patents, trademarks, copyrights, or other intellectual property (collectively,
"INTELLECTUAL PROPERTY ASSETS"), including agreements with current or former
employees, consultants or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets of SBI or any SBI
Subsidiary;
(h) each collective bargaining agreement and other Contract to or with
any labor union or other employee representative of a group of employees;
(i) each joint venture, partnership and other Contract (however named)
involving a sharing of profits, losses, costs or liabilities by SBI or any SBI
Subsidiary with any other Person;
(j) each Contract containing covenants that in any way purport to
restrict the business activity of SBI or any SBI Subsidiary or any Affiliate of
any of the foregoing, or limit the ability of SBI or any SBI Subsidiary or any
Affiliate of the foregoing to engage in any line of business or to compete with
any Person;
(k) each Contract providing for payments to or by any Person based on
sales, purchases or profits, other than direct payments for goods;
28
(l) the name and annual salary of each director, officer or employee
of SBI and each SBI Subsidiary, and the profit sharing, bonus or other form of
compensation (other than salary) paid or payable by SBI, each SBI Subsidiary or
a combination of any of them to or for the benefit of each such person in
question for the year ended December 31, 2004, and for the current fiscal year,
and any employment agreement, consulting agreement, non-competition, severance
or change in control agreement or similar arrangement or plan with respect to
each such person;
(m) each profit sharing, group insurance, hospitalization, stock
option, pension, retirement, bonus, severance, change of control, deferred
compensation, stock bonus, stock purchase, employee stock ownership or other
employee welfare or benefit agreements, plans or arrangements established,
maintained, sponsored or undertaken by SBI or any SBI Subsidiary for the benefit
of the officers, directors or employees of SBI or any SBI Subsidiary, including
each trust or other agreement with any custodian or any trustee for funds held
under any such agreement, plan or arrangement, and all other Contracts or
arrangements under which pensions, deferred compensation or other retirement
benefits are being paid or may become payable by SBI or any SBI Subsidiary for
the benefit of the employees of SBI or any SBI Subsidiary (collectively, the
"SBI EMPLOYEE BENEFIT PLANS"), and, in respect to any of them, the latest
reports or forms, if any, filed with the Department of Labor and Pension Benefit
Guaranty Corporation under ERISA, any current financial or actuarial reports and
any currently effective Internal Revenue Service private rulings or
determination letters obtained by or for the benefit of SBI or any SBI
Subsidiary;
(n) the name of each Person who is or would be entitled pursuant to
any Contract or SBI Employee Benefit Plan to receive any payment from SBI or any
SBI Subsidiary as a result of the consummation of the Contemplated Transactions
(including any payment that is or would be due as a result of any actual or
constructive termination of a Person's employment or position following such
consummation) and the maximum amount of such payment;
(o) each Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by SBI or any SBI
Subsidiary to be responsible for consequential damages;
(p) each Contract for capital expenditures in excess of $10,000;
(q) each written and, to the Knowledge of SBI, any other warranty,
guaranty or other similar undertaking with respect to contractual performance
extended by SBI or any SBI Subsidiary other than in the Ordinary Course of
Business; and
(r) each amendment, supplement and modification in respect of any of
the foregoing.
Copies of each document, plan or Contract listed and described in SCHEDULE
4.18 are appended to such Schedule.
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SECTION 4.19 NO DEFAULTS. Except as set forth in SCHEDULE 4.19, to the
Knowledge of SBI, each Contract identified or required to be identified in
SCHEDULE 4.18 is in full force and effect and is valid and enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and subject to general principles of equity. SBI and each SBI
Subsidiary is, and at all times since January 1, 2001, has been, in full
compliance with all applicable terms and requirements of each Contract under
which either SBI or any SBI Subsidiary has or had any obligation or liability or
by which SBI or any SBI Subsidiary or any of their respective assets owned or
used by them is or was bound, except where the failure to be in full compliance
would not reasonably be expected to have a Material Adverse Effect on SBI on a
consolidated basis. To the Knowledge of SBI, each other Person that has or had
any obligation or liability under any such Contract under which SBI or any SBI
Subsidiary has or had any rights is, and at all times since January 1, 2001, has
been, in full compliance with all applicable terms and requirements of such
Contract, except where the failure to be in full compliance would not reasonably
be expected to have a Material Adverse Effect on SBI on a consolidated basis. No
event has occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with or result in a material violation or
breach of, or give SBI, any SBI Subsidiary or other Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any Contract. Except in the
Ordinary Course of Business with respect to any SBI Loan, neither SBI nor any
SBI Subsidiary has given to or received from any other Person, at any time since
January 1, 2001, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or breach of, or
default under, any Contract, that has not been terminated or satisfied prior to
the Agreement Date. Other than in the Ordinary Course of Business in connection
with workouts and restructured loans, there are no renegotiations of, attempts
to renegotiate, or outstanding rights to renegotiate, any material amounts paid
or payable to SBI or any SBI Subsidiary under current or completed Contracts
with any Person and no such Person has made written demand for such
renegotiation.
SECTION 4.20 INSURANCE. SCHEDULE 4.20 lists the policies and material
terms of insurance (including bankers' blanket bond and insurance providing
benefits for employees) owned or held by SBI or any SBI Subsidiary on the
Agreement Date. Each policy is in full force and effect (except for any expiring
policy which is replaced by coverage at least as extensive). All premiums due on
such policies have been paid in full.
SECTION 4.21 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
SCHEDULE 4.21, there are no actions, suits, investigations, liabilities,
inquiries, Proceedings or Orders involving SBI or any SBI Subsidiary or any of
their respective assets that are pending or, to the Knowledge of SBI,
Threatened, nor to the Knowledge of SBI is there any factual basis for any of
the foregoing, as a result of any asserted failure of SBI or any SBI Subsidiary,
or any predecessor thereof, to comply with any federal, state, county and
municipal law, including any statute, regulation, rule, ordinance, Order,
restriction and requirement, relating to underground storage tanks, petroleum
products, air pollutants, water pollutants or process waste water or otherwise
relating to the environment or toxic or hazardous substances or to the
manufacture, processing, distribution, use, recycling, generation, treatment,
handling, storage,
30
disposal or transport of any hazardous or toxic substances or petroleum products
(including polychlorinated biphenyls, whether contained or uncontained, and
asbestos-containing materials, whether friable or not), including, the Federal
Solid Waste Disposal Act, the Hazardous and Solid Waste Amendments, the Federal
Clean Air Act, the Federal Clean Water Act, the Occupational Health and Safety
Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of
1986, all as amended, and regulations of the Environmental Protection Agency,
the Nuclear Regulatory Agency and any state department of natural resources or
state environmental protection agency now or at any time hereafter in effect
(collectively, the "ENVIRONMENTAL LAWS"). No environmental clearances or other
governmental approvals are required for the conduct of the business of SBI or
any SBI Subsidiary or the consummation of the Contemplated Transactions. To the
Knowledge of SBI, neither SBI nor any SBI Subsidiary is the owner of any
interest in real estate on which any substances have been used, stored,
deposited, treated, recycled or disposed of, which substances if known to be
present on, at or under such property, would require clean-up, removal or some
other remedial action under any Environmental Law.
SECTION 4.22 REGULATORY FILINGS. SBI and each SBI Subsidiary have filed in
a timely manner all required filings with all Regulatory Authorities, including
the Federal Reserve, the FDIC and the DFPR. All such filings were accurate and
complete in all material respects as of the dates of the filings, and no such
filing has made any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
SECTION 4.23 FIDUCIARY ACCOUNTS. SBI and each SBI Subsidiary have properly
administered in all material respects all accounts for which any of them acts as
fiduciary, including accounts for which it serves as trustee, agent, custodian
or investment advisor, in accordance with the material terms of the governing
documents and applicable Legal Requirements and common law. Neither SBI nor any
SBI Subsidiary, nor, to the Knowledge of SBI, any of their respective directors,
officers or employees, has committed any breach of trust with respect to any
such fiduciary account, 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.
SECTION 4.24 INDEMNIFICATION CLAIMS. To SBI's Knowledge, no action or
failure to take action by any director, officer, employee or agent of SBI or any
SBI Subsidiary has occurred that may give rise to a claim or a potential claim
by any such Person for indemnification against SBI or any SBI Subsidiary under
any Contract with, or the corporate indemnification provisions of, SBI or any
SBI Subsidiary, or under any Legal Requirements.
SECTION 4.25 INSIDER INTERESTS. Except as set forth in SCHEDULE 4.25, no
officer or director of SBI or any SBI Subsidiary, or any member of the Family of
any such Person, and no entity that any such Person "controls" within the
meaning of Regulation O of the Federal Reserve, has any loan, deposit account or
any other agreement with SBI or any SBI Subsidiary,
31
any interest in any material property, real, personal or mixed, tangible or
intangible, used in or pertaining to the business of SBI or any SBI Subsidiary.
SECTION 4.26 BROKERAGE COMMISSIONS. Except as set forth in SCHEDULE 4.26,
none of SBI, any SBI Subsidiary or any of their respective Representatives has
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or the Contemplated Transactions. Copies of any agreements
referred to in SCHEDULE 4.26 are appended to such Schedule.
SECTION 4.27 APPROVAL DELAYS. To the Knowledge of SBI, there is no reason
why the granting of any of the regulatory approvals referred to in Section 8.1
of this Agreement, would be denied or unduly delayed. The Bank's most recent CRA
rating is "satisfactory" or better.
SECTION 4.28 CODE SECTIONS 280G AND 4999. Except as set forth in SCHEDULE
4.28, no payment that is owed or may become due to any director, officer,
employee or agent of SBI or any SBI Subsidiary will be non-deductible to SBI or
any SBI Subsidiary (or, following the Merger, Princeton) or subject to tax under
Section 280G or Section 4999 of the Code, nor will SBI or any SBI Subsidiary
(or, following the Merger, Princeton) be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person. Except to the extent required under Section 601 et seq.
of ERISA and Section 4980B of the Code, and except as set forth in SCHEDULE
4.28, neither SBI nor any SBI Subsidiary provides health or welfare benefits to
any active employee following such employee's retirement or other termination of
service.
SECTION 4.29 DISCLOSURE. Neither any representation nor warranty of SBI
in, nor any SBI Schedule to, this Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. No notice given pursuant to Section 6.8 of
this Agreement, will contain any untrue statement or omit to state a material
fact necessary to make the statements therein or in this Agreement, in light of
the circumstances under which they were made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
PRINCETON AND ACQUISITION COMPANY
Princeton and Acquisition Company hereby represent and warrant to SBI that
the following are true and correct as of the Agreement Date, and will be true
and correct as of the Effective Date:
SECTION 5.1 PRINCETON ORGANIZATION. Princeton: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is also in good standing in the State of Illinois and in each other
jurisdiction in which the nature of business conducted or the properties or
assets owned or leased by it makes such qualification necessary; (b) is
registered with the Federal Reserve as a bank holding company under the
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BHCA; and (c) has full power and authority, corporate and otherwise, to operate
as a bank holding company and to own, operate and lease its properties as
presently owned, operated and leased, and to carry on its business as it is now
being conducted. Copies of the certificate of incorporation and bylaws of
Princeton and all amendments thereto are set forth in the Princeton SEC
Documents and are complete and correct. Princeton has no Subsidiaries other than
Acquisition Company and as set forth in the Princeton SEC Documents.
SECTION 5.2 PRINCETON SUBSIDIARY ORGANIZATION. Each Princeton Subsidiary
is duly organized, validly existing, and in good standing in its state or
jurisdiction of organization. Each Princeton Subsidiary has full power and
authority, corporate and otherwise, to own, operate and lease its properties as
presently owned, operated and leased, and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted or the
properties or assets owned or leased by it makes such qualification necessary.
SECTION 5.3 AUTHORIZATION; ENFORCEABILITY.
(a) Each of Princeton and Acquisition Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement by
Princeton and Acquisition Company, and the consummation by each of them of its
respective obligations under this Agreement, have been authorized by all
necessary corporate action, and this Agreement constitutes a legal, valid and
binding obligation of each of Princeton and Acquisition Company enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and subject to general principles of equity.
(b) Except for ordinary corporate requirements, no "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation or any provisions contained in the certificate of incorporation or
bylaws or similar organizational documents of any of Princeton or any Princeton
Subsidiary: (i) prohibits or restricts Princeton's ability to perform its
obligations under this Agreement, or its ability to consummate the Contemplated
Transactions; (ii) would have the effect of invalidating or voiding this
Agreement, or any provision hereof; or (iii) would subject SBI to any material
impediment or condition in connection with the exercise of any of its rights
under this Agreement. The board of directors of Princeton has unanimously
approved the execution of, and performance by Princeton of its obligations
under, this Agreement, and the board of directors and the sole stockholder of
Acquisition Company have each approved the execution of, and performance by
Acquisition Company of its obligations under, this Agreement.
SECTION 5.4 NO CONFLICT. Except as set forth in SCHEDULE 5.4, neither the
execution nor delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time): (a) contravene, conflict with or result in a
violation of any provision of the certificate of incorporation or charter or
bylaws (or similar organization documents), each as in effect on the
33
Agreement Date, or any currently effective resolution adopted by the board of
directors or stockholders of, Princeton or any Princeton Subsidiary; or (b)
contravene, conflict with or result in a violation of, or give any Regulatory
Authority or other Person the valid and enforceable right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Princeton or any Princeton
Subsidiary, or any of their respective assets that are owned or used by them,
may be subject, except for any contravention, conflict or violation that is
permissible by virtue of obtaining the regulatory approvals necessitated by the
Contemplated Transactions, including any such approvals under the BHCA, the NBA,
the Securities Act, the Exchange Act, the DGCL, the IBCA and the IBA. Except for
the approvals referred to in Section 8.1 of this Agreement, neither Princeton
nor any Princeton Subsidiary is or will be required to give any notice to or
obtain any consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
SECTION 5.5 PRINCETON CAPITALIZATION. The authorized capital stock of
Princeton at January 31, 2005, consisted of: (a) 7,000,000 shares of common
stock, $5.00 par value per share, of which: (i) 3,058,967 shares were duly
issued and outstanding, fully paid and non-assessable; (ii) 1,080,874 shares
were held in the treasury of Princeton as of that date; and (iii) 502,500 shares
have been reserved for issuance in respect of outstanding stock options that
have been or may be granted under existing option plans of Princeton by
Princeton or otherwise; and (b) 100,000 shares of preferred stock, no par value
per share, none of which shares were issued and outstanding. None of the shares
of Princeton Common Stock were issued in violation of any federal or state
securities laws or any other Legal Requirement. Since January 31, 2005, except
as disclosed in or permitted by this Agreement or as provided in SCHEDULE 5.5 or
the Princeton SEC Documents, no shares of Princeton capital stock have been
purchased, redeemed or otherwise acquired, directly or indirectly, by Princeton
or any Princeton Subsidiary and no dividends or other distributions payable in
any equity securities of Princeton or any Princeton Subsidiary have been
declared, set aside, made or paid to the stockholders of Princeton. To the
Knowledge of Princeton, none of the shares of authorized capital stock of
Princeton are, nor on the Closing Date will they be, subject to any claim of
right inconsistent with this Agreement. Except as contemplated in this Agreement
or as set forth in SCHEDULE 5.5 or the Princeton SEC Documents, there are, as of
the Agreement Date, no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls or other rights obligating Princeton or any
Princeton Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of Princeton or any
Princeton Subsidiary, and except as provided in this Section or otherwise
disclosed in this Agreement, Princeton is not a party to any Contract relating
to the issuance, purchase, sale or transfer of any equity securities or other
securities of Princeton. Princeton does not own or have any Contract to acquire
any equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business except for the
shares of Acquisition Company and as set forth in SCHEDULE 5.5 or the Princeton
SEC Documents.
SECTION 5.6 PRINCETON SUBSIDIARY CAPITALIZATION. Except as disclosed in
any Princeton SEC Documents, Princeton is, and will be on the Closing Date, the
record and beneficial owner of one hundred percent (100%) of the issued and
outstanding shares of capital
34
stock or other equity securities of each Princeton Subsidiary, free and clear of
any lien or encumbrance whatsoever. Except as disclosed in any Princeton SEC
Documents or for such rights held exclusively by Princeton, there are no
unexpired or pending preemptive rights with respect to any shares of capital
stock of any Princeton Subsidiary. Except as disclosed in any Princeton SEC
Documents, or for such rights held exclusively by Princeton, there are no
outstanding securities of any Princeton Subsidiary that are convertible into, or
exchangeable for, any shares of such Princeton Subsidiary's capital stock or
other equity securities, and no Princeton Subsidiary is a party to any Contract
relating to the issuance, sale or transfer of any equity securities or other
securities of such Princeton Subsidiary.
SECTION 5.7 FINANCIAL STATEMENTS AND REPORTS. Princeton has timely filed
all Princeton SEC Documents and all such Princeton SEC Documents have complied
in all material respects, as of their respective filing dates and effective
dates, as the case may be, with all applicable requirements of the Exchange Act.
As of their respective filing dates, none of the Princeton SEC Documents
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.8 UNDISCLOSED LIABILITIES; ADVERSE CHANGES. Except as set forth
in SCHEDULE 5.8 or the Princeton SEC Reports, neither Princeton nor any
Princeton Subsidiary has any material liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise), except for liabilities or
obligations reflected or reserved against in the Princeton SEC Reports, and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof. Since the date of the latest Princeton SEC Report,
there has not been any change in the business, operations, properties,
prospects, assets or condition of Princeton or any Princeton Subsidiary, and, to
Princeton's Knowledge, no event has occurred or circumstance exists, that has
had, or would reasonably be expected to have, a Material Adverse Effect on
Princeton on a consolidated basis.
SECTION 5.9 COMPLIANCE WITH LEGAL REQUIREMENTS. Princeton and each
Princeton Subsidiary holds all licenses, certificates, permits, franchises and
rights from all appropriate Regulatory Authorities necessary for the conduct of
its respective business. Except as set forth in SCHEDULE 5.9 or the Princeton
SEC Reports, Princeton and each Princeton Subsidiary is, and at all times since
January 1, 2001, has been, in compliance with each Legal Requirement that is or
was applicable to it or to the conduct or operation of its respective businesses
or the ownership or use of any of its respective assets, except where the
failure to comply would not reasonably be expected to have a Material Adverse
Effect on Princeton on a consolidated basis. No event has occurred or
circumstance exists that (with or without notice or lapse of time): (a) may
constitute or result in a violation by Princeton or any Princeton Subsidiary of,
or a failure on the part of Princeton or any Princeton Subsidiary to comply
with, any Legal Requirement; or (b) may give rise to any obligation on the part
of Princeton or any Princeton Subsidiary to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature in connection with a
failure to comply with any Legal Requirement; except where the failure to comply
would not reasonably be expected to have a Material Adverse Effect on Princeton
on a consolidated basis. Except as set forth in SCHEDULE 5.9 or the Princeton
SEC
35
Reports, neither Princeton nor any Princeton Subsidiary has received, at any
time since January 1, 2001, any notice or other communication (whether oral or
written) from any Regulatory Authority or any other Person regarding: (x) any
actual, alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement; or (y) any actual, alleged, possible, or potential
obligation on the part of Princeton or any Princeton Subsidiary to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature in
connection with a failure to comply with any Legal Requirement, except where any
such violation, failure or obligation would not reasonably be expected to have a
Material Adverse Effect on Princeton on a consolidated basis.
SECTION 5.10 LEGAL PROCEEDINGS; ORDERS. Except as disclosed in the
Princeton SEC Documents, there have been no Proceedings or Orders pending,
entered into or, to the Knowledge of Princeton, Threatened against, affecting or
involving Princeton or any Princeton Subsidiary or any of their respective
assets or businesses, or the Contemplated Transactions, since January 1, 2001,
that had, or would reasonably be expected to have, a Material Adverse Effect on
Princeton on a consolidated basis or that would materially impair Princeton's
ability to consummate any of the Contemplated Transactions, and there is no fact
to Princeton's Knowledge that would provide a basis for any other Proceeding or
Order involving Princeton or any Princeton Subsidiary, or any of its respective
officers or directors in their capacities as such, or its assets, business or
goodwill that would reasonably be expected to have a Material Adverse Effect on
Princeton on a consolidated basis or that would materially impair Princeton's
ability to consummate any of the Contemplated Transactions.
SECTION 5.11 BROKERAGE COMMISSIONS. Except as set forth in SCHEDULE 5.11,
neither Princeton nor any Princeton Subsidiary, nor any of their respective
Representatives, has incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or the Contemplated
Transactions.
SECTION 5.12 APPROVAL DELAYS. To the Knowledge of Princeton, there is no
reason why the granting of any of the regulatory approvals referred to in
Section 8.1 of this Agreement, would be denied or unduly delayed. The CRA rating
of Citizens Bank, which is the only Princeton subsidiary that is a "depository
institution," as defined by the FDIA, is "satisfactory" or better.
SECTION 5.13 DISCLOSURE. Neither any representation nor warranty of
Princeton in, nor any Princeton Schedule to, this Agreement contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which they were made, not misleading. No notice given pursuant to Section
7.3 of this Agreement, will contain any untrue statement or omit to state a
material fact necessary to make the statements therein, or in this Agreement, in
light of the circumstances in which they were made, not misleading.
SECTION 5.14 FINANCIAL RESOURCES. To the Knowledge of Princeton, there is
no reason why Princeton will not have sufficient cash available on the Closing
Date to enable it to
36
comply with its obligation to fund the cash portion of the Merger Consideration
and to perform its other obligations under this Agreement.
SECTION 5.15 LOANS; ALLOWANCE FOR LOAN AND LEASE LOSSES. Except as set
forth in SCHEDULE 5.15, all loans and loan commitments extended by any Princeton
Subsidiary and any extensions, renewals or continuations of such loans and loan
commitments (the "PRINCETON LOANS") were made and have been maintained
materially in accordance with the lending policies of such Princeton Subsidiary
in the Ordinary Course of Business. The Princeton Loans are evidenced by
appropriate and sufficient documentation and constitute valid and binding
obligations to such Princeton Subsidiary enforceable in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally and subject
to general principles of equity. All such Princeton Loans are, and at the
Closing will be, free and clear of any encumbrance or other charge (except for
liens, if any, as set forth in SCHEDULE 5.15) and each Princeton Subsidiary has
complied, and at the Closing will have complied with all Legal Requirements
relating to such Princeton Loans, except where any such failure to comply would
not reasonably be expected to have a Material Adverse Effect on Princeton on a
consolidated basis. The allowance for loan and lease losses of each Princeton
Subsidiary is and will be on the Closing Date adequate in all material respects
to provide for possible or specific losses, net of recoveries relating to loans
previously charged off, and contains and will contain an additional amount of
unallocated reserves for unanticipated future losses at an adequate level. To
the Knowledge of Princeton: (i) none of the Princeton Loans is subject to any
material offset or claim of offset; and (ii) the aggregate loan balances in
excess of the Citizens Bank's allowance for loan and lease losses are, based on
past loan loss experience, collectible in accordance with their terms (except as
limited above) and all uncollectible loans have been charged off.
SECTION 5.16 UNDISCLOSED LIABILITIES; ADVERSE CHANGES. Except as set forth
in SCHEDULE 5.16, neither Princeton nor any Princeton Subsidiary has any
material liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise), except for liabilities or obligations reflected or
reserved against in the Princeton SEC Documents and current liabilities incurred
in the Ordinary Course of Business since the respective dates thereof. Except as
set forth in SCHEDULE 5.16, since the date of the latest Princeton SEC
Documents, there has not been any change in the business, operations,
properties, prospects, assets or condition of Princeton or any Princeton
Subsidiary, and, to Princeton's Knowledge, no event has occurred or circumstance
exists, that has had or would reasonably be expected to have a Material Adverse
Effect on Princeton on a consolidated basis.
SECTION 5.17 TAXES. Princeton and each Princeton Subsidiary has duly filed
all material Tax Returns required to be filed by it, and each such Tax Return is
complete and accurate in all material respects. Princeton and each Princeton
Subsidiary has paid, or made adequate provision for the payment of, all Taxes
(whether or not reflected in Tax Returns as filed or to be filed) due and
payable by Princeton or any Princeton Subsidiary, or claimed to be due and
payable by any Regulatory Authority, and is not delinquent in the payment of any
Tax, except such Taxes as are being contested in good faith and as to which
adequate reserves have been provided. There is no claim or assessment pending
or, to the Knowledge of Princeton,
37
Threatened against Princeton or any Princeton Subsidiary for any Taxes owed by
any of them. No audit, examination or investigation related to Taxes paid or
payable by Princeton or any Princeton Subsidiary is presently being conducted
or, to the Knowledge of Princeton, Threatened by any Regulatory Authority.
SECTION 5.18 COMPLIANCE WITH ERISA. Except as set forth in SCHEDULE 5.18,
all employee benefit plans (as defined in Section 3(3) of ERISA) established or
maintained by Princeton or any Princeton Subsidiary or to which Princeton or any
Princeton Subsidiary contributes, are in compliance with all applicable
requirements of ERISA, and are in compliance with all applicable requirements
(including qualification and non-discrimination requirements in effect as of the
Closing) of the Code for obtaining the tax benefits the Code thereupon permits
with respect to such employee benefit plans. No such employee benefit plan has
any amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA) for which Princeton or any Princeton Subsidiary would be liable to any
Person under Title IV of ERISA if any such employee benefit plan were terminated
as of the Closing. Such employee benefit plans are funded in accordance with
Section 412 of the Code (if applicable). There would be no obligations of
Princeton or any Princeton Subsidiary under Title IV of ERISA relating to any
such employee benefit plan that is a multi-employer plan if any such plan were
terminated or if Princeton or such Princeton Subsidiary withdrew from any such
plan as of the Closing. All contributions and premium payments that are due
under any such benefit plans have been made.
SECTION 5.19 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
SCHEDULE 5.19, there are no actions, suits, investigations, liabilities,
inquiries, Proceedings or Orders involving Princeton or any Princeton Subsidiary
or any of their respective assets that are pending or, to the Knowledge of
Princeton, Threatened, nor to the Knowledge of Princeton is there any factual
basis for any of the foregoing, as a result of any asserted failure of Princeton
or any Princeton Subsidiary, or any predecessor thereof, to comply with any
Environmental Laws. No environmental clearances or other governmental approvals
are required for the conduct of the business of Princeton or any Princeton
Subsidiary or the consummation of the Contemplated Transactions. To the
Knowledge of Princeton, neither Princeton nor any Princeton Subsidiary is the
owner of any interest in real estate on which any substances have been used,
stored, deposited, treated, recycled or disposed of, which substances if known
to be present on, at or under such property, would require clean-up, removal or
some other remedial action under any Environmental Law.
ARTICLE 6
SBI'S COVENANTS
SECTION 6.1 ACCESS AND INVESTIGATION.
(a) Princeton and its Representatives shall, at all times during
normal business hours and with reasonable advance notice prior to the Closing
Date, have full and continuing access to the facilities, operations, records and
properties of SBI and each SBI
38
Subsidiary in accordance with the provisions of this Section. Princeton and its
Representatives may, prior to the Closing Date, make or cause to be made such
reasonable investigation of the operations, records and properties of SBI and
each SBI Subsidiary and of their respective financial and legal condition as
Princeton shall deem necessary or advisable to familiarize itself with such
records, properties and other matters; provided, however, that such access or
investigation shall not interfere unnecessarily with the normal operations of
SBI or any SBI Subsidiary. Upon request, SBI and each SBI Subsidiary will
furnish Princeton or its Representatives, attorneys' responses to auditors'
requests for information regarding SBI or such SBI Subsidiary, as the case may
be, and such financial and operating data and other information reasonably
requested by Princeton (provided, with respect to attorneys, such disclosure
would not result in the waiver by SBI or any SBI Subsidiary of any claim of
attorney-client privilege), and will permit Princeton and its Representatives to
discuss such information directly with any individual or firm performing
auditing or accounting functions for SBI or such SBI Subsidiary, and such
auditors and accountants shall be directed to furnish copies of any reports or
financial information as developed to Princeton or its Representatives. No
investigation by Princeton or any of its Representatives shall affect the
representations and warranties made by SBI. This Section shall not require the
disclosure of any information the disclosure of which to Princeton would be
prohibited by any Legal Requirement.
(b) SBI shall allow a representative of Princeton to attend as an
observer all meetings of the board of directors and committees of the board of
directors of SBI and any SBI Subsidiary, including any meeting of the loan
committee and asset liability management committee of SBI or any SBI Subsidiary.
SBI shall give reasonable notice to Princeton of any such meeting and, if known,
the agenda for or business to be discussed at such meeting. SBI shall provide to
Princeton all information provided to the directors on all such boards or
members of such committees in connection with all such meetings or otherwise
provided to the directors or members, and shall provide any other financial
reports or other analysis prepared for senior management of SBI or any SBI
Subsidiary, in each case excluding information which is privileged or is subject
to any restriction on disclosure. It is understood by the parties that
Princeton's representative will not have any voting rights with respect to
matters discussed at these meetings and that Princeton is not managing the
business or affairs of SBI or any SBI Subsidiary. All information obtained by
Princeton at these meetings shall be treated in confidence as provided in that
certain Confidentiality Agreement dated February, 2005, between Princeton and
SBI (the "SBI CONFIDENTIALITY AGREEMENT"). Notwithstanding the foregoing,
Princeton shall not be permitted to attend any portion of a meeting and SBI
shall not be required to provide Princeton with any materials, in violation of
applicable law or that relates to an Acquisition Transaction (as defined below),
except for information to be provided as required by Section 6.9 of this
Agreement, or that involve matters protected by the attorney-client privilege or
matters arising out of or related to this Agreement.
(c) Any confidential information or trade secrets of Princeton
received by SBI, its employees or agents in the course of the consummation of
the Contemplated Transactions shall be treated confidentially in accordance with
the terms of the Confidentiality Agreement.
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SECTION 6.2 OPERATION OF SBI AND SBI SUBSIDIARIES. Except with the prior
written consent of Princeton, between the Agreement Date and the Closing Date,
SBI will, and will cause each SBI Subsidiary, to:
(a) conduct its business only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current business
organization of SBI and each SBI Subsidiary, keep available the services of the
current officers, employees and agents of SBI and each SBI Subsidiary, and
maintain the goodwill of suppliers, customers, landlords, creditors, employees,
agents and others who have business relationships with SBI or any SBI
Subsidiary;
(c) confer with Princeton concerning operational matters of a material
nature;
(d) enter into loan transactions only in accordance with sound credit
practices and only on terms and conditions that are not materially more
favorable than those available to the borrower from competitive sources in
arm's-length transactions, and in that connection, from the date hereof to the
Closing Date, shall not:
(i) enter into any new credit or new lending relationships in
excess of $250,000 to any Person and such Person's Borrowing Affiliate (as
defined below); or
(ii) other than incident to a reasonable loan restructuring,
extend additional credit to any Person and any director or officer of, or any
owner of a ten percent (10%) or greater equity interest in, such Person (any of
the foregoing with respect to a Person being referred to as a "BORROWING
AFFILIATE") if such Person or such Borrowing Affiliate is the obligor under any
indebtedness to any SBI Subsidiary which constitutes a non-performing loan or
against any part of such indebtedness any SBI Subsidiary has established loss
reserves or any part of which has been charged-off by any SBI Subsidiary;
provided, however, that a SBI Subsidiary shall be permitted to make any loan
that is otherwise prohibited by this subsection with the prior written consent
of Princeton, or if a SBI Subsidiary has made a written request for permission
to make an otherwise prohibited loan and has provided Princeton with all
information necessary for Princeton to make an informed decision with respect to
such request, and Princeton has failed to respond to such request within five
(5) Business Days after Princeton's receipt of such request and all such
information;
(e) consistent with Bank policies and Legal Requirements, maintain an
allowance for possible loan and lease losses which is adequate in all material
respects under the requirements of GAAP to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding
(including accrued interest receivable), and charge-off any loans or leases that
would be deemed uncollectible in accordance with Bank policies, GAAP or any
Legal Requirements and place on non-accrual any loans or leases that are past
due greater than ninety (90) days;
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(f) maintain all of its assets necessary for the conduct of its
business in good operating condition and repair, reasonable wear and tear and
damage by fire or unavoidable casualty excepted, and maintain policies of
insurance upon its assets and with respect to the conduct of its business in
amounts and kinds comparable to that in effect on the date hereof and pay all
premiums on such policies when due;
(g) not buy or sell any security, but such restriction shall not
affect the buying and selling by any SBI Subsidiary of Federal Funds or the
reinvestment of dividends paid on any securities owned by any SBI Subsidiary as
of the date of this Agreement;
(h) file in a timely manner all required filings with all Regulatory
Authorities and cause such filings to be true and correct in all material
respects;
(i) maintain its books, accounts and records in the Ordinary Course of
Business, on a basis consistent with prior years;
(j) comply with all Legal Requirements and Contracts;
(k) report periodically to Princeton concerning the status of the
business, operations and finances of SBI and the SBI Subsidiaries; and
(l) accrue one-half of the costs of the employee sick leave which has
been accumulated, but is unused, as of the Determination Date, pursuant to SBI's
and any SBI Subsidiary's sick leave policy (the "SICK LEAVE ACCRUAL").
SECTION 6.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, SBI
will not, and will cause each SBI Subsidiary not to, without the prior written
consent of Princeton, take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or
events listed in Section 4.17 of this Agreement, is likely to occur.
SECTION 6.4 SUBSEQUENT SBI FINANCIAL STATEMENTS. As soon as available
after the date hereof, SBI will furnish Princeton copies of the annual audited
and quarterly unaudited consolidated balance sheets, consolidated statements of
income, consolidated statements of cash flow and consolidated statements of
changes in stockholders' equity, of SBI and the Call Reports of any SBI
Subsidiary for each annual or quarterly period completed after December 31,
2004, and all monthly and other financial reports or statements submitted after
the date hereof by SBI or any SBI Subsidiary to the Board of Directors of SBI or
any SBI Subsidiary or to any Regulatory Authority, to the extent permitted by
law (collectively, the "SUBSEQUENT SBI FINANCIAL STATEMENTS"). Except as may be
required by changes in GAAP effective after the date hereof, the Subsequent SBI
Financial Statements shall be prepared on a basis consistent with past
accounting practices and shall fairly present in all material respects the
consolidated financial condition and results of operations for the dates and
periods presented. The Subsequent SBI Financial Statements will not include any
material assets or omit to state any material liabilities, absolute or
contingent, or other facts, which inclusion or
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omission would render such Subsequent SBI Financial Statements misleading in any
material respect.
SECTION 6.5 TITLE TO REAL ESTATE. As soon as practical, but in no event
later than sixty (60) days after the Agreement Date, SBI shall obtain, at its
own expense, and deliver to Princeton, with respect to all real estate owned by
SBI or any SBI Subsidiary, excluding any "Other Real Estate Owned," (the "SBI
REAL ESTATE"), an owner's preliminary report of title covering a date subsequent
to the date hereof, issued by Chicago Title Insurance Company or such other
title insurance company as is reasonably acceptable to Princeton, showing fee
simple title in SBI or the SBI Subsidiary in such real estate with coverage over
all standard exceptions and subject to no liens, mortgages, security interests,
encumbrances or charges of any kind except for the Permitted Exceptions.
SECTION 6.6 SURVEYS. If requested by Princeton, by no later than sixty
(60) days after the Agreement Date SBI shall obtain, at Princeton's expense, and
deliver to Princeton a current ALTA survey of each parcel of SBI Real Estate
disclosing no survey defects that would materially impair the use thereof for
the purposes for which it is held or materially impair the value of such
property.
SECTION 6.7 ENVIRONMENTAL INVESTIGATION.
(a) If requested by Princeton, not later than forty-five (45) Business
Days after the Agreement Date, SBI shall provide to Princeton, at SBI's expense,
a Phase 1 environmental site assessment with respect to each parcel of SBI Real
Estate (the "PHASE 1 REPORTS") conducted by an independent professional
consultant reasonably acceptable to Princeton to determine if any SBI Real
Estate contains or gives evidence that any violations of Environmental Laws have
occurred on any such property. If the Phase 1 Reports disclose any material
adverse environmental conditions, or report a reasonable suspicion thereof, then
Princeton shall be permitted to obtain, at Princeton's expense, a Phase 2
environmental report with respect to any affected property which report shall
contain an estimate of the cost of any remediation or other follow-up work that
may be necessary to address those conditions in accordance with applicable laws
and regulations (the "PHASE 2 REPORT," and collectively referred to with the
Phase 1 Report, as the "ENVIRONMENTAL REPORTS"). Princeton shall have no duty to
act for the benefit of SBI, any SBI Subsidiary or any other Person upon any
information produced by the Environmental Reports, but shall provide such
information to SBI as soon as practicable after such information becomes
available to Princeton.
(b) Upon receipt of the estimate of the costs of all follow-up work to
the Environmental Reports, Princeton and SBI shall attempt to agree upon a
course of action for remediation of any environmental condition suspected, found
to exist, or that would tend to be indicated by the Environmental Reports. The
estimated total cost for completing all necessary work plans or removal or
remediation actions is referred to collectively as the "REMEDIATION COST."
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SECTION 6.8 ADVICE OF CHANGES. Between the Agreement Date and the Closing
Date, SBI shall promptly notify Princeton in writing if SBI or any SBI
Subsidiary becomes aware of any fact or condition that causes or constitutes a
Breach of any of SBI's representations and warranties as of the Agreement Date,
or if SBI or any SBI Subsidiary becomes aware of the occurrence after the
Agreement Date of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. If any such fact
or condition would require any change in the Schedules if such Schedules were
dated the date of the occurrence or discovery of any such fact or condition, SBI
will promptly deliver to Princeton a supplement to the Schedules specifying such
change. During the same period, SBI will promptly notify Princeton of the
occurrence of any Breach of any covenant of SBI in this Agreement or of the
occurrence of any event that might reasonably be expected to make the
satisfaction of the conditions in Article 9 of this Agreement, impossible or
unlikely.
SECTION 6.9 OTHER OFFERS.
(a) Until such time, if any, as this Agreement is terminated pursuant
to Article 11 of this Agreement, SBI will not, and will cause each SBI
Subsidiary and their respective Representatives not to, directly or indirectly
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Princeton)
relating to any Acquisition Transaction (as defined below) or a potential
Acquisition Transaction involving SBI or any SBI Subsidiary. Notwithstanding
such foregoing restriction, SBI may provide information at the request of, or
enter into negotiations with, a third party with respect to an Acquisition
Transaction if the board of directors of SBI determines, in good faith, that the
exercise of its fiduciary duties to SBI's stockholders under applicable law, as
advised by its counsel, requires it to take such action, and, provided further,
that SBI may not, in any event, provide to such third party any information
which it has not provided to Princeton. SBI shall promptly notify Princeton
orally and in writing in the event it receives any such inquiry or proposal and
shall provide reasonable detail of all relevant facts relating to such
inquiries, along with a summary of the advice provided by its counsel.
(b) "ACQUISITION TRANSACTION" shall, with respect to SBI, mean any of
the following: (i) a merger or consolidation, or any similar transaction (other
than the Merger) of any company with either SBI or any significant subsidiary,
as defined in Rule 1.2 of Regulation S-X of the SEC (a "SIGNIFICANT
SUBSIDIARY"), of SBI; (ii) a purchase, lease or other acquisition of all or
substantially all the assets of either SBI or any Significant Subsidiary of SBI;
(iii) a purchase or other acquisition of "beneficial ownership" by any "person"
or "group" (as such terms are defined in Section 13(d)(3) of the Exchange Act)
(including by way of merger, consolidation, share exchange or otherwise) that
would cause such person or group to become the beneficial owner of securities
representing twenty percent (20%) or more of the voting power of either SBI or
any Significant Subsidiary of SBI; (iv) a tender or exchange offer to acquire
securities representing twenty percent (20%) or more of the voting power of SBI;
(v) a public proxy or consent solicitation made to SBI Stockholders seeking
43
proxies in opposition to any proposal relating to any aspect of the Contemplated
Transactions that has been recommended by the board of directors of SBI; (vi)
the filing of an application or notice with any Regulatory Authority (which
application has been accepted for processing) seeking approval to engage in one
or more of the transactions referenced in clauses (i) through (v) above; or
(vii) the making of a bona fide proposal to SBI or its stockholders, by public
announcement or written communication, that is or becomes the subject of public
disclosure, to engage in one or more of the transactions referenced in clauses
(i) through (v) above.
SECTION 6.10 VOTING AGREEMENT. Concurrently with the execution and
delivery of this Agreement, SBI shall deliver to Princeton a voting agreement in
the form of EXHIBIT D, signed by all directors and executive officers of SBI who
are SBI Stockholders.
SECTION 6.11 NON-COMPETITION AGREEMENT. Concurrently with the execution
and delivery of this Agreement, SBI shall deliver to Princeton a non-competition
agreement in the form of EXHIBIT E, signed by all directors of each of SBI and
the Bank.
SECTION 6.12 STOCKHOLDERS' MEETING. SBI shall cause a meeting of its
stockholders for the purpose of acting upon this Agreement to be held at the
earliest practicable date after the Registration Statement (as defined below)
has been declared effective by the SEC. SBI shall send to its stockholders, at
least thirty (30) days prior to such meeting, notice of such meeting together
with the Proxy Statement, which shall include a copy of this Agreement and a
copy of Section 262 of the DGCL governing the rights of dissenting stockholders.
SBI and its board of directors shall recommend to stockholders the approval of
this Agreement and the Merger and shall solicit proxies voting only in favor
thereof from the SBI Stockholders, and SBI and its board of directors shall not
withdraw, modify or change, in any manner adverse to Princeton, or publicly
announce its intent to withdraw, modify or change, in any manner adverse to
Princeton, such recommendation of this Agreement and the Merger; provided,
however, that SBI shall not be required to make the recommendation required by
this Section, and shall be permitted to withdraw, modify or change such
recommendation, if the board of directors of SBI determines, in good faith, that
the exercise of its fiduciary duties to the SBI Stockholders under applicable
law, as advised by its counsel, so requires. For the avoidance of doubt, the
parties acknowledge that the failure of SBI to comply with the provisions of
this Section shall be deemed to have a Material Adverse Effect on SBI on a
consolidated basis and on Princeton's rights under this Agreement.
SECTION 6.13 INFORMATION PROVIDED TO PRINCETON. SBI agrees that the
information concerning SBI or any SBI Subsidiary that is provided or to be
provided by SBI to Princeton for inclusion or that is included in the
Registration Statement or Proxy Statement and any other documents to be filed
with any Regulatory Authority in connection with the Contemplated Transactions
will, at the respective times such documents are filed and, in the case of the
Registration Statement, when it becomes effective and, with respect to the Proxy
Statement, when mailed, not be false or misleading with respect to any material
fact, or omit to
44
state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement, or any amendment thereof or
supplement thereto, at the time of the meeting of SBI's stockholders referred to
above, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the meeting in
connection with which the Proxy Statement shall be mailed. Notwithstanding the
foregoing, SBI shall have no responsibility for the truth or accuracy of any
information with respect to Princeton or any Princeton Subsidiary or any of
their Affiliates contained in the Registration Statement or the Proxy Statement
or in any document submitted to, or other communication with, any Regulatory
Authority.
SECTION 6.14 AMENDMENT OR TERMINATION OF EMPLOYEE BENEFIT PLANS. To the
extent permitted by applicable Legal Requirements, upon the written request of
Princeton, SBI shall take such action as may be necessary to amend or terminate
any SBI Employee Benefit Plan on or before the Closing on terms reasonably
acceptable to Princeton; provided, however, that none of SBI nor any SBI
Subsidiary shall be obligated to take any such requested action that is
irrevocable until immediately prior to the Closing.
SECTION 6.15 DATA AND ITEM PROCESSING AGREEMENTS. SBI agrees to consult
with Princeton prior to the entry by it or any SBI Subsidiary by either action
or inaction into any new, or any extension of any existing, data or item
processing agreements. SBI agrees to coordinate with Princeton the negotiation
of any new or extension of any existing data or item processing agreement, with
the purpose of achieving the best possible economic and business result in light
of the Merger.
SECTION 6.16 TAX MATTERS. Neither SBI nor any SBI Subsidiary shall make
any election inconsistent with prior Tax Returns or elections or settle or
compromise any liability with respect to Taxes without prior written notice to
Princeton. SBI and each SBI Subsidiary shall timely file all Tax Returns
required to be filed prior to the Closing; provided, however, that each such Tax
Return shall be delivered to Princeton for its review at least fifteen (15)
Business Days prior to the anticipated date of filing of such Tax Return.
SECTION 6.17 EMPLOYMENT AGREEMENTS. Concurrently with the execution and
delivery of this Agreement, and at Princeton's direction and request, SBI shall
cause to be delivered to Princeton employment agreements in the form of EXHIBITS
F-1 THROUGH F-4, signed by the officers (the "OFFICERS") of SBI named therein
(the "EMPLOYMENT AGREEMENTS") to be effective at the Effective Time.
SECTION 6.18 ACCOUNTING AND OTHER ADJUSTMENTS. Subject to applicable Legal
Requirements, SBI agrees that it shall, and shall cause each SBI Subsidiary, to:
(a) make any accounting adjustments or entries to its books of account and other
financial records; (b) make additional provisions to any allowance for loan and
lease losses; (c) sell or transfer any investment securities held by it; (d)
charge-off any loan or lease; (e) create any new reserve account or make
additional provisions to any other existing reserve account; (f) make changes in
any accounting method; (g) accelerate, defer or accrue any anticipated
obligation, expense or income item; and (h) make any other adjustments that
would affect the financial reporting of Princeton, on a consolidated basis after
the Effective Time, in any case as Princeton shall reasonably request, provided,
however, that neither SBI nor any SBI Subsidiary shall be obligated to take any
such requested action until immediately prior to the Closing and at such
45
time as SBI shall have received reasonable assurances that all conditions
precedent to SBI's obligations under this Agreement (except for the completion
of actions to be taken at the Closing) have been satisfied.
SECTION 6.19 SPECIAL BONUS. SBI shall be permitted to pay on the Closing
Date, but prior to the Effective Time, a special bonus (the "SPECIAL BONUS") in
an aggregate amount not to exceed Five Hundred Fifty Thousand Dollars
("$550,000") to those employees of SBI or the Bank who were employed by SBI or
the Bank on the Agreement Date and who remain employed by SBI or the Bank on the
Closing Date; provided, however, if an employee is no longer so employed on the
Closing Date, SBI shall nevertheless be permitted to pay such employee a Special
Bonus if the Board of Directors of SBI determines, in good faith and after
consultation with Princeton, that such employee left the employ of SBI or the
Bank for legitimate reasons under all of the circumstances.
ARTICLE 7
PRINCETON'S COVENANTS
SECTION 7.1 ACCESS AND INVESTIGATION.
(a) Solely for the purpose of permitting SBI to ascertain the
correctness of the representations and warranties made in this Agreement by
Princeton to SBI, SBI and its Representatives shall at all times during normal
business hours and with reasonable advance notice prior to the Closing Date,
have full and continuing access to the facilities, operations, records and
properties of Princeton and each Princeton Subsidiary in accordance with the
provisions of this Section. SBI and its Representatives may, prior to the
Closing Date, make or cause to be made such reasonable investigation of the
operations, records and properties of Princeton and each Princeton Subsidiary
and of their respective financial and legal condition as SBI shall deem
necessary or advisable to familiarize itself with such records, properties and
other matters, provided, however, that such access or investigation shall not
interfere unnecessarily with the normal operations of Princeton or any Princeton
Subsidiary. Upon request, Princeton and each Princeton Subsidiary will furnish
SBI or its Representatives, attorneys' responses to auditors' requests for
information regarding Princeton or such Princeton Subsidiary, as the case may
be, and such financial and operating data and other information reasonably
requested by SBI (provided, with respect to attorneys, such disclosure would not
result in the waiver by Princeton or any Princeton Subsidiary of any claim of
attorney-client privilege), and will permit SBI and its Representatives to
discuss such information directly with any individual or firm performing
auditing or accounting functions for Princeton or such Princeton Subsidiary, and
such auditors and accountants shall be directed to furnish copies of any reports
or financial information as developed to SBI or its Representatives. No
investigation by SBI or any of its Representatives shall affect the
representations and warranties made by Princeton. This Section shall not require
the disclosure of any information the disclosure of which to SBI would be
prohibited by any Legal Requirement.
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(b) Any confidential information or trade secrets of SBI received by
Princeton, its employees or agents in the course of the consummation of the
Contemplated Transactions shall be treated confidentially as provided in that
certain Confidentiality Agreement dated November 24, 2004, between Princeton and
SBI (the "PRINCETON CONFIDENTIALITY AGREEMENT"), and any correspondence,
memoranda, records, copies, documents and electronic or other media of any kind
containing either such confidential information, or trade secrets or both shall
be destroyed by Princeton or, at SBI's request, returned to SBI if this
Agreement is terminated as provided in Article 11 of this Agreement. Such
information shall not be used by Princeton or its agents to the detriment of SBI
or any SBI Subsidiary.
SECTION 7.2 SUBSEQUENT PRINCETON STATEMENTS; SECURITIES REPORTS. As soon
as available after the Agreement Date, Princeton will furnish SBI copies of the
annual audited and quarterly unaudited consolidated balance sheets, consolidated
statements of income, consolidated statements of cash flow and consolidated
statements of changes in stockholders' equity, of Princeton prepared for its
internal use, and all other financial reports or statements submitted after the
Agreement Date by Princeton to any Regulatory Authority, to the extent permitted
by law (collectively, the "SUBSEQUENT PRINCETON STATEMENTS"). Without limitation
of the foregoing, Princeton shall deliver to SBI complete copies of any reports
filed with the SEC after the Agreement Date (collectively, the "PRINCETON SEC
FILINGS"). Except as may be required by changes in GAAP effective after the
Agreement Date, the Subsequent Princeton Statements shall be prepared on a basis
consistent with past accounting practices and shall fairly present in all
material respects the consolidated financial condition and results of operations
for the dates and periods presented. Neither the Subsequent Princeton Statements
nor the Princeton SEC Filings shall include any material assets or omit to state
any material liabilities, absolute or contingent, or other facts, which
inclusion or omission would render such Subsequent Princeton Statements or
Princeton SEC Filings misleading in any material respect.
SECTION 7.3 ADVICE OF CHANGES. Between the Agreement Date and the Closing
Date, Princeton shall promptly notify SBI in writing if Princeton or any
Princeton Subsidiary becomes aware of any fact or condition that causes or
constitutes a Breach of any of Princeton's representations and warranties as of
the Agreement Date, or if Princeton or any Princeton Subsidiary becomes aware of
the occurrence after the Agreement Date of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. During the same period, Princeton will promptly notify SBI of the
occurrence of any Breach of any covenant of Princeton in this Agreement or of
the occurrence of any event that might reasonably be expected to make the
satisfaction of the conditions in Article 10 of this Agreement impossible or
unlikely.
SECTION 7.4 INFORMATION PROVIDED TO SBI. Princeton agrees that none of the
information concerning Princeton or any Princeton Subsidiary that is provided or
to be provided by Princeton to SBI for inclusion or that is included in the
Registration Statement or Proxy Statement and any other documents to be filed
with any Regulatory Authority in connection with
47
the Contemplated Transactions will, at the respective times such documents are
filed and, in the case of the Registration Statement, when it becomes effective
and, with respect to the Proxy Statement, when mailed, not be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading.
Notwithstanding the foregoing, Princeton shall have no responsibility for the
truth or accuracy of any information with respect to SBI or any SBI Subsidiary
or any of their Affiliates contained in the Registration Statement or the Proxy
Statement or in any document submitted to, or other communication with, any
Regulatory Authority.
SECTION 7.5 INDEMNIFICATION; DIRECTOR AND OFFICER INSURANCE. Except as may
be limited by applicable Legal Requirements, Princeton shall honor any of SBI's
obligations in respect of indemnification and advancement of expenses currently
provided by SBI in its articles of incorporation in favor of the current and
former directors and officers of SBI or any SBI Subsidiary for not less than two
(2) years from the Effective Time with respect to matters occurring prior to the
Effective Time. Princeton shall pay $25,000 to acquire extended coverage of acts
or omissions occurring at or prior to the Effective Time with respect to those
persons who are currently covered by SBI's director and officer liability
policies of insurance, commonly referred to as "tail coverage," on terms with
respect to such coverage and amount substantially similar to the terms and
conditions of SBI's director and officer liability policies of insurance in
effect on the Agreement Date. In the event that the costs of the tail coverage
shall exceed $25,000, SBI may elect to pay the difference and the amount thereof
shall constitute SBI Transaction Expenses as that term is defined in Section
1.1(pp) of this Agreement. In the event SBI elects not to pay such difference,
Princeton shall not be required to obtain such tail coverage.
SECTION 7.6 EMPLOYEE BENEFITS. For purposes of determining eligibility to
participate in and, where applicable, vesting under Princeton's and its
Subsidiaries' employee benefit plans, programs and arrangements generally
accorded all to employees of Princeton and Citizens Bank (including
tax-qualified retirement plans, welfare benefit plans, vacation pay and Family
and Medical Leave Act leave rights), Princeton agrees that all former employees
of SBI or the Bank who become employees of Princeton or Citizens Bank shall
receive credit for their past service with SBI or the Bank as if such employee
had then been employed by Princeton.
SECTION 7.7 AUTHORIZATION AND RESERVATION OF PRINCETON COMMON STOCK. The
board of directors of Princeton shall, prior to the Effective Time, authorize
and reserve the maximum number of shares of Princeton Common Stock to be issued
pursuant to this Agreement and take all other necessary corporate action to
consummate the Contemplated Transactions.
SECTION 7.8 NEGATIVE COVENANTS. Except as otherwise expressly permitted by
this Agreement, between the Agreement Date and the Closing Date, Princeton will
not, and will cause each Princeton Subsidiary not to, without the prior written
consent of SBI:
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(a) take any affirmative action, or fail to take any reasonable action
within its control, as a result of which a Breach of Princeton's representations
or warranties occurs, if such Breach would have a Material Adverse Effect on
Princeton on a consolidated basis;
(b) take any action to amend Princeton's certificate of incorporation
or bylaws, the effect of which would be to materially and adversely affect the
rights or powers of holders of Princeton Common Stock generally; or
(c) take any affirmative action, or fail to take any reasonable action
within its control, the effect of which would be to materially impair or
otherwise prevent the consummation of the Contemplated Transactions.
SECTION 7.9 BOARD SEATS. Immediately following the Effective Time,
Princeton shall expand its board of directors and the board of directors of
Citizens Bank by one member each, and each board shall take such action as is
necessary to appoint as director one individual nominated to each board by SBI,
which nominee(s) shall be acceptable to Princeton in its sole discretion.
ARTICLE 8
COVENANTS OF ALL PARTIES
SECTION 8.1 REGULATORY APPROVALS. By no later than forty-five (45) days
after the Agreement Date, Princeton shall make all appropriate filings with
Regulatory Authorities for approval of the Contemplated Transactions, including
the preparation of an application or any amendment thereto or any other required
statements or documents filed or to be filed by any party with: (a) the Federal
Reserve pursuant to the BHCA (or a request for a waiver of the requirements
thereof); (b) the OCC pursuant to the NBA; (c) the DFPR pursuant to the IBA; and
(d) any other Person or Regulatory Authority pursuant to any applicable Legal
Requirement, for authority to consummate the Contemplated Transactions.
Princeton shall pursue in good faith the regulatory approvals necessary to
consummate the Contemplated Transactions. In advance of any filing made under
this Section, SBI and its counsel shall be provided with the opportunity to
comment upon all non-confidential portions thereof, and Princeton agrees
promptly to advise SBI and its counsel of, and share with them, any material
communication received by Princeton or its counsel from any Regulatory
Authorities with respect to the non-confidential portions of such filings.
SECTION 8.2 SEC REGISTRATION. By no later than sixty (60) days after the
Agreement Date, Princeton shall prepare and file with the SEC a registration
statement under the Securities Act on an appropriate form reasonably acceptable
to SBI covering the shares of Princeton Common Stock to be issued pursuant to
this Agreement and shall use its Best Efforts to cause the same to become
effective, and thereafter, until the Effective Time or lawful termination of
this Agreement, to keep the same effective and, if necessary, amend and
supplement the same (such registration statement, and any amendments and
supplements thereto, is referred to as the "REGISTRATION STATEMENT"). The
Registration Statement shall include the Proxy Statement for use in connection
with the meeting of the SBI Stockholders referred to in Section 6.12 of this
49
Agreement, all in accordance with the rules and regulations of the SEC.
Princeton shall, as soon as practicable after the execution of this Agreement,
make all filings required to obtain all permits, authorizations, consents or
approvals required under any applicable Legal Requirements (including all state
securities laws) for the issuance of the shares of Princeton Common Stock to SBI
Stockholders. In advance of any filing made under this Section, Princeton and
SBI and their respective counsel shall be provided with the opportunity to
comment thereon, and Princeton and SBI each agree promptly to advise each other
and each other's counsel of any material communication received by it or its
counsel from the SEC or any other Regulatory Authorities with respect to such
filings. Preparation and filing of the Registration Statement shall be at the
sole cost and expense of Princeton, except that SBI shall be solely responsible
for the costs and expenses, including fees of SBI's accountants and legal
counsel, related to the preparation and review of SBI financial statements and
SBI information required to be presented in the Registration Statement and the
costs of printing and mailing the Proxy Statement to SBI Stockholders.
SECTION 8.3 NECESSARY APPROVALS. Princeton and SBI agree that Princeton's
counsel will have primary responsibility for preparation of the Registration
Statement and Princeton will have primary responsibility for the preparation of
the necessary applications for regulatory approval of the Contemplated
Transactions. Each of Princeton and SBI and their respective Subsidiaries agree
fully and promptly to cooperate with each other and their respective counsels
and accountants in connection with any steps to be taken as part of their
obligations under this Agreement.
SECTION 8.4 CUSTOMER AND EMPLOYEE RELATIONSHIPS. Each of Princeton and SBI
agrees that its respective Representatives may jointly:
(a) participate in meetings or discussions with officers and employees
of SBI and Princeton and their Subsidiaries in connection with employment
opportunities with Princeton after the Effective Time; and
(b) contact Persons having dealings with SBI or Princeton or any of
its respective Subsidiaries for the purpose of informing such Persons of the
services to be offered by Princeton after the Effective Time.
SECTION 8.5 PUBLICITY. Prior to the Effective Time, the parties to this
Agreement will consult with each other before issuing any press releases or
otherwise making any public statements to stockholders, customers, employees or
others with respect to this Agreement or the Contemplated Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other parties, except as may be required by law.
SECTION 8.6 BEST EFFORTS; COOPERATION. Each of Princeton and SBI agrees to
exercise good faith and use its Best Efforts to satisfy the various covenants
and conditions to Closing in this Agreement, and to consummate the transactions
contemplated hereby as promptly as possible. Neither Princeton nor SBI will
intentionally take or intentionally permit
50
to be taken any action that would be a Breach of the terms or provisions of this
Agreement. Between the Agreement Date and the Closing Date, each of Princeton
and SBI will, and will cause each Princeton Subsidiary and SBI Subsidiary,
respectively, and all of their respective Affiliates and Representatives to,
cooperate with respect to all filings that any party is required by Legal
Requirements to make in connection with the Contemplated Transactions.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF PRINCETON
The obligations of Princeton to consummate the Contemplated Transactions
and to take the other actions required to be taken by Princeton at the Closing
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Princeton, in whole or in
part):
SECTION 9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of SBI set forth in this Agreement shall be true
and correct with the same force and effect as if all of such representations and
warranties were made at the Closing Date (provided, however, that to the extent
such representations and warranties expressly relate to an earlier date, such
representations shall be true and correct on and as of such earlier date),
except for any untrue or incorrect representations or warranties that
individually or in the aggregate do not have a Material Adverse Effect either on
SBI on a consolidated basis or on Princeton's rights under this Agreement.
SECTION 9.2 SBI'S PERFORMANCE. SBI shall have performed or complied with
all of the covenants and obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date, except where
any non-performance or noncompliance would not have a Material Adverse Effect
either on SBI on a consolidated basis or on Princeton's rights under this
Agreement.
SECTION 9.3 DOCUMENTS SATISFACTORY. All proceedings, corporate or other,
to be taken by SBI in connection with the Contemplated Transactions, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to counsel for Princeton.
SECTION 9.4 CORPORATE APPROVAL. This Agreement and the Contemplated
Transactions shall have been duly and validly approved as necessary under
applicable Legal Requirements by the SBI Stockholders.
SECTION 9.5 NO PROCEEDINGS. Since the Agreement Date, there must not have
been commenced or Threatened against SBI or any SBI Subsidiary any Proceeding:
(a) involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions; or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Contemplated Transactions, in either case that would reasonably be expected to
have a Material Adverse Effect on SBI or its stockholders or Princeton's rights
under this Agreement.
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SECTION 9.6 ABSENCE OF MATERIAL ADVERSE CHANGES. From the Agreement Date
to the Closing, there shall be and have been no event or occurrence that had or
would reasonably be expected to have a Material Adverse Effect either on SBI or
any SBI Subsidiary.
SECTION 9.7 CONSENTS AND APPROVALS. Any consents or approvals required to
be secured by either party by the terms of this Agreement shall have been
obtained and shall be reasonably satisfactory to Princeton, and all applicable
waiting periods shall have expired.
SECTION 9.8 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), contravene, or conflict with or result in a
violation of: (a) any applicable Legal Requirement or Order; or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed
by or before any Regulatory Authority.
SECTION 9.9 REGISTRATION STATEMENT. The Registration Statement shall have
become effective and no stop order suspending such effectiveness shall have been
issued or threatened by the SEC that suspends the effectiveness of the
Registration Statement and no Proceeding shall have been commenced or be pending
or Threatened for such purpose.
SECTION 9.10 DISSENTING SHARES. The total number of Dissenting Shares
shall be no greater than ten percent (10%) of the number of Outstanding SBI
Common Stock.
SECTION 9.11 EMPLOYMENT AGREEMENTS. The Employment Agreements shall be in
full force and effect, and the Officers shall be active employees of SBI or the
Bank.
SECTION 9.12 ALLOWANCE FOR LOAN AND LEASE LOSSES. Consistent with the
methodology utilized by SBI in the Ordinary Course of Business, SBI shall have a
consolidated allowance for loan and lease losses that is adequate in all
material respects to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including accrued interest
receivable) and the amount of the consolidated allowance for loan and lease
losses shall not be less than Eight Hundred Forty Thousand Dollars ($840,000) as
of the Closing Date.
SECTION 9.13 SBI CAPITALIZATION. At the Effective Time, the issued and
outstanding capital stock of SBI shall consist exclusively of no more than
50,598 shares of SBI Common Stock.
SECTION 9.14 SBI TRANSACTION EXPENSES. Princeton shall have received proof
satisfactory to it that SBI has paid or fully accrued for as of the
Determination Date all of the SBI Transaction Expenses.
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ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBI
SBI's obligation to consummate the Contemplated Transactions and to take
the other actions required to be taken by SBI at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by SBI, in whole or in part):
SECTION 10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Princeton and Acquisition Company set forth in
this Agreement shall be true and correct with the same force and effect as if
all of such representations and warranties were made at the Closing Date
(provided, however, that to the extent such representations and warranties
expressly relate to an earlier date, such representations shall be true and
correct on and as of such earlier date), except for any untrue or incorrect
representations or warranties that individually or in the aggregate do not have
a Material Adverse Effect either on Princeton on a consolidated basis or on
SBI's rights under this Agreement.
SECTION 10.2 PRINCETON'S PERFORMANCE. Princeton and Acquisition Company
shall have performed or complied with all covenants and obligations to be
performed or complied with by them under the terms of this Agreement on or prior
to the Closing Date, except where any non-performance or noncompliance would not
have a Material Adverse Effect either on Princeton on a consolidated basis or on
SBI's rights under this Agreement.
SECTION 10.3 DOCUMENTS SATISFACTORY. All proceedings, corporate or other,
to be taken by Princeton in connection with the Contemplated Transactions, and
all documents incident thereto, shall be reasonably satisfactory in form and
substance to counsel for SBI.
SECTION 10.4 CORPORATE APPROVAL. This Agreement and the Contemplated
Transactions shall have been duly and validly approved as necessary under
applicable Legal Requirements by the SBI Stockholders.
SECTION 10.5 NO PROCEEDINGS. Since the Agreement Date, there must not have
been commenced or Threatened against Princeton or any Princeton Subsidiary any
Proceeding: (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions; or (b) that may have
the effect of preventing, delaying, making illegal or otherwise interfering with
any of the Contemplated Transactions, in either case that would reasonably be
expected to have a Material Adverse Effect either on Princeton or its
stockholders or SBI's rights under this Agreement.
SECTION 10.6 ABSENCE OF MATERIAL ADVERSE CHANGES. From the Agreement Date
to the Closing, there shall be and have been no event or occurrence that had or
would reasonably be expected to have a Material Adverse Effect on Princeton on a
consolidated basis.
53
SECTION 10.7 CONSENTS AND APPROVALS. Any consents or approvals required to
be secured by either party by the terms of this Agreement shall have been
obtained and shall be reasonably satisfactory to SBI, and all applicable waiting
periods shall have expired.
SECTION 10.8 NO PROHIBITIONS. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), contravene, or conflict with or result in a
violation of: (a) any applicable Legal Requirement or Order; or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed
by or before any Regulatory Authority.
SECTION 10.9 REGISTRATION STATEMENT. The Registration Statement shall have
become effective and no stop order suspending such effectiveness shall have been
issued or threatened by the SEC that suspends the effectiveness of the
Registration Statement and no Proceeding shall have been commenced or be pending
or Threatened for such purpose.
SECTION 10.10 FAIRNESS OPINION. SBI shall have received an opinion from
Xxxx Xxxx & Co., Inc. (the "FAIRNESS OPINION"), dated as of the Agreement Date,
to the effect that the terms of the Merger are fair to SBI's Stockholders from a
financial point of view as of that date and such Fairness Opinion shall not have
been subsequently withdrawn.
ARTICLE 11
TERMINATION
SECTION 11.1 REASONS FOR TERMINATION AND ABANDONMENT. This Agreement, by
prompt written notice given to the other parties prior to or at the Closing, may
be terminated:
(a) by mutual consent of the boards of directors of Princeton and SBI;
(b) by Princeton if: (i) any of the conditions in Article 9 of this
Agreement has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Princeton to comply with its obligations under this Agreement); and (ii)
Princeton has not waived such condition on or before the Closing Date;
(c) by SBI if: (i) any of the conditions in Article 10 of this
Agreement has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of SBI
to comply with its obligations under this Agreement); and (ii) SBI has not
waived such condition on or before the Closing Date;
(d) by Princeton in accordance with the provisions of Section 6.7 of
this Agreement;
(e) by either Princeton or SBI if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) by the date which is
eight (8) months after the Agreement Date, or such later date as the parties may
agree (the "TERMINATION DATE").
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SECTION 11.2 EFFECT OF TERMINATION. Except as provided in Sections 11.3,
11.4 and 11.5 of this Agreement, if this Agreement is terminated pursuant to
Section 11.1 of this Agreement, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Princeton, SBI
or any of their respective Representatives, and all rights and obligations of
each party hereto shall cease; provided, however, that, subject to Sections
11.3, 11.4 and 11.5 of this Agreement, nothing herein shall relieve any party
from liability for the Breach of any of its covenants or agreements set forth in
this Agreement.
SECTION 11.3 EXPENSES. Except as provided below, all Expenses (as defined
below) incurred in connection with this Agreement and the Contemplated
Transactions shall be paid by the party incurring such expenses, whether or not
the Merger is consummated. "Expenses" as used in this Agreement shall consist of
all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its Affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the solicitation of stockholder approvals and all
other matters related to the consummation of the Merger.
SECTION 11.4 SBI TERMINATION PAYMENT.
(a) If this Agreement is terminated by:
(i) Princeton because: (A) SBI committed a Breach of its
covenants or agreements under this Agreement (but not a Breach of its
representations or warranties); or (B) there is a Breach of SBI's
representations or warranties as of the Agreement Date, unless, in either case
of clauses (A) or (B), such Breach is a result of the failure by Princeton to
perform and comply in all material respects with any of its material obligations
under this Agreement which are to be performed or complied with by it prior to
or on the date required hereunder, or such Breach or Breaches would not
individually or in the aggregate be reasonably expected to have a Material
Adverse Effect on Princeton on a consolidated basis or on SBI or any SBI
Subsidiary; or
(ii) Princeton or SBI because both (A) any of: (x) any Person
shall have commenced (as such term is used in Rule 14d-2(b) under the Securities
Exchange Act) a bona fide tender offer or exchange offer to acquire at least 20%
of the then-outstanding shares of SBI Common Stock, shall have otherwise made a
bona fide proposal to SBI or the SBI stockholders by public announcement or
other written communication that is or becomes the subject of public disclosure
to engage in a transaction that will result in an acquisition of control of SBI
or the Bank (as defined below), or shall have filed an application or notice
with any Regulatory Authority for approval to engage in a transaction that will
result in an acquisition of control of SBI or the Bank; (y) the board of
directors of SBI shall have authorized, recommended, proposed or publicly
announced its intention to authorize, recommend or propose any transaction that
will result in an acquisition of control of SBI or the Bank by a Person other
than Princeton (or resolved to take any such action), whether or not permitted
by the terms of this Agreement; or (z) the board of directors of SBI, in the
exercise
55
of its fiduciary duties as permitted by this Agreement, shall have failed to
recommend in the Proxy Statement the approval of this Agreement and the Merger,
shall have withdrawn, modified or changed, in any manner adverse to Princeton,
or publicly announced its intent to withdraw, modify or change, in any manner
adverse to Princeton, such recommendation of this Agreement and the Merger, or
shall have failed to call or convene the meeting of the SBI stockholders
referred to in Section 6.12; and (B) SBI's stockholders fail to approve the
Contemplated Transactions and this Agreement on or before the Termination Date;
and provided in the case of both clauses (i) and (ii), Princeton is in material
compliance with all of its material obligations under this Agreement, then SBI
shall pay to Princeton, upon its written demand, an amount equal to Two Million
Dollars ($2,000,000).
(b) The sum payable by SBI under this Section shall constitute
liquidated damages and Princeton's receipt thereof shall be Princeton's sole and
exclusive remedy under this Agreement for all Breaches of this Agreement by SBI
or failure by its stockholders to approve this Agreement.
SECTION 11.5 PRINCETON TERMINATION PAYMENT.
(a) If this Agreement is terminated by SBI because: (i) Princeton
committed a Breach of its covenants or agreements under this Agreement (but not
a Breach of its representations or warranties); or (ii) there is a Breach of
Princeton's representations or warranties as of the Agreement Date, unless, in
either case of clauses (i) or (ii), such Breach is a result of the failure by
SBI to perform and comply in all material respects with any of its material
obligations under this Agreement which are to be performed or complied with by
it prior to or on the date required hereunder, or such Breach or Breaches would
not individually or in the aggregate be reasonably expected to have a Material
Adverse Effect either on Princeton on a consolidated basis or on SBI's rights
under this Agreement, then Princeton shall pay to SBI, upon its written demand,
an amount equal to Two Million Dollars ($2,000,000).
(b) The sum payable by Princeton under this Section shall constitute
liquidated damages and SBI's receipt thereof shall be SBI's sole and exclusive
remedy under this Agreement for all Breaches of this Agreement by Princeton.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement shall be governed by the internal laws of
the State of Illinois applicable to Contracts made and wholly to be performed in
such state without regard to conflicts of laws.
SECTION 12.2 ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTY RIGHTS. None of
the parties to this Agreement may assign any of its rights under this Agreement
without the prior
56
consent of the other parties. Subject to the preceding sentence, this Agreement
and every representation, warranty, covenant, agreement and provision hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing expressed or referred to in
this Agreement will be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement.
SECTION 12.3 WAIVER. Except as provided in Article 11 of this Agreement,
the rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power or privilege, and
no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law: (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
SECTION 12.4 NOTICES. All notices, consents, waivers and other
communications under this Agreement must be in writing (which shall include
telecopier communication) and will be deemed to have been duly given if
delivered by hand or by nationally recognized overnight delivery service
(receipt requested), mailed by registered or certified U.S. mail (return receipt
requested) postage prepaid or telecopied, if confirmed immediately thereafter by
also mailing a copy of any notice, request or other communication by U.S. mail
as provided in this Section:
If to Princeton, to:
Princeton National Bancorp, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxx
57
with copies to:
Xxxxxx & Xxxxxx Attorneys, P.C.
000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to SBI, to:
Somonauk FSB Bancorp, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx
with copies to:
Barack Xxxxxxxxxx Xxxxxxxxxx Xxxxxxx & Xxxxxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
or to such other Person or place as SBI shall furnish to Princeton or Princeton
shall furnish to SBI in writing. Except as otherwise provided herein, all such
notices, consents, waivers and other communications shall be effective: (a) if
delivered by hand, when delivered; (b) if mailed in the manner provided in this
Section, five (5) Business Days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
Business Day after deposit with such service; and (d) if by telecopier, on the
next Business Day if also confirmed by mail in the manner provided in this
Section.
SECTION 12.5 ENTIRE AGREEMENT. This Agreement and any documents executed
by the parties pursuant to this Agreement and referred to herein, including the
Princeton Confidentiality Agreement and the SBI Confidentiality Agreement,
constitute the entire understanding and agreement of the parties hereto and
supersede all other prior agreements and understandings, written or oral,
relating to such subject matter between the parties.
SECTION 12.6 MODIFICATION. This Agreement may not be amended except by a
written agreement signed by each of SBI and Princeton. Without limiting the
foregoing, SBI and Princeton may by written agreement signed by each of them:
(a) extend the time for the performance of any of the obligations or other acts
of the parties hereto; (b) waive any
58
inaccuracies in the representations or warranties contained in this Agreement or
in any document delivered pursuant to this Agreement; and (c) waive compliance
with or modify, amend or supplement any of the conditions, covenants,
agreements, representations or warranties contained in this Agreement or waive
or modify performance of any of the obligations of any of the parties hereto,
which are for the benefit of the waiving party; provided, however, that no such
modification, amendment or supplement agreed to after authorization of this
Agreement by the SBI Stockholders shall affect the rights of SBI's stockholders
in any manner that is materially adverse to such Persons.
SECTION 12.7 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement unless the
consummation of the Contemplated Transactions is adversely affected thereby.
SECTION 12.8 FURTHER ASSURANCES. The parties agree: (a) to furnish upon
request to each other such further information; (b) to execute and deliver to
each other such other documents; and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
SECTION 12.9 SURVIVAL. The representations, warranties and covenants
contained herein shall not survive beyond the Closing.
SECTION 12.10 COUNTERPARTS; FACSIMILES. This Agreement may be executed in
two or more counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart. The delivery of executed counterparts of this
Agreement may be effected by telecopy, which shall have the same force and
effect as original executed and delivered signature pages hereto.
SECTION 12.11 JURISDICTION AND SERVICE OF PROCESS. Any action or
proceeding seeking to enforce, challenge or avoid any provision of, or based on
any right arising out of, this Agreement shall be brought only in the courts of
the State of Illinois, County of Bureau or, if it has or can acquire
jurisdiction, in the United States District Court serving the County of Bureau,
and each of the parties consents to the exclusive jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to jurisdiction or venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any
party anywhere in the world.
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first written above.
SOMONAUK FSB BANCORP, INC. PRINCETON NATIONAL BANCORP, INC.
By: /s/ Xxxxxxx Xxx By: /s/ Xxxx X. Xxxxxx
--------------------------------- ------------------------------------
Name: Xxxxxxx Xxx Name: Xxxx X. Xxxxxx
Title: President Title: President & Chief Executive
Officer
SOMONAUK ACQUISITION, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
Title: President
61
